Jeff Rickard

     You have probably heard the commercials on the radio that say “pay your mortgage off faster, save 10 years”,  “do not change your spending habits and pay your mortgage off in half the time”.  These ads have generated a lot of interest and have caused my clients to call and ask “what is it all about?”  The truth is that I do not know, so I figured I better do some research.  After my research I still do not know!  This post is a new concept for me, it is based on me knowing nothing and still giving an opinion.

     I did find several websites and even had a person call me to see if my company would be interested in offering this great benefit to my clients.  I said yes, what is it?  I was then told I would have to go a presentation to find out the real answer but I could be sent information that would tell me nothing.  I had him send the information, it told me nothing. 

     Now, not to bash this guy, because none of the websites I found told me anything except the one that is from the Australian Securities and Investment Commission.  The ASIC is Australia’s banking regulatory agency.  They shed some light on this program but still left me with many questions.

     The program has you refinance your current mortgage to a line of credit mortgage.  You then deposit your entire pay check into your line of credit and that line of credit works as your check book.  By putting a large deposit into the account you reduce the amount of interest you will pay, well until you have to take it all out to pay the rest of your bills.  The theory is that you really deposit say $5000 in the account, your current mortgage is $1500 and your other monthly bills total $3000, so if you subtract the $1500 and $3000 from the $5000 you have $500 left over that is actually reducing your mortgage……………I think. 

     The truth is most of the people I know deposit $5000 and spend $6000.  The other fact is that if you have $500 left after all your expenses you can pre-pay your mortgage now.  Even mortgages with pre-payment penalties usually let you pay some extra principle.  Paying extra principle is a great idea, one extra payment a year reduces a 30 year mortgage to around 22 years. 

     If this program makes it easier for someone to make extra payments than that is great, I am in favor of that.  What I am not in favor of is the fact that the only way I can get an explanation of this program is to have to sit in a room or meet with someone in person.  Sounds a little like a time share presentation or worse like a Pay Option ARM presentation.  You all remember the Pay Option mortgage that lets you make 4 choices a month as to what you will pay.  The fourth choice being a minimum payment that “oh by the way” results in NEGATIVE AMORTIZATION.  The single loan type that has moved the Colorado legislature to pass a million new mortgage laws.  Yeah, that guy.  You see those loans were so complicated that we needed charts, graphs and computer illustrations to show you the real benefit.  

     Now the truth is that the Pay Option loan was a good choice for a few people, no where near the number of people who took one.  When you mass advertise on the radio are you looking for the few right people or are you looking for the masses?

     Is the Asset Accelerator right for you?  I guess you will need to sit through a presentation.  My guess is that it will work for some of you but not most.  Here is one link for the program that I found, there are lots.

     Please feel free to educate me on this program and let me know what you think.

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