This process is essentially nothing new in that the method outlined expounds on what is commonly referred to as, "Accelerated Payments". Whereby, a homeowner takes the agreed monthly payment and splits it into two payments. The net effect is it pays down the average daily principal that interest is calculated by and saves the homeowner some measure of the interest payments each month. Banks actually encourage homeowners to take advantage of this provision if they have the cash flow to split their monthly payment in two.
So why all of a sudden is the concept of paying down principal and saving money on interest payments becoming such a big deal? Because some smart Chaps from Australia have written an ingenious software program. Whereby, the software program monitors virtually all of a person’s average daily balance on all of their borrowed money and creates a payment schedule that saves a homeowner not just a few thousand dollars but in most cases the savings will be a few hundred thousand dollars over the life of their loans, especially the mortgage loan. And again, it takes full advantage of borrowing & payment protocols that already exist within the American banking industry. The result is the loan’s life itself will likely be cut in half or even by 2/3’s of the original time. And, this software program also reports to the homeowner their interest savings on a daily basis. Plus, instead of brain-hand calculations the software makes it a much more reliable, convenient & efficient way to employ the existing banking protocols. That’s why!
Is there a catch? No. However, there is a criterion if the software program is to work for you. Jim Snyder, a reporter for KVBC TV Las Vegas, Nevada produced an article on this subject titled, "Own Your Home Years Sooner" and reported that the main criterion for successfully using the software are, 1) Your income needs to be able to meet the existing monthly payments. 2) You need to qualify for a "Home Equity Line of Credit" called a HELOC (HEE-LOCK). 3) Have the $3500.00 necessary to purchase the software.
Why the HELOC? It’s the vehicle used to both actually pay down the principal using idle money (such as the deposit of a paycheck ordinarily left idle in an account until the bills are due) and to borrow out the money to pay the loan and the other bills when they come due. The software program monitors all of the activity, calculates an optimum time to make the payments, and also sends a daily savings report to the homeowner.
Why the $3500.00? I interviewed "Honchos" from two different companies and they both said, "support". It seems that the software necessary to monitor, make payments and adjustments as necessary, is not the type of program to simply be down loaded, installed and then put to use right out of a box or off the internet. Actual human support should be a welcome aspect of using the software since at this point in time a homeowner can not expect any direct help from the bankers. The fixed tutorial & support costs are built into the price of the software so most homeowners use the HELOC they apply for to pay for the software.
Each homeowner simply needs to evaluate the savings against the cost and decide if it’s a reasonable undertaking. The process can be evaluated by what amounts to be a “Good Faith Estimate” of sorts produced by for the homeowner by the company so you have an idea of the savings before applying for the HELOC. And, for those homeowners who average only a few years in a home, sell it, and then move on, or for those who still need to “buy their toys”, the math I saw shows this hyper-accelerated payment process is a perfect way for a home owner to have such latitude and still produce equity fast.
As for the bankers, are they happy about this process? Currently, no is a polite way to put it. I shared all of this information with Cindy, a friend of mine and the manager of my bank who said, "I doubt any bank would like this". But then I posed the question, "doesn’t this just mean, by people paying off their loan faster, that the money to re loan to someone else will be freed up faster too"? Cindy said, "possibly". The point here is no one is likely to get hurt from people paying down their loan faster than originally agreed because banks are notorious for their reluctance to loan money long term. They would much rather deal in short term loans anyway. Seems more like a win-win scenario eh?
Do the bankers really need to beware of the ingenious software? From what I’ve seen that’s doubtful, if for no other reason than the fact not everyone will pass the three main criteria necessary to qualify for the savings.
Meanwhile, I have coming to my radio show as my special guest one of the Honchos I interviewed for this article. He is a founder of a company that created and supports this amazing software program. To tune in or even ask questions go to www.garyjamesradioshow.com click on "schedule" for the shows date & time. You can also gather further information by going to www.themortgagebuster.com Tell them that Gary James sent you and receive a gift from me.
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About the author: Gary James is a writer, producer, and radio talk show host. He covers subjects both written and on the air that are not typically given fair & unbiased coverage by standard media outlets.