Posted on: 07th Nov, 2007 04:50 pm
i am interested in the homeownership accelerator program offered throuhg cmg, but cannot find much information on it. sounds to good to be true. actual unbiased customer reviews would be great.
Eugene....
Very true.... in regards to the part of the procrastination and mathematically challenged... :D
There are days I know I fit into that category... :D Something I would love to stay out of though.....
Very true.... in regards to the part of the procrastination and mathematically challenged... :D
There are days I know I fit into that category... :D Something I would love to stay out of though.....
Guys, I would like to shed more light on this. The CMG product is similar to a ZERO balance account used by many companies in the US. I would recommend doing a search for CMG's Home Ownership Accelerator and you can see the information from the lender's site.
As for smoke and mirrors, I do not believe this loan to be that, it gives you a financial tool for the rest of your life. Basic principal is using your paycheck to reduce your obligation, although temporarily, and reducing mortgage interest charges. Payoff occurs because of certain assumptions. These assumptions, you keep your mortgage payment in the loan, and your savings is left in the loan.
Please note the original question was about the Home Ownership Accelerator loan. Not the Ufirst or Tardis system. Some of the information I see above is mixing different products. Like comparing a car and a plane - both can get you to the destination you want. But they are dramatically different ways to travel.
Major difference is, Ufirst = software solution, Macquire = original system, and CMG = Credit line with fully function banking abilities.
I hope this helps!
Shawn
As for smoke and mirrors, I do not believe this loan to be that, it gives you a financial tool for the rest of your life. Basic principal is using your paycheck to reduce your obligation, although temporarily, and reducing mortgage interest charges. Payoff occurs because of certain assumptions. These assumptions, you keep your mortgage payment in the loan, and your savings is left in the loan.
Please note the original question was about the Home Ownership Accelerator loan. Not the Ufirst or Tardis system. Some of the information I see above is mixing different products. Like comparing a car and a plane - both can get you to the destination you want. But they are dramatically different ways to travel.
Major difference is, Ufirst = software solution, Macquire = original system, and CMG = Credit line with fully function banking abilities.
I hope this helps!
Shawn
Hello Shawn,
No that really didn't help at all. Simply stated you said nothing at all. There is no basic principal. If you pay your extra money to your 1st mortgage instead of this bs aloc or heloc or whatever you want to call it, you will PAY YOUR MORTGAGE FASTER. This program does not accelerate the payoff time at all, the extra payments THAT YOU PAY are what pays down the first. The heloc/2nd mortgage is useless for what the companies claims it does.
What you said above makes no sense.
And I think they are all BS products. They are all on equal playing fields in my book, because they are useless. Period.
No that really didn't help at all. Simply stated you said nothing at all. There is no basic principal. If you pay your extra money to your 1st mortgage instead of this bs aloc or heloc or whatever you want to call it, you will PAY YOUR MORTGAGE FASTER. This program does not accelerate the payoff time at all, the extra payments THAT YOU PAY are what pays down the first. The heloc/2nd mortgage is useless for what the companies claims it does.
What you said above makes no sense.
And I think they are all BS products. They are all on equal playing fields in my book, because they are useless. Period.
So, that's the issue here - Mortgage accelerator program is an expensive one and you can even do without it, just that you need to be careful about how you manage your finances.
Frankly speaking, if I know the importance of budget and understand how to pay in time, then there's no use of any program to make it fast. Why do I have to spend more on a software when I can myself do it just by being disciplined in managing my finances.
Frankly speaking, if I know the importance of budget and understand how to pay in time, then there's no use of any program to make it fast. Why do I have to spend more on a software when I can myself do it just by being disciplined in managing my finances.
let me give some examples to help further clarify. i am sorry if what i said was not fully understood.
cmg's home ownership accelerator works like this:
i am going to use round numbers and a very simplified example to show the math. for accurate numbers i would need to know a lot about the customer's balances and spending habits, all the way to the daily balances.
$100,000 balance. 10,000 net income. 7,000 in bills. rate of 6.5% monthly payment of 541.67 (io). daily interest charge of .01805%.
balance would move like this. 100,000 to start. income deposited on the first of the month, 90,000 balance.
now you would incur a daily interest charge of $16.25 (balance * daily interest rate) at the $90,000 level. say on the 15th of the month your pay half of your monthly bills, $3500. balance would move to $93,500, and we will continue this till the last day of the month. for the next 15 days your daily interest charge would be $16.88. last day of the month you incur the rest of the monthly bills. so your balance goes to $97,000 to begin next month.
what does this all mean? customer on an io program, expects a payment of $541.67. with the cmg's product they actually incur an interest charge of $497.00 (90000 for 15 days = 243.76, and 93500 for 15 days = 253.24). for discussions sake, let assume the $7,000 covers all of their bills, mortgage + everything else.
now we start month 2 at 97000. this would continue to month three at 94,000. so on and so forth.
other examples. say a customer could actually extinguish there mortgage for parts of the month (this actually occurred with a small biz owner). 100,000 balance extinguished for 25 days of the month. they would only incur a daily interest charge of $18.06 for 5 days. your 100,000 mortgage cost you $90.28 for the month.
a large portion of my examples are the liquidity you have with this mortgage. every dollar put to this mortgage is available to you. you do not lose any access to the money so you can put everything into temporarily.
using your previous examples you accelerate your regular mortgage you have to refinance to get the cash back out, so what do we see? customer tend not to put their money into their mortgage because they might need the cash. with the hoa you can put all of your cash towards the mortgage, reserves, short term money, savings, etc. reducing your interest charges by just storing your money there until you need it.
i do not disagree that you can do similar things with additional payments to your mortgage or enter a bi-weekly. i just believe that this product provides the most flexible method to do it.
cmg's home ownership accelerator works like this:
i am going to use round numbers and a very simplified example to show the math. for accurate numbers i would need to know a lot about the customer's balances and spending habits, all the way to the daily balances.
$100,000 balance. 10,000 net income. 7,000 in bills. rate of 6.5% monthly payment of 541.67 (io). daily interest charge of .01805%.
balance would move like this. 100,000 to start. income deposited on the first of the month, 90,000 balance.
now you would incur a daily interest charge of $16.25 (balance * daily interest rate) at the $90,000 level. say on the 15th of the month your pay half of your monthly bills, $3500. balance would move to $93,500, and we will continue this till the last day of the month. for the next 15 days your daily interest charge would be $16.88. last day of the month you incur the rest of the monthly bills. so your balance goes to $97,000 to begin next month.
what does this all mean? customer on an io program, expects a payment of $541.67. with the cmg's product they actually incur an interest charge of $497.00 (90000 for 15 days = 243.76, and 93500 for 15 days = 253.24). for discussions sake, let assume the $7,000 covers all of their bills, mortgage + everything else.
now we start month 2 at 97000. this would continue to month three at 94,000. so on and so forth.
other examples. say a customer could actually extinguish there mortgage for parts of the month (this actually occurred with a small biz owner). 100,000 balance extinguished for 25 days of the month. they would only incur a daily interest charge of $18.06 for 5 days. your 100,000 mortgage cost you $90.28 for the month.
a large portion of my examples are the liquidity you have with this mortgage. every dollar put to this mortgage is available to you. you do not lose any access to the money so you can put everything into temporarily.
using your previous examples you accelerate your regular mortgage you have to refinance to get the cash back out, so what do we see? customer tend not to put their money into their mortgage because they might need the cash. with the hoa you can put all of your cash towards the mortgage, reserves, short term money, savings, etc. reducing your interest charges by just storing your money there until you need it.
i do not disagree that you can do similar things with additional payments to your mortgage or enter a bi-weekly. i just believe that this product provides the most flexible method to do it.
I had it spaced and paragrahed nicely.....
well this is all great on paper but in reality a person that makes a 10000 net a month makes 17-18000 gross and lives in a 1,000,000 home and just their mortgage payment is 5000+ (if you put some money down) then you add their taxes and insurance thats another $1500. Now car payments 1000 (you not driving a KIA and you probably got 2 cars), then when you make 10000 a month you think you can afford 2000 ( thouse who dont never made 100k+ trust me your tastes change) for food/bills/etc. Thats 5000+1500+1000+2000=9500. That leaves you with $500/mon you can use to reduce your 800k mortgage with and that is if nothing else happens like going out to restaurants and buying something outside you budget. If you can keep to that schedule you will be able to be debt free in 23-25 years rather then 30 which you could do by paying $300-500/month towards your principle anyways.
Now if you had a financial planner he could tell you that your home is a good tax benefit for now and since you have $500/mon you can put away to start paying dow thouse cars asap + you could stop spending so much and shop smarter and save another $500/mon now with $1000 extra going towards your cars each mon you done with thouse in 2 yrs and now putting extra 2k towards your mortgage wich will payoof your mortgage in under 15 years saving you tons in interest.
And just out of curiosity how many people make 10,000 net? Lets keep it in reality
Now if you had a financial planner he could tell you that your home is a good tax benefit for now and since you have $500/mon you can put away to start paying dow thouse cars asap + you could stop spending so much and shop smarter and save another $500/mon now with $1000 extra going towards your cars each mon you done with thouse in 2 yrs and now putting extra 2k towards your mortgage wich will payoof your mortgage in under 15 years saving you tons in interest.
And just out of curiosity how many people make 10,000 net? Lets keep it in reality
Evolovik. The purpose of the previous post was to show the mechanics of the loan. I do understand that my numbers seem too perfect but again the purpose was to show the workings of the loan.
The biggest thing about the HOA is not so much what you do or how much you make. The key is cashflow. Your example shows a person that is possibly living outside of their means. One unexpected expense and they would be in trouble. They probably would not be a good canidate for the loan. We have seen Doctors, Lawyers, and other professions that like the loan but It will not work for them due to zero or negitive cashflow.
But to further look at your example, your customer could reduce their loan balance by 15,000 a month, temporarily. To follow my previous model for simplicity sake. Your client would have $500 left per month. So to split there expense into two parts 7250 and 7250. Your interest charge would be $5416.67 (6.5%) HOA = $5355.15, 15 days at $985,000 and the rest of the month at $992,250. Finally they would spend the rest of the money and return to a loan amount of $999,500 for month 2.
I have not included other items you spoke of, spending savings, car payoff, etc.
Some other clarifications. The CMG product is a first position HELOC based on LIBOR, and a fully functional bank account. You do a refinance into the product, not a software purchase. Annual fee of $30 and no PPP or anything else.
I can post the website, but I am unsure of this site's TOS and do not want to violate them. Please tell me if this is okay, I will pass the direct link to their website.
CMG does also offer something that could be viewed as an ARM for the loan. You can cap the upwards movement of the rate for a 3 -5 year period for an additional cost.
The biggest thing about the HOA is not so much what you do or how much you make. The key is cashflow. Your example shows a person that is possibly living outside of their means. One unexpected expense and they would be in trouble. They probably would not be a good canidate for the loan. We have seen Doctors, Lawyers, and other professions that like the loan but It will not work for them due to zero or negitive cashflow.
But to further look at your example, your customer could reduce their loan balance by 15,000 a month, temporarily. To follow my previous model for simplicity sake. Your client would have $500 left per month. So to split there expense into two parts 7250 and 7250. Your interest charge would be $5416.67 (6.5%) HOA = $5355.15, 15 days at $985,000 and the rest of the month at $992,250. Finally they would spend the rest of the money and return to a loan amount of $999,500 for month 2.
I have not included other items you spoke of, spending savings, car payoff, etc.
Some other clarifications. The CMG product is a first position HELOC based on LIBOR, and a fully functional bank account. You do a refinance into the product, not a software purchase. Annual fee of $30 and no PPP or anything else.
I can post the website, but I am unsure of this site's TOS and do not want to violate them. Please tell me if this is okay, I will pass the direct link to their website.
CMG does also offer something that could be viewed as an ARM for the loan. You can cap the upwards movement of the rate for a 3 -5 year period for an additional cost.
scraig,
Firstly you are wrong. Second "something that could be viewed as an ARM for the loan" Not something that "could" be an ARM based off of the LIBOR. It "IS" an ARM (adjustable rate mortgage). Don't beat around the bush here.
Now on to the real math....and thank you for showing some numbers even though they prove nothing for you and just further the speculation your companies feed people. You have shown nothing except your unwillingness to speak the truth. Countless people on countless websites have had this same conversation. Yet you say "I am going to use round numbers and a very simplified example to show the math. For accurate numbers I would need to know a lot about the customer's balances and spending habits, all the way to the daily balances. "
Why not just do a straightforward example from start to finish. Be as complicated as you feel necessary to prove your point, and end the debate once and for all?.... because you can't. You will, like many others, simply start on with the rhetoric that I personally am growing tired of.
Here is how the breakdown works for a true prepayment method.
Per your example I am using a $3000 per month additional payment to principle. If you did this a $100,000 loan would be paid off in 32 payments. Thats right, 32 payments. And below is the first 3 months of ammortization. You can see were this method beats your scam hands down. By the way if you did interest only for 12 months like you show, the payment in the 13 month goes down to $3402.12 for the remainder of the 20 months.
ie.
1st payment $3541.67 = Balance of $97000
2nd payment $3541.67 = Balance of $93983.75
3rd payment $3541.67 = Balance of $90951.16
4th payment $3541.67 = Balance of $87902.14
5th through 12th payments are $3541.67
13th through 31 payments are $3402.12
and 1 final payment of $1827.17
No tricks or scams. Just a straight 30 year fixed rate with 12 months interest only paid off in 32 short months. And most importantly no need to worry about this new heloc going to a 15% interest rate. Quick question, when that happens, how are these people going to save money?
p.s. I only used the interest only in my example because you mentioned it. It is pointless also and actually causes you to have to make 1 extra payment. So if you skipped that part and just went straight 30 year fixed you could pay it off in 31 payments.
Don't give me the liquid money song and dance. After 31 payments... where do you think that money goes? Thats right folks, after 32 months you get to keep your $3500 plus per month and spend it, invest it, etc, any way you choose. Not waste it on unecessary interest.
Firstly you are wrong. Second "something that could be viewed as an ARM for the loan" Not something that "could" be an ARM based off of the LIBOR. It "IS" an ARM (adjustable rate mortgage). Don't beat around the bush here.
Now on to the real math....and thank you for showing some numbers even though they prove nothing for you and just further the speculation your companies feed people. You have shown nothing except your unwillingness to speak the truth. Countless people on countless websites have had this same conversation. Yet you say "I am going to use round numbers and a very simplified example to show the math. For accurate numbers I would need to know a lot about the customer's balances and spending habits, all the way to the daily balances. "
Why not just do a straightforward example from start to finish. Be as complicated as you feel necessary to prove your point, and end the debate once and for all?.... because you can't. You will, like many others, simply start on with the rhetoric that I personally am growing tired of.
Here is how the breakdown works for a true prepayment method.
Per your example I am using a $3000 per month additional payment to principle. If you did this a $100,000 loan would be paid off in 32 payments. Thats right, 32 payments. And below is the first 3 months of ammortization. You can see were this method beats your scam hands down. By the way if you did interest only for 12 months like you show, the payment in the 13 month goes down to $3402.12 for the remainder of the 20 months.
ie.
1st payment $3541.67 = Balance of $97000
2nd payment $3541.67 = Balance of $93983.75
3rd payment $3541.67 = Balance of $90951.16
4th payment $3541.67 = Balance of $87902.14
5th through 12th payments are $3541.67
13th through 31 payments are $3402.12
and 1 final payment of $1827.17
No tricks or scams. Just a straight 30 year fixed rate with 12 months interest only paid off in 32 short months. And most importantly no need to worry about this new heloc going to a 15% interest rate. Quick question, when that happens, how are these people going to save money?
p.s. I only used the interest only in my example because you mentioned it. It is pointless also and actually causes you to have to make 1 extra payment. So if you skipped that part and just went straight 30 year fixed you could pay it off in 31 payments.
Don't give me the liquid money song and dance. After 31 payments... where do you think that money goes? Thats right folks, after 32 months you get to keep your $3500 plus per month and spend it, invest it, etc, any way you choose. Not waste it on unecessary interest.
I guess I'll chime in too. I recently wrote in my blog that I thought these acceleration programs are a rip-off. I've been approached by many people in the loan businesss trying to get me to sell this product, because there's a network marketing aspect to it. That's why it's so expensive - since the commissions can be hefty. Every time I've really challenged the numbers from one of the salesmen, and ask them to use a real world example, and compare that to just paying your mortgage down on your own, they tend to go away quietly. So I agree with Eric and others above - you can achieve the same results when you have extra cash on your own and save the $3,500. In my humble opinion.
Rick,
Sorry but I always have to point this out. I agree with you, but "you can achieve the same results when you have extra cash on your own and save the $3,500" Not the same results, you get better results when you DON'T use the accelerators.
You know what the funniest thing is? When they call you and start rambling nonsense numbers at you... they act like you won't already have Calyx up and running. One guy recently told me that Point's math was wrong somehow because he was coming up with something different. Imagine if that were true... the most common LO software, which helps to originate what?... 70% of all mortgages... is wrong. LOL
Sorry but I always have to point this out. I agree with you, but "you can achieve the same results when you have extra cash on your own and save the $3,500" Not the same results, you get better results when you DON'T use the accelerators.
You know what the funniest thing is? When they call you and start rambling nonsense numbers at you... they act like you won't already have Calyx up and running. One guy recently told me that Point's math was wrong somehow because he was coming up with something different. Imagine if that were true... the most common LO software, which helps to originate what?... 70% of all mortgages... is wrong. LOL
You're right Eric. I guess I could have added that extra phrase...but thought it was implied. Good catch.
Rick,
I sent you a pm. You will probably get it later. Hope to see you around.
And as far as flexibility goes... which is what they always resort to in the end.... would only offer flexibility if it weren't based on Adjustable rates.
What happens with the CMG example when your 90,000 heloc goes to 14% interest rate? Could we have a salesman answer that for us?
I sent you a pm. You will probably get it later. Hope to see you around.
And as far as flexibility goes... which is what they always resort to in the end.... would only offer flexibility if it weren't based on Adjustable rates.
What happens with the CMG example when your 90,000 heloc goes to 14% interest rate? Could we have a salesman answer that for us?
Livinginnky and Rick,
Sorry gentlemen, I did not see your replies until this weekend and wanted to provide information that you would feel is as transparent as possible. So to say the least this will be a lengthy post and have links to other site for referencing.
To start with my comment on the ARM, what CMG is offering is a cap of any increase in the rate for a 3 to 5 year period. It cannot increase above 1% for the next 3 or 5 years, this will not cap the downward movement, just the upward movement. For ease of explanation I used the ARM comment and I apologize if that was misunderstood. For example you start at 6.5% rate cannot go past 7.5% for chosen amount of time. If LIBOR goes to 20% you are at 7.5% for 3 or 5 years. If LIBOR goes to 1% you are at your chosen LIBOR + margin, say 2.5%.
Reference for this is 'www.cmgbanking.com,' under guidelines. Unfortunately you will need a password to access that portion of the page, so I have copied that portion for you. You can apply for a password, without a lot of information, just basic address stuff.
- Program 900C3 and 900MC3: Interest rate increase cap of no more that 1% for the first three years
I am going to move to the part about rate going up to 15% next.
Your reply :
No tricks or scams. Just a straight 30 year fixed rate with 12 months interest only paid off in 32 short months. And most importantly no need to worry about this new heloc going to a 15% interest rate. Quick question, when that happens, how are these people going to save money?
Or you later comment
What happens with the CMG example when your 90,000 heloc goes to 14% interest rate? Could we have a salesman answer that for us?
According to
'http://www.moneycafe.com/library/1mlibor.htm#graph'
and
'http://mortgage-x.com/general/indexes/fnma_libor_history.asp'
the history of 1 month LIBOR starts in 1989.
I entered it into Excel and did an average for what the 1 month LIBOR has been for 18 years, I came up with 4.411618%. I am aware that the index came about in Sept 1989, and started in the 9.5% range, so without the first few months, my average is likely to be skewed down. So let us call it 4.6% for argument's sake.
CMG has a life time cap of 5% over start rate. Customer starts at 6.5%, 11.5% would be the highest this loan could ever go if market conditions occurred for this to happen.
So my customer would never see the 15% or the 14% rate you are speaking of and will mostly likely see a rate averaging around the indexed 4.6%+ margin of borrower's choice, 6.5% is high but fair for comparison.
Now for your next reply
You have shown nothing except your unwillingness to speak the truth
Here is the math that I was simplifying, I hope after I show this you will understand my request to simplify the math.
Here is a month in my customer's life
*note upon preview of file this did not transfer well, please refer to the attachment" decided to keep it in the post.
Day Balance Interest Change in new Int
charge (daily) Acct Balance Charge
1 100000 0.000180556 -10000 90000 16.25
2 90000 0.000180556 200 90200 16.286111
3 90200 0.000180556 0 90200 16.286111 4 90200 0.000180556 400 90600 16.3583333
5 90600 0.000180556 0 90600 16.358333 6 90600 0.000180556 0 90600 16.358333 7 90600 0.000180556 1000 91600 16.5388889
8 91600 0.000180556 0 91600 16.538889
9 91600 0.000180556 400 92000 16.611111 10 92000 0.000180556 0 92000 16.611111
11 92000 0.000180556 75 92075 16.6246528
12 92075 0.000180556 0 92075 16.624653 13 92075 0.000180556 0 92075 16.624653 14 92075 0.000180556 1000 93075 16.805208 15 93075 0.000180556 0 93075 16.805208 16 93075 0.000180556 0 93075 16.805208
17 93075 0.000180556 0 93075 16.805208
18 93075 0.000180556 1000 94075 16.985764
19 94075 0.000180556 0 94075 16.985764
20 94075 0.000180556 0 94075 16.985764
21 94075 0.000180556 300 94375 17.039931
22 94375 0.000180556 0 94375 17.039931 23 94375 0.000180556 0 94375 17.039931
24 94375 0.000180556 1000 95375 17.220486
25 95375 0.000180556 650 96025 17.337847
26 96025 0.000180556 200 96225 17.373958
27 96225 0.000180556 775 97000 17.513889
28 97000 0.000180556 0 97000 17.513889
29 97000 0.000180556 0 97000 17.513889
30 97000 0.000180556 0 97000 17.513889
This would need to continue like this for the total time in the loan. I did this and came to a consistent negative balance at 959 days. 959/360 (financial days) = 2.66 years till payoff or 31.97 months or 30.07 months till the first time they are at a $0 Balance.
Interest cost $8091.96, at first $0 balance
Interest cost $8106.91, at consistent negative balance.
Calyx gave me an interest charge of $8586.27 (30 year scenario) or $8824.32 (30 year IO) for your scenario.
I have provided the excel sheet that I did for your review, to continue to be as transparent as possible. The explanation for the interest saving on the HOA and your scenarios is explained further below.
Next reply
Don't give me the liquid money song and dance. After 31 payments. Where do you think that money goes? That's right folks, after 32 months you get to keep your $3500 plus per month and spend it, invest it, etc. any way you choose. Not waste it on unnecessary interest.
My part of the liquid song and dance is my customer is putting everything they have through their mortgage. This is what is recommended. You put your total income through the loan and because of the interest calculation based on the daily balance, they pay less interest. The money they put into the loan is 100% liquid, and can be accessed via ATM/POS Visa (8 ATM charges are refunded per month), online bill pay, checks, and EFTs. This part is covered by GMAC bank (nothing to do with their mortgage division) and has all of the protections as your present banking institution.
While these dollars are sitting in the account the interest is saved. And the $7000 we are using could include whatever they want, investments, taxes, etc. The $3000 we are both using is what is left after all of their expenses are paid.
Another �liquid song and dance� point is that all of the monthly $3000 is
available to my borrower. After your client puts their money into their first loan they have to apply for a 2nd, or refinance to get this out. Mine remains fully liquid, all at no risk of loss of usage of the money.
edited per forum rules
Sorry gentlemen, I did not see your replies until this weekend and wanted to provide information that you would feel is as transparent as possible. So to say the least this will be a lengthy post and have links to other site for referencing.
To start with my comment on the ARM, what CMG is offering is a cap of any increase in the rate for a 3 to 5 year period. It cannot increase above 1% for the next 3 or 5 years, this will not cap the downward movement, just the upward movement. For ease of explanation I used the ARM comment and I apologize if that was misunderstood. For example you start at 6.5% rate cannot go past 7.5% for chosen amount of time. If LIBOR goes to 20% you are at 7.5% for 3 or 5 years. If LIBOR goes to 1% you are at your chosen LIBOR + margin, say 2.5%.
Reference for this is 'www.cmgbanking.com,' under guidelines. Unfortunately you will need a password to access that portion of the page, so I have copied that portion for you. You can apply for a password, without a lot of information, just basic address stuff.
- Program 900C3 and 900MC3: Interest rate increase cap of no more that 1% for the first three years
I am going to move to the part about rate going up to 15% next.
Your reply :
No tricks or scams. Just a straight 30 year fixed rate with 12 months interest only paid off in 32 short months. And most importantly no need to worry about this new heloc going to a 15% interest rate. Quick question, when that happens, how are these people going to save money?
Or you later comment
What happens with the CMG example when your 90,000 heloc goes to 14% interest rate? Could we have a salesman answer that for us?
According to
'http://www.moneycafe.com/library/1mlibor.htm#graph'
and
'http://mortgage-x.com/general/indexes/fnma_libor_history.asp'
the history of 1 month LIBOR starts in 1989.
I entered it into Excel and did an average for what the 1 month LIBOR has been for 18 years, I came up with 4.411618%. I am aware that the index came about in Sept 1989, and started in the 9.5% range, so without the first few months, my average is likely to be skewed down. So let us call it 4.6% for argument's sake.
CMG has a life time cap of 5% over start rate. Customer starts at 6.5%, 11.5% would be the highest this loan could ever go if market conditions occurred for this to happen.
So my customer would never see the 15% or the 14% rate you are speaking of and will mostly likely see a rate averaging around the indexed 4.6%+ margin of borrower's choice, 6.5% is high but fair for comparison.
Now for your next reply
You have shown nothing except your unwillingness to speak the truth
Here is the math that I was simplifying, I hope after I show this you will understand my request to simplify the math.
Here is a month in my customer's life
*note upon preview of file this did not transfer well, please refer to the attachment" decided to keep it in the post.
Day Balance Interest Change in new Int
charge (daily) Acct Balance Charge
1 100000 0.000180556 -10000 90000 16.25
2 90000 0.000180556 200 90200 16.286111
3 90200 0.000180556 0 90200 16.286111 4 90200 0.000180556 400 90600 16.3583333
5 90600 0.000180556 0 90600 16.358333 6 90600 0.000180556 0 90600 16.358333 7 90600 0.000180556 1000 91600 16.5388889
8 91600 0.000180556 0 91600 16.538889
9 91600 0.000180556 400 92000 16.611111 10 92000 0.000180556 0 92000 16.611111
11 92000 0.000180556 75 92075 16.6246528
12 92075 0.000180556 0 92075 16.624653 13 92075 0.000180556 0 92075 16.624653 14 92075 0.000180556 1000 93075 16.805208 15 93075 0.000180556 0 93075 16.805208 16 93075 0.000180556 0 93075 16.805208
17 93075 0.000180556 0 93075 16.805208
18 93075 0.000180556 1000 94075 16.985764
19 94075 0.000180556 0 94075 16.985764
20 94075 0.000180556 0 94075 16.985764
21 94075 0.000180556 300 94375 17.039931
22 94375 0.000180556 0 94375 17.039931 23 94375 0.000180556 0 94375 17.039931
24 94375 0.000180556 1000 95375 17.220486
25 95375 0.000180556 650 96025 17.337847
26 96025 0.000180556 200 96225 17.373958
27 96225 0.000180556 775 97000 17.513889
28 97000 0.000180556 0 97000 17.513889
29 97000 0.000180556 0 97000 17.513889
30 97000 0.000180556 0 97000 17.513889
This would need to continue like this for the total time in the loan. I did this and came to a consistent negative balance at 959 days. 959/360 (financial days) = 2.66 years till payoff or 31.97 months or 30.07 months till the first time they are at a $0 Balance.
Interest cost $8091.96, at first $0 balance
Interest cost $8106.91, at consistent negative balance.
Calyx gave me an interest charge of $8586.27 (30 year scenario) or $8824.32 (30 year IO) for your scenario.
I have provided the excel sheet that I did for your review, to continue to be as transparent as possible. The explanation for the interest saving on the HOA and your scenarios is explained further below.
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Don't give me the liquid money song and dance. After 31 payments. Where do you think that money goes? That's right folks, after 32 months you get to keep your $3500 plus per month and spend it, invest it, etc. any way you choose. Not waste it on unnecessary interest.
My part of the liquid song and dance is my customer is putting everything they have through their mortgage. This is what is recommended. You put your total income through the loan and because of the interest calculation based on the daily balance, they pay less interest. The money they put into the loan is 100% liquid, and can be accessed via ATM/POS Visa (8 ATM charges are refunded per month), online bill pay, checks, and EFTs. This part is covered by GMAC bank (nothing to do with their mortgage division) and has all of the protections as your present banking institution.
While these dollars are sitting in the account the interest is saved. And the $7000 we are using could include whatever they want, investments, taxes, etc. The $3000 we are both using is what is left after all of their expenses are paid.
Another �liquid song and dance� point is that all of the monthly $3000 is
available to my borrower. After your client puts their money into their first loan they have to apply for a 2nd, or refinance to get this out. Mine remains fully liquid, all at no risk of loss of usage of the money.
edited per forum rules
great post guys, lots of good information. thanks