A traditional Home Equity Line of Credit (HELOC) has advantages and disadvantages. Usually placed as a second mortgage, it may be easier to qualify for. It is a simple interest loan and easier to pay off quickly. The traditional disadvantage is, after 10 years this HELOC turns into a 15 years amortized mortgage. If we were not diligent to be respectful of the 10 years interest only period we might get caught up in a higher monthly mandatory amortized payment than expected.
There is a NEW HELOC called Smart Loan or the All In One (AIO) Loan. This loan is in the United States since 2004 and has never had a late payment or default in this time. It is designed as a First Position loan. We can use New Heloc for purchase or refinance. This New Heloc is modernized to include every advantage we are accustomed to having in full service checking accounts. Smart Loan KEEPs the Interest Only feature and the term is extended to 30 years. At the end of ten years the “available credit” is reduced monthly 1/240th of the principle amount.
You will qualify for this loan just like any other loan. There is an exception for traditional Income calculations called an “asset depletion income calculation.” Our Underwriting totals your asset values and divide by some number of years related to your age and use this number as your income.
The Chief advantage of this simple interest loan is we escape the 10 years of front loaded interest expense we have with an amortized loan. The Smart Loan calculates interest due on a daily basis. ANY money added to your mortgage/checking (Payroll for instance) account is, in effect, a principle payment. The monthly payment is the sum of each days (per diem) calculated interest expense. For example $10,000 of monthly cash flow, deposited into your mortgage/checking account, lowers your per diem interest expense every day it is in the account. Compare to your amortized loan, any money put to that mortgage is Lost Liquidity, locked in the mortgage. With our New Heloc, you keep your liquidity. Even when the bulk of your cash flow leaves the mortgage/checking account to pay bills in 15 or 20 days you saved the interest expense on those days. This is called working smarter with your money.
Dormant money in checking or savings accounts at .5% rate of return can now dramatically reduce your mortgage interest expense. You could pay your home off in 1/3 of the time and still have access to your liquidity. Bottom Line? YOU PAID A LOT LESS INTEREST.
Over $350 trillion of RETAIL & COMMERCIAL BANKERS financial products, including this one, are tied to this type of financial structure. One Hundred Percent (100%) of banks use it when they borrow money from the Fed. This structure is recognized as the most stable and cheapest but it is not available to anybody. A minimum of 700 score and 10% of home equity is required for homeowners/buyers. (720 score and 20% equity is best). Loan amounts can go as high as Jumbo, Super Jumbo amounts of $2,000,000. Higher loan amounts may be granted on the strength of an exception basis. ALSO, this loan is available for residential investment properties.
We are please to be approved to offer this modern home finance for the modern era. “New Heloc” Smart Loan is all about working smarter with money.