30 year fixed mortgages have been extremely popular these days.  With the rates near historic lows, and the negativity towards adjustable loans and the subprime mess, they sure make a lot of sense.  There is another option that has not been getting a lot of press lately, and could be a very good option for many homeowners to look into, however.

This new program goes by a number of names, most common is the home ownership accelerator program.  It basically turns your home loan into a checking account, like a line of credit in a manner, but with much better potential from an interest rate standpoint and with a great ability to pay down your principal balance in a unique manner.  It works by applying your assets, income and receivables against the principal balance of your loan.

The quick overview of this program is simple.  You take out a new loan, just as you would any other home loan.  This new loan is set up almost like a revolving line of credit.  You run your checking account, and your income via direct deposit through this line of credit.  Just like a normal checking account, you get a check book and ATM card.  The benefit comes from the balance you keep in checking.  The balance of your checking account in this program offsets the loan amount you are paying interest on, as does the income from your direct deposit.  Even if you direct deposit your paycheck on the first of the month, and then write a check on the fifteenth, you are reducing the principal amount you are paying on for those fifteen days.

Under this plan, your income via direct deposit lowers your monthly balance.  Your lower balance, in turn, saves you interest, and the saved interest becomes an extra principal payment on your loan.  This extra principal payment, in turn, further lowers your balance, saving you more interest.  This cycle continues each month, and compounds your interest savings, allowing you to pay down your mortgage more quickly than you would paying on a 30 year amortized schedule.

This is just a quick overview of the program, please feel free to contact me for more details, or to find out if this program is right for you.