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-Save thousands in interest |
-Pay off your loan years earlier |
-No change to spending habits |
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Answers to common questions:
- Why hasn't this loan been offered to the public in the
past? [answer]
- Who is CMG and what is their role? [answer]
- Will my loan be sold? Who will service it? [answer]
- What is my "credit line"? [answer]
- How do I make payments? [answer]
- Can I make extra lump-sum payments in addition to my
payroll deposit? [answer]
- Should I put all of my available cash into the mortgage?
[answer]
- Should I close my old checking and savings accounts? [answer]
- Are my payments FDIC insured? [answer]
- How and when does my payment change? [answer]
- What is the LIBOR index? [answer]
- What happens when I pay off the loan EARLY? [answer]
- What happens if my home loses value? [answer]
- Do I have to pay off my loan early? [answer]
- How do I find out how fast my loan should pay off? [answer]
- What happens if I miss a payment? [answer]
- How do I access the equity in my account for expenses? [answer]
- Do I need to change my spending habits? [answer]
- Is there a maximum amount you can draw from the account?
[answer]
- Isn't access to all that equity a bit dangerous? [answer]
- Can I use this loan as a platform from which to make
other outside investments? [answer]
- What portion of the interest I pay is tax deductible? [answer]
- Won't paying less mortgage interest reduce my tax
deduction? [answer]
- Why is the margin on this loan higher than on other
adjustable rate loans? [answer]
- Why is there an annual fee? [answer]
1. Why hasn’t this loan been offered
to the public in the past?
It's simple. Banks have historically dominated the mortgage
market, and they make money by paying small interest rates on
deposits, and then loaning that money back out in the form of
mortgages, earning a profit on the “spread” between their loan
rates and deposit rates. If banks offered this to their
customers, their spread would disappear, and with it,
considerable profits.
2. Who is CMG and what is their role?
CMG is a mortgage banker who works with select loan agents on
this exclusive loan product.CMG developed the product and funds
the loan.
3. Will my loan be sold? Who will
service it?
CMG works with subservicing partners, who power the
transactional aspects of the product (the ATM card, checks,
electronic transfers, etc.). CMG may sell the underlying asset
to investors, but this will be transparent to borrowers.
4. What is my “credit line”?
Your credit line is the maximum amount you can borrow under the
terms of the mortgage. This is usually higher than your first
draw amount, which will typically be used to pay off an old
mortgage (in a refinance) or complete a purchase transaction.
Your credit line will remain the same throughout the 10-year
interest-only period, and then it will decline by 1/240 per
month throughout the subsequent 20-year repayment period,
reaching zero at the end of the 30-year term. You'll need to
keep your principal balance below this line throughout the term
of the loan, meaning that you'll at least need to be making
progress against paying down principal during the final 20
years.
5. How do I make payments?
Every time you make a direct deposit of your payroll, or add
funds from another account, you're in effect making a payment.
Then at the end of each monthly statement period, we add a
charge for interest based on your daily principal balance. This
charge is simply added to your principal balance. You actually
only owe interest-only for the first 10 years; after that you'll
be in the “repayment period”, where your credit line starts to
decrease regularly (1/240 per month) so that you do pay off in
30 years, and you'll need to be making progress against both
principal and interest during that period.
6. Can I make extra lump-sum payments
in addition to my payroll deposit?
Anytime, and this can be beneficial. Moving funds from
low-interest deposit accounts or poorly-performing assets into
your mortgage will reduce your principal instantly, and save you
even more interest, allowing you to pay off even sooner. And,
you have access to the additional equity this creates.
7. Should I put all of my available
cash into the mortgage?
While we do not recommend putting “all of your eggs in one
basket,” if your cash is earning less than your mortgage
interest rate, it could be an excellent idea to move a portion
of it into the mortgage. Instead of “earning” 1-2% on your
deposits, for example, you'll “save” 5-6% on your mortgage. In
effect, you get the same advantage the banks now enjoy with your
money. Again, you have access to your available credit line if
you need it.
8. Should I close my old checking and
savings accounts?
No, but to maximize the effectiveness of the product, you will
want to flow as much of your cash finances through this account
as possible. The more funds you “park” in the account, the lower
your daily principal balance, and the more interest you save.
9. Are my payments FDIC insured?
No. This is a line of credit mortgage, not a savings account,
and therefore not FDIC insured. You are paying down your
mortgage, not making a deposit in the traditional sense. Years
of traditional banking has trained us to think we need to have a
“pile” of money somewhere, when in reality, the banks are using
it to loan money to others. In this new approach, you access
your wealth in a completely new way — it's in your real estate
investment.
10. How and when does my payment
change?
The interest due on your loan may change monthly, based on the
LIBOR interest rate index.
11. What is the LIBOR index?
The London Interbank Offered Rate Index (LIBOR) is an average of
the interest rates that major international banks charge each
other to borrow U.S. dollars in the London money market. It is
one of the most common indexes on which to base mortgages.
12. What happens when I pay off the
loan EARLY?
If you pay off the loan early, you still have access to the
accumulated equity, up to your credit line amount, until your
30-year term is complete. If you continue to make deposits into
the account, and your loan is paid in full, those deposits will
earn interest at a competitive rate.
13. What happens if my home loses
value?
Just like any mortgage, you owe the amount you've borrowed,
regardless of what happens to the value of your home. The
problem some people have when their home devalues is that they
end up owing more on the house than the house is worth. However,
since the Home Ownership Accelerator allows you to pay down
principal faster, you'll stand a better chance of avoiding being
“underwater” on your loan as compared to a traditional loan.
14. Do I have to pay off my loan
early?
No. You can pay off over the full 30 years if you wish.
15. How do I find out how fast my
loan should pay off?
To get an advance estimate of your payoff timing, interest
costs, and to evaluate different interest rate environments,
visit www.cmghome.com to use our interactive calculator.
16. What happens if I miss a
payment?
The loan is ideal for people whose income might vary. During the
first 10 years, you only owe interest, which is automatically
added to your principal balance monthly, so there's really no
“payment” to make as long as your principal balance stays below
your credit line amount. The only payment you need to make is to
stay below your credit line amount.
17. How do I access the equity in my
account for expenses?
Just like you access your bank account. You have online access
to view your account balances and transactions, and you can
access funds via check, ATM, EFT, ACH and bill-pay.
18. Do I need to change my spending
habits?
No. Generally that will not be necessary, and since more of your
income will be going towards principal, you'll likely come out
ahead even then. However, you'll find that if you can find a way
to trim expenses even more, you'll pay off even earlier.
19. Is there a maximum amount you
can draw from the account?
You can draw up to your credit line; the amount you have
available is the difference between your principal balance and
the line amount.
20. Isn't access to all that equity
a bit dangerous?
As with any of your finances, you need to be disciplined. You
probably get several credit card offers each week, and can
easily open a home equity line of credit to access your home's
available equity. Any of which offer you the same ability to get
into financial trouble.
21. Can I use this loan as a
platform from which to make other outside investments?
Absolutely. Sophisticated investors will see it as an
opportunity to “borrow” money from their available equity and
“reinvest” it in an outside investment at a higher rate of
return, netting the difference between the two.
22. What portion of the interest I
pay is tax deductible?
Since this is a mortgage and since it represents the acquisition
debt on your property, under IRS publication 936, the interest
you pay may be tax deductible; consult your tax advisor for more
guidance.
23. Won’t paying less mortgage
interest reduce my tax deduction?
Of course it will. Unless you're currently a renter, paying a
dollar in interest to get a thirty-cent tax deduction is a
no-win game. If maximizing your interest tax deduction really
made sense, you'd want to pay a higher interest rate on your
loans, right? So minimize overall interest with the CMG Home
Ownership Accelerator, and own your home sooner.
24. Why is the margin on this loan
higher than on other adjustable rate loans?
The margin on this loan may be higher than that of other loans
because of the highly transactional nature of the product, which
has a cost. However, most borrowers will find that the higher
margin will have a minimal effect on the overall payoff timing,
particularly when compared to the costs and lengthy payoff times
for traditional loans.
25. Why is there an annual fee?
Most mortgages do not have the ability to do transactions, and
traditional home equity lines of credit only let you write a low
number of checks (often with a minimum draw). This is a mortgage
which gives you full transactional capabilities, which is what
the annual fee helps offset. Compared to the amount of interest
you'll be able to save, it's a relatively small fee.
Intellichoice Financial Services, LLC.
MB#0908584 |
