Mortgage Accelerators

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There’s a fancy new loan product that’s come to town:  Mortgage Accelerators.  I’ve heard about them from a couple of different loan brokers now, but the first to tell me was Rob Jones with Charter Funding, a direct lender that’s new in town.  Rob sent me this great video explaining how it works:

http://www.cmgfs.com/home_loans/cmghome/movie/player.html

It sounds really great, so I asked another lender I work with frequently what he thought about such loans.  He wasn’t too keen on the mortgage accelerator, since it’s not a fixed rate loan…although I imagine that he, like most lenders in town, put people into all kinds of loans without a fixed rate, so I’m not sure that this, in and of itself, is such a horrible thing – you can always re-finance out of this loan if the rate creeps too high for comfort.

He also didn’t like the fact that it allows the borrower just to suck all the equity out of the house on a moment’s notice.  True, that’s a risk – but that’s the case with any ol’ HELOC (Home Equity Line of Credit), which many homeowners have.

It looks to me like this is the kind of loan for people savvy people who are responsible with their credit.  Actually, another loan broker told me he thought you need to have a FICO Score of 720 or higher to get a loan of this sort.  Don’t know if that’s true, but it seems reasonable to me; it’s not the kind of product you would want to put in the hands of reckless spenders.

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