The Greatest Loan Story Never Sold (revisited)

 The home ownership accelerator loan:

It has become a great tool for the high wage earner. It's not for everyone. It has been the loan of choice in Australia for a long time. It's starting to gain traction here because of it's incredible flexibility and the interest saved over the life a loan as the loan balance gets paid more rapidly over time. Why? Because, it pays down principal before interest. That's the opposite of a traditional 30 year mortgage in which interest is front loaded. So, your loan could be paid down to zero in 15 years instead of 30 and still remain open. It also acts as your primary bank and home equity line of credit.

A couple of main features:

• With the Home Ownership Accelerator, you direct-deposit your entire paycheck into your mortgage, instead of your checking account. This immediately reduces your principal balance. Since interest is based on your daily balance, you start saving interest immediately compared to traditional loans.
• You pay all of your expenses out of your mortgage, just like you would with a traditional bank account -- using the unlimited checks, free ATM/Debit card, and free online bill-pay that comes with the account. Until you need the money, though, it's in your mortgage in the form of a lower principal balance, saving you 5-6% in mortgage interest, instead of earning 1% in a bank account. Less interest means that more of your take-home pay goes towards principal, and you pay off sooner.
• Direct deposit of your paycheck is required and is your mortgage payment.
• The rate is tied to Libor.
• Your spare cash is in your home instead of in a checking account. Your cash is, in effect, converted to home equity until you need it, saving you interest until it is spent.
• Most banks and brokers offer this product.
  

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