You know. Out of all places I would read about this type of "accelerated" mortgage payment scheme…..I just was thumbing through the latest issue of the Costco Connection magazine..errr. infomercial while sitting on my throne in the morning. There was an interesting article about this from Suzi Orman. Sorry, it's not quality reading, nor do I really like Suzi…But…

 

http://www.costcoconnection.com/connection/200711/?u1=texterity

 

Page 15. The irony.. The person asking the question about this type of loan is from Temecula.

 

 

 

Here's the text..

 

The downside of
accelerating loans

We are looking at refinancing through
an “accelerating loan.” You put all your
monies in the account and it pays down
your mortgage daily according to your balance.
Can you tell us about this new loan?
—Lisa Adams, Temecula, California

 

Suzi Says.
STOP LOOKING! With this type of deal you set
up a home equity line of credit (HELOC) and your
paycheck is automatically deposited into the account.
You then basically use it as a mega-banking account.
From it you pay all your bills, and whatever is left over
is used to pay down your mortgage. The idea is that
if the money you put into the account each month
(your paycheck) greatly exceeds your expenses, you
should have plenty left over after paying your bills to
make an extra-large mortgage payment. The allure is
that you will end up paying off the mortgage ahead
of schedule, saving thousands in interest payments.
I am all for accelerating paying off your mortgage,
but not with a deal like this. First, you’re stuck
with a HELOC, and that means your interest rate
can and will change depending on the direction
of general interest rates. Even if you think interest
rates might be heading lower in the coming months,
there’s also the possibility that they could rise in the
future. That’s the risk with variable-rate loans, and
it’s a risk millions of homeowners are struggling with
right now. And if you ever run into a month when
your expenses exceed what you owe, you will have to
draw on the line of credit —that is, borrow more.
You can get your mortgage paid off faster without
refinancing into one of these newfangled loans
(and paying refinancing lender fees). All you have to
do is send in extra principal payments whenever you
can on your existing mortgage. Make one extra payment
a year on a 30-year mortgage and you will cut
your payback time down to about 25 years.