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Cmg Hoa Realtor Presentation
- 1. Home Ownership AcceleratorHomeOwnership Accelerator CMG Home Ownership AcceleratorCMG Home Ownership Accelerator®® Realtor® Focused PresentationRealtor® Focused Presentation 3-25-10 Copyright 2005-2010, CMG Mortgage, Inc. All rights reserved. Home Ownership Accelerator , the yellow flying house logo, and other marks are registered trademarks of CMG Financial Services, Inc. Content and concepts presented here are proprietary information which is made available for the sole purpose of training and educating CMG-approved agents and their clients, and is non-transferrable, non-distributable, and may not be copied or repurposed. Any other use outside CMG=approved educational efforts is unauthorized, except with the express written permission of CMG Mortgage Inc.
- 2. Home Ownership AcceleratorHomeOwnership Accelerator 2 Our Parents Spent Their Working Years Trying to Pay Off Their 30-Year Mortgage. Right idea. Wrong tool. Opening thoughts…..Opening thoughts…..
- 3. Home Ownership AcceleratorHomeOwnership Accelerator 3 Product Trend: Smaller PaymentsProduct Trend: Smaller Payments LESS PRINCIPAL MORE PRINCIPAL BIGGER PAYMENT SMALLER PAYMENT 15-Yr Loan 20-Yr Loan 30-Yr Loan Bi-weekly Loan 40-Yr Loan 50-Yr Loan Int. Only Loan Neg Am Option ARM 3/1, 5/1, 7/1, 10/1 Hybrid ARMs
- 4. Home Ownership AcceleratorHomeOwnership Accelerator 4 Easy payments, low rates, and...Easy payments, low rates, and... Price vs Household Income (Q1 :1987 = 1.0)
- 5. Home Ownership Accelerator 5 Debtstill out of control.Debt still out of control. Mortgage debt more than doubled since 2000 Source: Federal Reserve, U.S. Census data http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm http://www.federalreserve.gov/Releases/housedebt/
- 6. Home Ownership AcceleratorHomeOwnership Accelerator Conventional Wisdom…Conventional Wisdom… “A 30-year fixed is a great loan!” “Lock-in a low fixed-rate today!” “Your payment never changes!” “Record low rates!” 6
- 7. Home Ownership AcceleratorHomeOwnership Accelerator Wisdom? High Cost of Fixed-Rate Loan StrategyWisdom? High Cost of Fixed-Rate Loan Strategy • Price tag (Truth in Lending): we try not to look! – A $500K loan at 5.5% interest: = $522K in interest! • Built-in hedge costs: – 0.50%+/- ($30,000 on typical $300K loan) • Freddie Mac average “age” of loan: <5 years. – Eight loans in 40 year window: $50K in refi costs • At the 5-year mark (16% of 30-year term)…. – Virtually all borrowers have refinanced – 25% of total interest due has been paid • 5-year cumulative interest: +81% premium over a 5-year amortization. – Payment is still 75% interest • Takes 17.5 years to achieve parity on interest/principal payment. – Only 5% of borrowers will have made extra payments 7
- 8. Home Ownership AcceleratorHomeOwnership Accelerator 8 Today’s Mortgage is #1 Barrier to Building WealthToday’s Mortgage is #1 Barrier to Building Wealth • Mortgage consumes about half of your net income. – Typical mortgage payment vs income (DTI ratio): • 33-45% of gross income • Often exceeds 50% of net income. • Most of payment is interest (or all of it!) • Mortgage always takes priority • Most of us will retire WITH a mortgage • Persistent burden: – Prevents us from buying up – Prevents us from purchasing more real estate
- 9. Home Ownership AcceleratorHomeOwnership Accelerator 9 Reducing Interest: The Mortgage TriangleReducing Interest: The Mortgage Triangle • People try all 3 ways to reduce interest. – But which one is the most effective? INTEREST COST TERM PRINCIPAL Make extra payments – works, but has 3 issues % RATE Unpopular: 15-year loans Marginal impact: Rate chasing
- 10. Home Ownership AcceleratorHomeOwnership Accelerator 10 Accelerating via extra paymentsAccelerating via extra payments • Problems: – Commitment: • Extra payments crimp lifestyle! • Hard to stick with it… for 22 years. – Irreversible: extra payments are “one-way” • Might need that money in an emergency • Over-aggressive pre-payment of a fixed-rate loan could result in insufficient liquidity. – Impact: only can use a tiny portion of your resources • Usually not more than 1/3 of your residual cash • Federal Reserve: – Only 5% make regular extra payments – Average: $125 (less than 1/3 of cash available)
- 11. Home Ownership AcceleratorHomeOwnership Accelerator 11 How it looks: piles and holesHow it looks: piles and holes Bank account: 1% Home loan: 6% Income Expenses •Prepaying isn’t attractive •Might need that money •Can’t get it back
- 12. Home Ownership AcceleratorHomeOwnership Accelerator 12 What if we could change this?What if we could change this? Bank account: 1% Home loan: 6% Income Expenses
- 13. Home Ownership AcceleratorHomeOwnership Accelerator 13 Just move the arrows…Just move the arrows… Bank account: 1% Home loan: 6% Income Expenses
- 14. Home Ownership AcceleratorHomeOwnership Accelerator 14 Simple change, big impact.Simple change, big impact. You could… • Save thousands in interest and • Pay off in about half the time with • No change to spending habits TM
- 15. Home Ownership AcceleratorHomeOwnership Accelerator 15 How it worksHow it works • You deposit your paycheck into the loan • Therefore, your daily balance is less. • Therefore, you save interest. • Therefore, you have more money for principal. • Therefore, you pay off faster. • Notice how we didn’t change your spending? – For expenses, it works just like a normal checking account!
- 16. Home Ownership AcceleratorHomeOwnership Accelerator 16 How does it work?: 5-minute movieHow does it work?: 5-minute movie On the homeownershipaccelerator.net site below.
- 17. Home Ownership AcceleratorHomeOwnership Accelerator 17 Highlights from the 5-min movieHighlights from the 5-min movie HomeOwnershipAccelerator.net
- 18. Home Ownership AcceleratorHomeOwnership Accelerator Solves the 3 Big Problems with AccelerationSolves the 3 Big Problems with Acceleration • Easy to stick with. – Direct deposits into the account – “Set it and forget it” • Flexible. – Default is always to aggressively attack debt FIRST • Only loan where you pay principal FIRST – However, if you have extra expenses, you have access • Maximize impact – ALL your income can go towards paydown • Idle cash works for YOU, not the Bank 18
- 19. Home Ownership AcceleratorHomeOwnership Accelerator 19 Lazy MoneyLazy Money
- 20. Home Ownership AcceleratorHomeOwnership Accelerator 20 Structure: Line of creditStructure: Line of credit Initial credit line (10 years) Credit line (final 20 years), decreases by 1/240 per month Principal balance (sample) Available credit $500K LINE $400K LOAN 10 20 30
- 21. Home Ownership Accelerator 21 YOUare in Control of the BalanceYOU are in Control of the Balance Money In (reduces) – Direct Deposit (ideal method) – Bonuses, dividends – Rental property income – Small business income* • Money Out (increases) – Interest • Computed on daily balance • Added to principal on due date – Access to money (equity) • ATM/Debit Card – ATM (Cirrus/MasterCard® ) $1,000/day limit – ATM charges rebated 6/mo – MC P.O.S. debit card $2,500/day limit • Unlimited checks • Bill-pay (free) *See your CPA and tax advisor.
- 22. Home Ownership AcceleratorHomeOwnership Accelerator 22 Details….Details…. • Line of credit: first lien position – Owner-occupied, primary residences, purchase/refinance – Line amounts: $100K to $2.5million – Initial draw: 25%-97% of the line – Requires 25% down (75% LTV maximum) – 700 FICO – all borrowers – Up to 45% debt-to-income ratio – Rate: • 1 mo. LIBOR index (=0.23% today) + margin: 2.75% / 3.00% / 3.25% • Initial rate: 2.98% / 3.23% / 3.48% – Margin improvements up to -0.50% for high FICO and low LTV • Qualify at Initial Rate +2%, interest-only! • Life Cap: +6% over Initial rate (= 8.48-9.48%) • Minimum rate (floor): 3.5% (everyone is at this today). – $60 annual fee, waived in year 1.
- 23. Home Ownership AcceleratorHomeOwnership Accelerator 23 Who is the Ideal customer?Who is the Ideal customer? • Money-savvy • Positive cash flow • Solid credit • Good money-management habits • Long term view / goal oriented
- 24. Home Ownership AcceleratorHomeOwnership Accelerator 24 But it’s an Adjustable…But it’s an Adjustable… • It’s not about the rate! • It’s about the principal balance!
- 25. Home Ownership AcceleratorHomeOwnership Accelerator ““Which Sign Would You Rather HaveWhich Sign Would You Rather Have in Your Front Yard?”in Your Front Yard?” 25 I have 6% APR and paid $400,000 in interest I have 6% APR and paid $400,000 in interest I have 8% APR and paid $250,000 in interest I have 8% APR and paid $250,000 in interest
- 26. Home Ownership AcceleratorHomeOwnership Accelerator ““The Only Loan Where you Pay Principal FirstThe Only Loan Where you Pay Principal First ™™”” • All other loans take interest first. • Whatever is left = principal • With the HOA, your paycheck drives balance down. • “Even the money for your loan payment helps you save interest, while it waits for your monthly statement to arrive.” 26
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- 32. Home Ownership Accelerator 32 AvgIncrease= +1.45%/Yr Avg Increase= +1.45%/Yr Avg LIBOR=4.3%... …Plus Margin =7.05%, 7.30%, 7.55% Avg LIBOR=4.3%... …Plus Margin =7.05%, 7.30%, 7.55%
- 33. Home Ownership Accelerator 33 Avg= +1.45%/YrAvg = +1.45%/Yr
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- 39. Home Ownership AcceleratorHomeOwnership Accelerator Other typical concernsOther typical concerns • Property value decline: reduction of line / freezing • Tax deductibility 39
- 40. Home Ownership AcceleratorHomeOwnership Accelerator 40 Can my line be reduced / Suspended?Can my line be reduced / Suspended? • Yes, under certain conditions set forth in Reg. Z. – Specific circumstances, not arbitrary • See the line of credit agreement for full details. • Biggest concern: Substantial property value decline • Big difference – 75% LTV and paying down, vs 100% LTV /tapping equity • “Never put all of your eggs in one basket” – Home Ownership Accelerator is no different – Maintain financial flexibility to handle any situation – Keep an eye on property value and interest rates! – Consult financial advisor for guidance
- 41. Home Ownership AcceleratorHomeOwnership Accelerator 41 But I’ll lose my interest tax deduction…But I’ll lose my interest tax deduction… • Good news…you WILL! • Interest is not in your best interest! – Pay $3 in interest to get a $1 deduction? – Want larger tax deductions? Get a higher rate! • Interest is still deductible while you have the loan
- 42. Home Ownership AcceleratorHomeOwnership Accelerator Tax deductibility rulesTax deductibility rules • Acquisition debt – $1 million (married, filing jointly) – Acquisition or improvement – HOA financing/refinancing your home • Home equity debt – $100,000 – Non-acquisition, non-improvement – HOA re-draws (living expenses) – Repaid with subsequent inbound deposits 42
- 43. Home Ownership AcceleratorHomeOwnership Accelerator 43 Tax deductibility: same rules applyTax deductibility: same rules apply $400K $200K Example: redraw $150K from equity (only $100K is deductible as home equity debt*, unless used for improvements) $350K New acquisition debt level (fully deductible) Orig. acquisition debt basis Same tax deductibility: - First + HELOC - Cashout refi (Flags in 2010) - HOA HOA difference: -Single loan! Non deductible $300K *Except under Alternative Minimum Tax rules
- 44. Home Ownership AcceleratorHomeOwnership Accelerator More Purchasing PowerMore Purchasing Power 44 Typical Jumbo Loan Home Ownership Accelerator® Max Loan Amount $2.0M $2.5M Max. DTI Ratio 40% 45% Qualifying Interest Rate Fully Indexed Rate (about 5.75%) Fully-amortized Rate +2% (about 5% today) Interest-only Payment on $1 Mil loan $5,836 (APR 5.869%) $2,917 (APR 3.50%) 50% less! Purchasing power of $150K income $1.07M at 80% LTV ($857K loan) $1.80M at 75% LTV ($1.35M loan) 68% more house 57% more loan Other -- 24/7 Access to equity Faster equity buildup Direct deposit Automatic payment
- 45. Home Ownership AcceleratorHomeOwnership Accelerator Healthy/Happy Borrower:Healthy/Happy Borrower: Better for YOUBetter for YOU • Healthy borrower: more business downstream – Faster equity buildup: • Post-purchase improvements • Flexibility to take advantage of real estate opportunities • Equity for future purchases • Happy borrower: more referrals – 6:1 referral ratio – Only 10% payoff rate in portfolio since 2005! – Borrowers talk! “Backyard barbeque loan!” 45
- 46. Home Ownership AcceleratorHomeOwnership Accelerator 46 Bottom line:Bottom line: The loan your Clients should know about!The loan your Clients should know about! • Most powerful home financing tool available! – Superior purchasing power – 3.5% fully-indexed rate – Interest only qualification: higher ratios – Faster paydown / equity buildup – 24/7 access to equity for expenses, AND opportunities SPECIAL WEBINAR OFFER: FREE APPRAISAL!! (GOOD THRU APRIL 30, 2010) Tell the loan agent who invited you to provide your client’s name to me. SPECIAL WEBINAR OFFER: FREE APPRAISAL!! (GOOD THRU APRIL 30, 2010) Tell the loan agent who invited you to provide your client’s name to me.
- 47. Home Ownership AcceleratorHomeOwnership Accelerator 47 Thank you!Thank you!
- 48. Home Ownership AcceleratorHomeOwnership Accelerator 48 ADDENDUM:ADDENDUM: Frequently-asked questionsFrequently-asked questions
- 49. Home Ownership AcceleratorHomeOwnership Accelerator ““Know Thy LIBOR”Know Thy LIBOR” • Avg rate of increase, last 3 rising rate periods: 1.45%/yr • Average duration of last 3 rising rate periods: 26 mos. • Average LIBOR (historical): 4.3%. • Average LIBOR +2.75% (i.e., HOA) = 7.1% – Plus HOA cash flow effect - - typical effective rate 3-5% • Freddie Mac average 30Y FX (historical) = 7.1% 49
- 50. Home Ownership AcceleratorHomeOwnership Accelerator Know your (LIBOR) History!Know your (LIBOR) History! 50 Max: 9% Avg: 4.3% Cur: 0.23% LIBOR+2.75% Avg: 7.09% Fixed Avg: 7.04%
- 51. Home Ownership AcceleratorHomeOwnership Accelerator 51 Where is my Money, Really?Where is my Money, Really? And is it FDIC-Insured?And is it FDIC-Insured? • Money is swept against your loan balance daily. – Any intra-day balance is FDIC insured, – But no end-of-day “pile” to insure. • Your cash is converted to home equity – Saves interest – Higher effective yield on your money • No “pile” anymore - - filling the hole instead. – 24/7 access to your money
- 52. Home Ownership AcceleratorHomeOwnership Accelerator 52 Thank you!Thank you!
Editor's Notes
- #5 Those artificially low payments and low interest rates boosted demand for homes, and prices skyrocketed. &gt;In fact, we saw the price-to-income relationship which had been fairly steady for decades increase to unsustainable levels. People were buying homes they really couldn’t afford. Where once it was buy what you can afford, the new mantra became “buy regardless of whether you can afford it, as long as the payment works.”
- #6 So, it’s no wonder that mortgage debt has skyrocketed. &gt; U.S. Mortgage debt has nearly doubled since 2000, to over $10 trillion dollars! And we know that income and population haven’t grown at that rate since then! Now home prices are falling substantially. A large number of homeowners actually owe more than their home is worth, and millions of others are stuck with huge mortgages that came with over-inflated home prices. &gt;As a result, today’s families are saddled with nearly 3 times as much debt as a percent of disposable income as their parents and grandparents were.
- #9 And servicing all that debt is a huge effort. &gt;For most consumers, about half of their net income goes to pay the mortgage (assuming typical debt ratios). &gt;And since most of these mortgages are relatively new, they mostly consist of interest, versus principal. And the mortgage always takes priority, doesn’t it. Over emergencies, investments, opportunities, etc. &gt; Keep in mind that mortgage interest is a COST. Yes, deductibility tends to make it less painful, but it’s a cost. Money that you could be investing or saving for other purposes. It’s an enemy of true wealth-building.
- #10 So if you want to minimize the cost of your mortgage, &gt;what can you do? Well, it’s helpful to visualize your mortgage as a &gt;triangle. There are three levers that you can use in reducing the cost of your loan. &gt; The first is the term. Usually that’s established up front, and shorter terms, while they can save interest, are &gt;unpopular since the payment on these loans – like 15-year loans – is significantly larger and comes at you every month. &gt; The next lever is Rate. This one’s more familiar to those of us who like to refinance to chase rate. &gt;The problem is that it’s largely ineffective – refinancing comes with its own cost, and has only marginal impact on your lifetime interest costs. You don’t hear of many people who have refinanced their way into freedom from debt - - and there are millions of people who refinance frequently and will still have a mortgage in retirement. &gt;The third lever is to change the loan amount. While this amount is set up front, you can always manually reduce the loan amount with extra payments along the way. Let’s talk about this some more on the next slide.
- #11 The reason they hold back is that the extra money might come in handy, and extra mortgage payments are one-way - - that money is locked in when it might be needed in an emergency. In fact, it would not be unreasonable to say that over-aggressive pre-payment of a fixed-rate loan could leave you with insufficient liquidity!
- #12 We’ve boiled this down into a diagram we call “piles and holes”. &gt;Your money sits in a pile (on the left), earning very little, and all of the activity is at the pile. &gt;Your paychecks come in, and your spending goes out. It earns 1 percent or less, usually. Over on the right is the hole - - or more properly a “whole” lot of debt. It costs 6%. And once a month you put a little money in the hole - - remember its just the principal portion of your monthly house payment. If you have any extra money, you could prepay some additional principal and get done with your loan faster. &gt;But most people don’t do this, because they might need that money down the road, and once you prepay any principal, it’s permanent - - you can’t get it back.
- #13 But what if we could change this? What if you could fill up the hole with any unused money you had, whether or not you were going to need it in the future. If you could do this, the hole would then get smaller, and cost less interest. And when you needed the money, let’s say you could simply reach down in the hole and get some out!
- #14 And with this new loan, that’s just what we’re going to do. We simply move the arrows from here, &gt;to here. So all we’re changing is where your paychecks go first, and where your spending comes out of.
- #15 It’s a simple change. But it has a big impact. You could save thousands in interest, pays off in about half the time, and do it all with no change to your spending habits.
- #16 One great way to pitch the product quickly is to use the “ski slope” approach. We all know that when you start skiing down the hill, you start at the top, right? Well, with the Home Ownership Accelerator, the top of the hill is “depositing funds”. That’s what makes the loan work! You start with “deposit” and then keep saying the word therefore each time you explain the effect that follows. &gt; So, you “deposit” your paycheck into the loan…&gt; therefore, your daily balance is less…&gt; therefore, you save interest….&gt; therefore, you have more money for principal…..&gt;therefore you pay off faster. &gt;And notice how we didn’t change your spending? Remember, if you start with putting the paycheck in the loan, and just keep saying therefore, and explain what that does, you’ll never get lost!
- #17 But first, let’s take a look at how it works….. &gt;This 5-minute movie is also on the web at www.homeownership.net, and you can play it anytime.
- #18 Here are some highlights from the movie - - Your old loan - - it amortizes SLOWLY. The HOA - - note the paycheck coming in (balance dropping) and your expenses going out (balance going back up) - - note the difference between the daily balance on the HOA and the old loan. There’s your interest savings! The process repeats, month after month. The balance is often so much less, that interest rate changes have a much smaller effect on the loan.
- #20 And the solution we found starts right where the money flow starts - - the checking account. First, when you get paid, where do you put your money? Of course. You put it in a checking account, so you can get access to it when you need it. There are lots of good reasons we store up money in a checking account: &gt; short term needs like a sandwich at lunch and gas money, and &gt; monthly bills. But we often forget that we have to also stash money away for longer term needs – things like &gt; property taxes and vacations – you don’t invest that money in the stock market, because it might not be there when you need it. So we leave it in low-interest accounts, waiting patiently to be spent. &gt; And we also have money we just leave in there for emergencies, or to prevent bouncing a check - - money that always stays in there. But again, while all of this money you make is waiting to get spent, we all know it doesn’t earn much interest.
- #21 This is how the loan is structured. &gt; Let’s say you needed $400,000, and took out a &gt;line of credit for $500,000. &gt;The line of credit would remain at $500,000 for 10 years, &gt; then it would decrease by 1/240 per month for the remaining 240 months or 20 years. This represents the maximum amount you can borrow. Your $400,000 loan being paid down &gt; is the blue line. As you pay down, you can see that the &gt; available credit changes. Unlike a normal HELOC where you can only draw for 10 years and then you have a 15 year repay, with the Accelerator, you can draw on the line for a full 30 years. And because it’s a line of credit, you aren’t required to make deposits every month, like a mortgage, as long as you stay below your credit limit. This makes it an excellent loan for self-employed individuals whose income might fluctuate. It also can leave a nice cushion if you have unexpected expenses or other emergency.
- #22 &gt;When money comes in, it reduces the loan’s principal balance. These are things like the &gt;direct deposit of income, which is essentially the payment, plus a whole lot extra. &gt;Any bonuses and dividends too. &gt;You can also deposit rents and &gt;small business cash in the account temporarily, which will also reduce principal balance and save interest. &gt;Consult with your CPA and your tax advisor when doing this, as certain regulations do apply. &gt;When money goes out, it increases the loan balance. The main ones are interest and expenses. &gt; Interest is computed on daily balance, and posted to your statement, which cycles on the last business day of the month. &gt;If you deposit no new funds and you have available credit, 25 days later, any payment due is automatically paid from your account, increasing your loan balance. Or, if you send in a deposit, any payment due will be deducted first and the residual amount reduces your principal balance. This means that in most cases, a cash-flow positive borrower, whose payment and living expenses are less than their income, should not usually have to write a check to make a payment, and would never be late! Remember, when payments are due, most cash-flow-positive borrowers will already have made a deposit of a paycheck, which keeps the balance lower until the payment is required. &gt;And, you have full access to equity, available equity, just like your old bank account. &gt; You get an ATM/Debit card that’s good at over a million ATM’s worldwide where the MasterCard® and Cirrus logos are shown, and gets 6 surcharge-free transactions per month up to $1,000 per day. &gt; The ATM card can be used as a MasterCard point-of-sale debit card anywhere MasterCard is accepted; it has a $2,500 per day limit. &gt;You can write as many checks as you like, up to your credit limit. &gt;And, there’s free online bill-pay as well.
- #23 &gt;Again, the CMG Home Ownership Accelerator is not a mortgage! It’s a line of credit. &gt;We’ll do loans up to $2.5 million, &gt;with an initial draw between 25% and 97% of the line amount. &gt;The LTV can be up to 75% of appraised value, &gt;and all borrowers need FICO’s of 700 FICO or higher, &gt;and a debt ratio of 45% or lower. &gt;The line of credit is based on the 1-month LIBOR index, plus you can select margins from 2.50% up to 3.00% over LIBOR.. &gt;And the life cap is just 6% over the starting rate. &gt;There is a minimum, or floor rate, of 3.5%. &gt;The annual fee of $60 is waived in year one.
- #24 Who is best suited for the Home Ownership Accelerator? &gt;The best client is generally a money-savvy borrower with good positive cash flow. This allows them to force down the balance enough during the month to be able to generate some interest savings versus a traditional loan. &gt;Usually this means that they have a reasonable sized mortgage, compared to their income and expenses. Another way to put this is that they have a reasonable debt-to-income ratio. &gt;The ideal client also has great credit, and has good money-management habits. If you meet all of these criteria, you may be a good fit for the HOA. But, since each of us has different finances, the only way to really tell, is to put your information into the interactive simulator and let it compute the savings and payoff timing. And even then, it’s critical to make sure that you understand exactly how the loan works, and to discuss how it fits into your overall financial plan.
- #25 Another common question is what happens if rates go up? &gt;Remember, it’s no longer about the rate, it’s about how much interest you pay, on a lower principal balance. Because you’re continually forcing your principal balance down compared to where it would have been with a traditional loan, you’re going to pay less interest. So even if rates go up considerably, you could still end up paying less interest and paying off sooner. This is where we have really rewritten the old rule of rate driving your payment. Imagine choosing from two signs to put in your front yard. &gt; One says I paid 6% and $400,000 in interest. &gt; The other says I paid 8% and $250,000 in interest. Which sign would you choose? Of course, you’d choose the one that makes you look smart! &gt; And, remember, if you have funds in low-interest savings accounts that are earning less than your mortgage rate, you can park these funds against the mortgage, driving down your principal balance, and it often completely offsets the effect of rising interest rates. The best part is that you still have full access to these funds if ever you need them.
- #41 Many of us have heard that lines of credit in recent downturn have been either frozen, where new draws against the line cannot be made, or reduced, where the line of credit limit is reduced. &gt; All lines of credit are like this, and the HOA is no exception. &gt; The line of credit agreement contains full details. In short, however, this can occur &gt; if the property value declines significantly, &gt;the lender reasonably believes you won’t be able to continue to pay the loan,&gt; you are in default, &gt;there is some governmental action or notification that prevents the lender from collecting payments on the loan, &gt;or the APR on the loan surpasses the interest rate cap and as a result you’d be drawing funds at below-market rates. &gt;Therefore, the old “Don’t put all your eggs in one basket” rule also applies to your Home Ownership Accelerator account. Experts recommend that you never put all of your assets in any one investment, &gt; and the Accelerator is no exception. &gt; You should have ample financial flexibility to handle any situation by having appropriate diversification and adequate reserves. Once that’s established, accelerating loan payoff can be accomplished with confidence. &gt;We recommend that clients seek guidance from their financial advisor.
- #42 A third concern that people have is losing their tax deduction when their loan pays off. &gt; The good news is that you WILL lose it when your loan pays off. &gt;We like to say that “interest is not in your best interest” because you have to pay $3 in interest to get about $1 back in deductions - - not a great deal. In fact, if getting a higher tax deduction was the objective, then you’d want to take out a loan with a higher interest rate, right? Of course this makes no sense. So get rid of your loan as soon as you can, with the CMG Home Ownership Accelerator. &gt; And remember, the same tax rules apply to this loan as with other loans, and the interest you do pay while you have the loan, may be tax deductible – your clients should see their tax advisor.
- #44 This graph visually shows that if you originally had a $400K loan, and you paid it down to $200K, your new acquisition debt basis would be reestablished at $200K. Now you need to pull out $300K, let’s say. You have 3 ways to do it. Get a HELOC (or second), do a cashout refi to a new loan, or get a HOA. The same tax rules apply to all 3 moves - - you can only go up by $100K (which is a home equity draw in all cases, unless you use the money for improvements) and still have it be deductible. Your new tax deductibility would be $300K in all cases!
- #47 We hope this presentation has given you a solid understanding of why we believe this loan is truly &gt;the most powerful financial tool in the home finance world today. Savvy borrowers can finally benefit from the power of their money working for them, not the bank. All in all, the Home Ownership Accelerator is a loan whose time &gt;has finally come. &gt;And just in time for homeowners, who need their money to work harder than ever. For them. &gt;Whose money is it after all?
- #48 Thanks for learning more about the revolutionary CMG Home Ownership Accelerator.
- #49 To wrap up, we’re going to review 10 common questions that people have about the loan.
- #52 We often get asked if the account if FDIC insured. &gt; Once your funds go into the Accelerator, they sweep from the HOA’s checking account interface promptly against the loan balance. So while any daily balance is FDIC insured, there’s generally nothing to insure. &gt; You’re converting your lazy money to hard working home equity, which saves you interest, and so the effective yield on this money is now equal to your mortgage interest rate. &gt; Remember, there’s no “pile” anymore - - you’re filling the hole up while your money isn’t busy. And just like a bank, you have 24/7 access to your money for any expenses.
- #53 Thanks for learning more about the revolutionary CMG Home Ownership Accelerator.