Mortgage Company's Equity Accelerator Program

[Box & Won]

I received a mailer from my mortgage company asking if I'd like to enroll in their Equity Accelerator program - Instead of making one payment on the first of the month, you pay half the monthly payment on the first and the other half on the 15th.

There is a one-time enrollment fee of $295, and monthly participation fees of $5.42. They promise that I will build equity quicker - $28,415.11 of additional equity in 10 years. I don't plan on being in my house for 30 years, but 10 years might be a possibility.

My gut tells me not to trust them. Is this worth doing??

[Iowa_Card]

I received a mailer from my mortgage company asking if I'd like to enroll in their Equity Accelerator program - Instead of making one payment on the first of the month, you pay half the monthly payment on the first and the other half on the 15th.

There is a one-time enrollment fee of $295, and monthly participation fees of $5.42. They promise that I will build equity quicker - $28,415.11 of additional equity in 10 years. I don't plan on being in my house for 30 years, but 10 years might be a possibility.

My gut tells me not to trust them. Is this worth doing??

My first thought is why do you have to pay a fee in order to split up your mortgage payment?

BTW, in that 10 years you'll assume $650.40 worth of "participation fees" plus the up-front $295.

You could potentially do the same thing if you sent in a partial payment ahead of your mortgage's due date.

I personally wouldn't do it.

[MTV]

All you have to do is factor in 1 extra mortgage payment per year divided by 12 with each payment you make. Why pay the mortgage company to do that for you?

[MTV]

PS, I recently bought a condo that has depreciated by at least 20% in 15 months, so what the fuck do I know?

[Box & Won]

That all makes perfect sense. I lack the ability to think analytically, so I appreciate the help.

[drobny23]

I don't think Mort Co does anything that won't make them $$$ if you do it.

[jack jones]

My first thought is why do you have to pay a fee in order to split up your mortgage payment?

I agree and agree with your conclusion. Their response would probably be something like "we're allowing B&1 to apply his cash to principal and reduce interest charges sooner without paying more in the aggregate per month".

[Airshark]

It might be advantageous if your mortgage has a truly hideous early-payment penalty clause. You might not be able to make an extra payment every year.

[Moon Man]

PS, I recently bought a condo that has depreciated by at least 20% in 15 months, so what the fuck do I know?

With a bad roof, no less!

Moon

[marco]

What you got was a bi-weekly payment plan option from the company that services your home loan. You can do this yourself by making 1 full extra payment per year towards your principal. You'll cut about 5 years off your loan by doing either one.

At first I thought you were talking about the Home Ownership Accelerator which is a little different. It's a line of credit mortgage that is also your checking account.

You deposit all your money to lower your mortgage balance, but you have 24/7 access to your funds in case you need to get the money to pay bills, buy food, etc... At the end of the month your left over savings keeps your balance low and means you spend less on interest. The effect compounds on itself each month and your end of the month savings grow each month and typically it accelerates your balance to zero in about half the time.

Now if you went out and bought a Corvette with your Equity Line you'll be right back to where you started, but if you don't make any major purchases your home loan will get paid off very fast.

Bottom line, you'll save tens of thousands of dollars in interest and payments if you apply all your deposits towards the line of credit. It's just math.

http://www.cmghome.com

[Forty Ounce Curls]

What you got was a bi-weekly payment plan option from the company that services your home loan. You can do this yourself by making 1 full extra payment per year towards your principal. You'll cut about 5 years off your loan by doing either one.

At first I thought you were talking about the Home Ownership Accelerator which is a little different. It's a line of credit mortgage that is also your checking account.

You deposit all your money to lower your mortgage balance, but you have 24/7 access to your funds in case you need to get the money to pay bills, buy food, etc... At the end of the month your left over savings keeps your balance low and means you spend less on interest. The effect compounds on itself each month and your end of the month savings grow each month and typically it accelerates your balance to zero in about half the time.

Now if you went out and bought a Corvette with your Equity Line you'll be right back to where you started, but if you don't make any major purchases your home loan will get paid off very fast.

Bottom line, you'll save tens of thousands of dollars in interest and payments if you apply all your deposits towards the line of credit. It's just math.

http://www.cmghome.com

My wife and I did this a few years ago. Our mortgage is through Wells Fargo and they offered this to us with no fees. It made sense to us and now we make two payments each month and should have our house paid off considerably quicker. If you are good about making extra payments you shouldn't need to do this. When our mortgage lender offered this to us with no cost to us we jumped at it.

[marco]

My wife and I did this a few years ago. Our mortgage is through Wells Fargo and they offered this to us with no fees. It made sense to us and now we make two payments each month and should have our house paid off considerably quicker. If you are good about making extra payments you shouldn't need to do this. When our mortgage lender offered this to us with no cost to us we jumped at it.

That's rare, but Wells Fargo is a solid servicing company, one of the best out there.

[billiken_roy]

box, miami is correct. all you do by paying every other week is make the equal of one extra monthly pmt per month. you will come real close to the same effect doing the same yourself anyway any time throughout the year in extra principal pmts. the only other advantage the every other month might give you is an equal cash flow scenario for your own financial needs.

one thing, it is nice to pay off your mortgage first, but the truth is that any other debt you have is more important to focus on paying off before your mortgage. typically you mortgage is the lowest interest lending instrument you have and second dont forget that mortgage interest is tax deductible whereas that car pmt or credit card is not.

[Prngr44]

Wachovia just rolled out an interesting mortgage vehicle that lets you make flexible payments depending on your situation.

1. A negative amort. payment (WAY SCARY!!)
2. Interest only payment. (LESS SCARY)
3. 30 year rated principal + interest.
4. 15 year rated principal + interest.

I think it's a scary kind of loan because I think most people aren't disciplined enough to make the legit payments if they don't HAVE to but for someone like b_roy described as having larger amounts of other debts it's a decent way to get those payed off before you start making regular old payments. There's a 1% premium on the std. 30 year rate for this one though.

[wildhorse]

box, miami is correct. all you do by paying every other week is make the equal of one extra monthly pmt per month. you will come real close to the same effect doing the same yourself anyway any time throughout the year in extra principal pmts. the only other advantage the every other month might give you is an equal cash flow scenario for your own financial needs.

one thing, it is nice to pay off your mortgage first, but the truth is that any other debt you have is more important to focus on paying off before your mortgage. typically you mortgage is the lowest interest lending instrument you have and second dont forget that mortgage interest is tax deductible whereas that car pmt or credit card is not.

I think you meant to say one extra monthly payment per year, Roy.