Should it be easier to pay down your mortgage faster, potentially saving you thousands of dollars of interest?
Should the process also be simple, incorporating banking features you already use daily? And provide access to your assets without having to refinance?
“While a lot of people don’t believe it’s possible to pay down their mortgage, the All In One Loan makes it a very realistic goal,” says Jodi Longley, loan officer, retail lending, with CMG Financial.
In turn, the savings realized can be applied to other parts of your financial plan, whether that’s retirement planning or children’s post-secondary costs, for example.
Time for an innovative idea
While 30- and 15-year fixed residential mortgages have been around since the 1930s, we’ve seen little innovation since. And while these pre-Second World War-era mortgages are still a good choice for many borrowers, they don’t suit everyone.
With these mortgages, borrowers can lock in their rate, but it takes longer to pay down principal, because you pay the interest upfront.
The All In One Loan combines banking functionality with home financing into one dynamic product. The interest rate matters less, because you pay down principal quicker, reducing the interest paid and letting you be debt-free sooner.
While the concept may seem new to US homeowners, similar products have been used for years in Canada, Australia, New Zealand and Western Europe. Even here at home, many lenders provide business clients with similar products, known as universal accounts and zero-balance accounts.
“Many borrowers don’t realize the impact a traditional mortgage has on their ability to save for retirement,” Longley says. “While interest rates may be low, and their payment affordable, the interest paid over the first 10 years alone is more than double that of principal.”
How it works:
Essentially operating as your checking account too, deposits like your paycheck help pay down the principal. At the same time, you have easy access to your equity – no refinancing needed – for those emergencies that crop up from time to time.
“For the household that is budget conscious, that sets financial goals, it’s a game-changer,” Longley says.