Interesting Concept - One Account Mortgage

Sponsored Article

Anyone that has ever attempted to make an extra payment on their mortgage or especially several extra payments, may have learned that their mortgage company may not apply that money to the principle right away.

Every mortgage is different some treat it as a prepayment on a future bill and hold the money while they continue to charge interest on the mortgage balance.  Others may not allow it outright.  That may seem strange, but it usually means they have tight rules hoping to force you to refinance into a plan where you pay your mortgage every two weeks instead of monthly to save interest.

Paying more frequently saves you money in interest, just like credit cards charge you more interest when they are computed daily. 

So when I found a new type of mortgage that essentially lets you pay down your mortgage daily, I was intrigued.

The One account mortgage allows you to combine your current account with your mortgage. Send your direct deposit pay check to the account and you can pay the mortgage down as the money coms in and then as you need money for other bills and expenses you withdraw those funds. (essentially borrowing again on your house)

If I understand the concept correctly it would be like combining your checking account with your mortgage and a home equity line of credit all in one.

The goal is to provide you with an instant pay down on your mortgage as money comes in saving you money as interest is computed daily. Then as you take money out, you borrow again and start the interest clock on that portion.

The interest rate on this type of mortgage is 6.45%. There are two questions that I would want answered before I would consider this type of mortgage. One could I get a better rate of return on my checking/savings than 6.45%? If the answer is yes and if that return is calculated daily or if the real money turns out to be more than the time value of money on 6.45% computed daily, then it could be a good deal from that perspective.

The second question would be - How does the law look at this type of mortgage? Is it deductible for tax purposes? What happens if a person goes bankrupt or forecloses? I suspect those answers would be a little more difficult and depend on the country or state you live in.

Overall I like the concept as it allows the daily pay down of interest as cash flows in and out. I would want the other questions answered as well, but its a concept worth paying attention to going into the future.