'Mortgage accelerator' loans come to U.S.
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For the indisciplined, the mortgage accelerator program makes the additional principal payments automatically. That's the real hook to this program -- unless you spend the money by drawing against the line of credit, your paycheck goes toward paying off the house.

Where a mortgage accelerator loan program gives the homeowner additional flexibility, however, is in having the line of credit available if there is an emergency need for cash. Make additional principal payments on a conventional 30-year fixed-rate loan and you can't borrow that money without taking out a home equity line of credit or home equity loan. With the mortgage accelerator program you already have the line in place. That gives homeowners confidence that they can be aggressive in repaying the loan and money will still be readily available if a financial emergency crops up.

Homeowners could cobble together a payment plan similar to a mortgage accelerator on their own by taking out a conventional HELOC, but a mortgage product specifically structured for this approach to consumer finances has some advantages.

Some of the product attributes of the Home Ownership Accelerator and Macquarie Asset Manager are shown in the following table.

Accelerator mortgage comparison

Macquarie "Asset Manager" loan CMG "Home Ownership Accelarator" loan Loan type first lien HELOC first lien HELOC Index Prime 1-month LIBOR 1-month LIBOR Direct deposit of income required No Yes Deposits/ payments Funds transfer "to" (ACH Credit) Funds transfer "to" (ACH Credit) Funds transfer from (ACH Debit) Direct deposit Wire transfer to account Bank by mail Withdrawals Checks Checks ATM (STAR\CIRRUS network, 8 free\month) VISA point-of-sale card Online bill pay Life cap 21% 5% over initial rate Minimum FICO score 660 680 Maximum debt-to-income ratio 45% 48%

Sources: CMG Home Ownership Accelerator comparison chart, Macquarie Asset Manager flier, MGIC Insight Features (March 2006)

Mortgage accelerator loans have interest-only minimum payments during the first 10 years -- although that goes against the idea of paying off your mortgage as fast as you can. After 10 years, the line of credit decreases by 1/240 each month over the remaining loan term (20 years x 12) forcing principal repayment until the loan is paid off at the end of the loan term.