Mortgage Accelerator

  

Categories: Mortgage

See: Mortgage.

We’d love to add some flair to our home mortgage, and also possibly pay it off a lot faster than 30 years, which is why we’re all about the mortgage accelerator loan.

Imagine that a checking account and a home equity loan had a baby. We take out a loan for the amount we need, just as we do with a normal mortgage. But instead of having fixed payments every month that we have to pay out of our checking account, it works a little differently. Our paychecks go directly into the mortgage account, and then we pay our other bills out of that. At the end of the month, whatever's leftover goes toward the mortgage.

Pretty ingenious, eh? At least...it is if we’re making more money than we’re spending. If we’re not, then we risk not paying enough toward the mortgage every month, and eventually taking a lot longer than 30 years to pay off the loan. Also, though mortgage accelerators are crazy common in places like Australia and the UK (and they’re gaining popularity here as well), we need to take a careful look at the interest rate before we get too excited. Since it's such a flexible type of loan, the interest rates can be a lot higher than they would be on a standard 30-year mortgage. And if we’re not in a position to put a nice chunk of change toward the loan amount every month, those interest charges could add up really fast.

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Finance: What is a second mortgage?4 Views

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Finance allah shmoop What is a second mortgage Okay you

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know what a first mortgages it's otherwise cleverly named what

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is called it is called oh yeah Mortgage it's Just

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a loan on a house You paid four hundred grand

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for this baby Hundred grand down two hundred fifty grand

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in a first mortgage And they're still fifty grand You

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owe well where's that fifty large coming from the bank

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wouldn't loan you any more on a first mortgage that

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was costing you six percent a year Tio you know

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to rent that money So you had to get a

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second mortgage which should things go awry and you become

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a statistic Well that's it's fully behind the first mortgage

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in the priority stack of payback So in a bankruptcy

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situation the first mortgage first what's called a first mortgage

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get it fully paid along with any fees associated with

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it and back interest accrued and any other things that

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are associated with that first mortgage it stands in line

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first in priority Then any cash leftover gets attributed to

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that second mortgage So not surprisingly second mortgage money costs

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the risk of non payment in a bad situation is

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