Accelerator loan (fixed rate, interest, real estate, heloc)

[mystree]

Just wondering everyones thoughts on accelerator loans,I kind of like the idea of these.These would be great for the disciplined spender.
http://articles.moneycentral.msn.com...YourHouse.aspx

[conk0029]

First, let me be clear, I own a company that has put together a system that revolves around this concept. We first spotted this system six months ago, in Australia and have been working with it since. We have found that people who are eligible is the best way to finance a home today, hands down.

It allows the borrower control of the equity of their home and they can use the HELOC as a savings/checking account. It allows that extra money that sits in a person savings/checking account to always be used. It helps to cut down heavy interest that people encounter in their fixed loan.

If you have the desire to learn more about this option, please email me and I can send you over some information.

I will tell you this is a new system that will hit mainstream America in the next few months. It will be the next hip thing in financing real estate in the US.

Steve

[FedUpInFtMyers]

We have this loan product at our mortgage company, too. The only problem we are having is finding qualified people. The Home Ownership Accelerator is requiring a minimum of a 660 score with at least 20% equity, and a lot of people here in this area of FL have lost equity (due to decreasing home values), and due to that circumstance alone, some were unable to refinance and are now scraping money together every month in an effort to make their adjusted rate mortgage payments - - so their credit scores just aren't there anymore, either. It is an AMAZING loan product, and we would do it if we had the equity that we needed to do it. I will definitely be doing this as soon as the equity is there, and I would not hesitate to purchase my next home with the product if I can put 20% down.

[Sgoldie]

I didn't think this article was very well written. My initial analysis seems to be that it's a good move for banks.

Instead of people spending by use of (unsecured) credit cards, customers have the ease of spending while using up their home equity (secured debt for the bank), and at a possible similar interest rate as a credit card (12.75 to 21% cap). The equity in their homes would be lost when they sell in the amount owing.

I also didn't care for the idea of minimum payments for the first 10 years at interest only. If this came into common use it could double the amount owned on the mortgage thru negative amoratization. At the 10 year mark you could be in big trouble. It seems to me that the possibility of homeowner problems is greater than advantages.

Now, if you do have lots of free cash every month and can take advantage of your deposit lowering your interest as well as paying your mortgage off earlier, and you absolutely pay more than minimums, it would seem fine.

However, I think that if you are using the discipline you would need to take advantage of this program in a 'positive' way you would be better off getting the seperate - fixed rate mortgage w provision for addl payments, a seperate 'emergency' home equity line you'd be less inclined to use, and investing the balance in a tax deductible retirement account (w possible employer matching and auto payroll deduction).

I'll be interested to hear more about this product. I'm afraid the complexity of it and the potential downside for homeowners is going to be a problem more than the advantages.

[thecloserman2]

i have been looking at this for the last few weeks. The only down side that I see is if someone takes the line of credit and uses it all up, otherwise it looks pretty good. I would like to hear from people that have this type of loan.

[LarryMorris]

It will also be interesting to see how the IRS treats these loans as equity lines are technically supposed to be used for the financing of real estate, not paying groceries, gas and other personal expenses.