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Life More Affordable
- 1. CMGFinancial Services Responsiblelending since 1993A nationwide private mortgage bankCopyright 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. Not a commitment to lend. Credit on approval. Rates shown are for example only and may change without notice. Licensed by the CA Department of Corporations under CRMLA and in other states as applicable; see website for additional license info.
- 2. Why Talk Mortgages?OpeningCommentsMortgage products are built to benefit the banks first
- 3. There’s been verylittle consumer-centric development A Smarter Way to Borrow (& Lend)Old Way: Bank controlled balance )
- 4. New Way: Borrowercontrolled balanceCMGFinancial Services“High-speed mortgage pay-off”“Letting your paycheck work for you”
- 5. Principal or InterestWhichdo you prefer to pay first?130How long is acceptable?CMGFinancial Services5RateTermBreakevenPrincipal30yr5.5%17.5yr5.0%30yr16.3yrInterest4.5%30yr14.8yr1016.3years
- 6. All-In-One FinancingCMGFinancial ServicesLifemore affordable.
- 7. Banking and BorrowingConventionalBankingCMGFinancial ServicesCosts More than yourBank PaysEarnsLess than yourMortgage CostLargest LiquidAssetLargest PersonalLiability
- 8. Conventional MortgagesBank ControlledBalanceMonthly interest is computed on the principal balance
- 9. But, the paceat which the balances reduces is determined by thebankPayment: $1520Payment: $1520CMGFinancial Services$300,000Payment: $1520$298,810Net Gain:$1198Assumption: 30yr fix @ 4.5%Mo 2Mo 1Mo 3
- 10. TrendsProduct vs. Behavior80%of mortgages are a 30 year fixed
- 11. Average lifespan fora U.S. mortgage is 5 years
- 12. $10.5 Trillion isstill outstanding despite low ratesCMGFinancial ServicesMortgage Debt in TrillionsSources: Federal Reserve, U.S. Census data, Freddie Machttp://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htmhttp://www.freddiemac.com/pmms/pmms30.htm
- 13. HedgePayment vs. PayDownWhat protects you the most?
- 14. The math:CMGFinancial ServicesRateTermCost/$10BreakevenExtraTimeSaved5.0%30$9.3016.3 yrsnonenone$8.204.5%3014.8 yrsnonenone5.0%304.3 yrs$5.20$50012 yrs
- 15. Banking and BorrowingAcceleratorBanking$CMGFinancial ServicesBy combining the two accounts, you in effect, pay yourself the rate of the mortgage with each deposit!One Account - More Control
- 16. The Home OwnershipAccelerator ®Borrower Controlled BalanceMonthly interest is computed on the average daily loan balance
- 17. Your own cash-flowdetermines the average daily balanceCMGFinancial Services$300,000DepositNet Gain:$5704Variable Rate: 7.15% avg.(assuming hyper inflation)Interest is computedon the Average Daily BalanceDepositExpensesDepositExpenses$294,296ExpensesMo 1Mo 2Mo 3
Editor's Notes
- #2 My name is Dave Herbst and I represent CMG Mortgage, a CMG Financial subsidiary. Established nearly 20 years ago, CMG is one of the most well respected nationwide mortgage banks in the U.S. and the developer of the product I’ll be introducing you to over the next few moments.(Next)
- #3 So why talk about mortgages? (Aren’t we done with this topic?) Well, not quite. Although home ownership can be extremely rewarding, the unfortunate reality is, not many of us can afford to buy with cash, so we are agree to the terms of a tremendous burden called a mortgage. A mortgage is likely the biggest financial barrier to all things… building reservessaving for retirementaffording a school of choice for a childpaying off debt, or maybe re-investing in more real estate; vacation home or otherwise This makes the topic of mortgages worth addressing, especially because we developed a solution. But, like most innovative products, it often takes discovering a solution to even realize the problem.So here’s what I’m offering: Choice. Because for far too long you haven’t had much of it, not any that seemed to have benefitted the home owner, anyway.That the real story here; you now have a new option!(click)
- #4 It goes without saying, that when you borrow money, you’re signing up to pay interest. Conventional products have you pay primarily interest, for decades.Is that the best use of your money?Your new choice is to pay principal first. Wouldn’t you agree, that so far, this sounds like a smarter way to borrow?(click)
- #5 So that’s what we provide. It’s called the Home Ownership Accelerator; globally recognized as an All-In-One Account. Its very easy to understand and use because itsbuilt on things you already do.In short, it combines personal banking and home financing into one account. Here’s why that makes sense: (click)
- #6 I’m sure its no surprise to you that your bank account earns less than your mortgage costs. (click) But for a lot of home owners, their mortgage is likely their largest personal liability. We’ll talk about how that’s managed in just a moment, but (click) the interesting thing about your checking account is that it is probably your largest liquid asset.Think for a moment, about all the receivables you’ve deposited in the last decade: income, rent checks, tax refunds, bonuses and commissions, etc. Sum it up quickly in your head. For some people, that number is 2 or 3 times what they owe on their home. That is a lot of money and it’s being under utilized by you, which is just the way your bank wants it. As long as they can keep your cash away from your liabilities, they remain very profitable; especially when they hold both. (click)
- #7 Whoever controls the balance controls the cost.Unfortunately, with a conventional loan the balance is determined by your lender, not you.The pace at which it reduces has already been scheduled on your behalf; a process called Forward Amortization.Here’s an example:$300,000 4.5% 30 year fixed rate mortgagepayment $1520 a month(click)After 3 months, you would have:Spent $4560But only $1198 of it went to principalAt this pace, you’ll spend 14.8 years paying more interest than principal(click)
- #8 Couple that design with the behavioral trends and you end up with ton of debt.Is it any surprise that despite lower rate trends for decades, we still owe $10.5 Trillion on our homes.People are often surprised to learn that conventional mortgages (e.g. 15 and 30 year fixed) were developed by the federal government during the Great Depression Era; products built specifically for a market which existed nearly 8 decades ago.Needless to say, the industry and the government have done a great job at exploiting the American Dream:Debt has been very marketable… 80% of mortgages are built with 30 year terms or longer, but they are turned in for a variety of reasons every 5.So do the products we lean-on to finance our largest commitment to debt, fit today’s needs?(click)
- #9 Let’s analyze the only thing we really control with conventional mortgage product: Rate.At5%, on a 30 year fixed loan, this is what you get: $9.30 in interest for each $10 you borrow.You will continue to pay mostly interest each month for 16.3 years.Usually we would refinance into a lower rate when it comes available in order to lower the payment: (click)At4.5% this is what you get: your costs come down a little, but not much.(click) What if we simply kept our 5% rate, and paid a little extra?Clearly, paying extra is a better hedge against interest. (click)
- #10 That’s the beautiful thing about the Accelerator. It breaks-down that banking barrier between your cash-flow and your mortgage and integrates the two management instruments together: One account, one process, one statement, & more control ofthe balance which reduces your costs. (click)
- #11 Now you are able to leverage your cash against your loan.Example:$8000 income depositedThe mortgage balance will re-adjust that very day down to $292,000Money you used to use to pay for a mortgage ($1520) no longer needs to be spent, so it remains as residualPlus any other funds you may not need during the month remain as residual, keeping your balance lowerAnd even if you spend most of the remaining on living expenses, the Accelerator saves you interestThe monthly finance fee is computed on your average daily loan balance which is lower, naturallySaved interest, plus residual cash, roll-over to the next month as a lower balanceAnd the process continues month over monthBy the end of the 3rd month:$5704 in new equity At this pace you’re borrowing at $4.90 for each $10 borrowed and will be free and clear in about 12 years.(click)
- #12 Now Accelerated pay-down is nice for 3 reasons:Money not spent on interest is now freed-up and liquid to you – it’s your money to begin withBuild more equity more quickly which will leverage you better as a sellerAfter you shed the debt altogether, you could quickly apply more of your cash towards wealth building opportunities(click)
- #13 So to be clear, your dollars impact Principal first, which saves you a ton of time, and interest.(click)
- #14 Lets analyze these opportunities side by side: First, the features: Next, lets test drive the risk and return on both. Here are the assumptions:(click)
- #15 Now our results.The conventional mortgage:(click) The Accelerator:(click) That means a total savings rate over the comparison product of 38%!In addition, total wealth gain at these assumptions is 435% over what you would accomplish with the comparison loan.(click)
- #16 So how do you dive into the math: www.hoasimulator.com Built to include every penny and trend of your personal budget, today and tomorrow; so that you can not only understand where you’re currently headed, but so that you can also change direction towards a new strategy. It provides comprehensive data about:Debt reductionWealth gainAnd future rate trendsWe often say: “It’s not magic, it’s only math.” But I’ve witnessed a lot of life changing moments with this product and sometimes it is about the magic.(click)
- #17 Your loan will be sold and serviced by our lending partner, Ameriprise Bank, FSB, but we never lose touch.Every HOA client is assigned their own personal CMG loan concierge, in order to provide the best experience possible, from start to finish.The Accelerator is available for purchase and refinance transactions, and primary residences only.We lend up to 80% LTV and up to a loan amount of $2.5 MillionAt it’s foundation, it’s a line of credit, so it can mirror the banking access seamlessly.You will have access to your cash income for 30 years but the limit on your available credit will begin to reduce after year 10, in order to provide an end to the note by year 30. To make a good candidate, there needs to be a verifiable income source and reserves. You need to have good credit, and good cash-flow. Household that spend more than 90% of their income on debts and expense might not flow enough cash to provide a powerful hedge.And, last but not least, you’d have to know how to use a checking account…
- #18 So this is the end of the slide show but only the beginning of your discovery. The real paradigm shift required of you, is to simply realize that the money you work so hard for, is your money and not the bank’s. All you need is the right instrument to manage it more wisely so you can afford more life.Please share the news with people you know and trust, and lets schedule time to run your own numbers.Thank you.