TOP 5 QUESTIONS ABOUT THIS REVOLUTIONARY LOAN:
1. What makes the loan pay off sooner?
Direct-deposit of your income into this mortgage. It has an
immediate and dramatic impact on your principal balance. With this
loan, interest is based on your daily balance, so when your paycheck
hits, you start saving interest compared to a traditional loan. This
leaves more of your income available for principal, accelerating the
buildup of equity with no change to your spending habits. Naturally,
the more positive cash flow you have, the faster your loan paydown
If I pay off early, will I lose my tax deduction?
Yes, and this is good. Because you will no longer have a mortgage.
We believe that "interest is not in your best interest." Paying $3
in interest to get approximately $1 in tax deductions is not a good
long-term strategy. The CMG Home Ownership Accelerator can help you
get rid of your mortgage faster. And, of course, while you're still
paying down your balance, the interest you do pay IS deductible (see
your tax advisor).
The loan is based on the LIBOR index - why is the margin slightly
higher than other loans, and what if rates go up even higher?
Here is where we're changing the way mortgages are viewed. It's no
longer about the rate. It's about how many dollars of interest you
pay on a given principal balance. And because with this loan your
principal balance is continually forced down by your direct
deposits, this can even offset the effect of higher rates. Even,
depending on your cash flow, if rates double! The power of your
money sitting in your mortgage is amazing. The best way to observe
this is to use the Interactive Simulator, which can be found at
www.cmghome.com. You'll see why the slightly higher margin on this
loan, which is required due to its highly transactional nature, can
have such a minimal effect on the overall payoff timing.
What is the payment?
Again, we're changing the way mortgages work. Every time you make a
direct deposit of your payroll, or add funds from another account,
you're in effect making a payment. Then at the end of each monthly
statement period, interest is charged based on your daily principal
balance. We simply add it to your principal balance.
5. Who is the ideal customer for this loan?
The CMG Home Ownership Accelerator is ideally suited for responsible
homeowners with positive cash flow, who understand that parking
their cash against their mortgage balance can earn them a much
higher effective return than in a low-interest checking or savings
Why hasn't this loan been offered to the public in
the past? [answer]
How does CMG make
money on this loan, then? [answer]
Will my loan be sold? Who will service it? [answer]
What is my "credit line"? [answer]
How do I make payments? [answer]
Can I make extra lump-sum payments in addition to my payroll
Should I put all of
my available cash into the mortgage? [answer]
Should I close my
old checking and savings accounts? [answer]
Are my payments
FDIC insured? [answer]
How and when does
my payment change? [answer]
What is the LIBOR
What happens when I
pay off the loan EARLY? [answer]
What happens if my
home loses value? [answer]
Do I have to pay
off my loan early? [answer]
How do I find out
how fast my loan should pay off? [answer]
What happens if I
miss a payment? [answer]
How do I access the
equity in my account for expenses? [answer]
Do I need to change
my spending habits? [answer]
Is there a maximum
amount you can draw from the account? [answer]
Isn't access to all
that equity a bit dangerous? [answer]
Can I use this loan
as a platform from which to make other outside investments? [answer]
What portion of the
interest I pay is tax deductible? [answer]
Won't paying less
mortgage interest reduce my tax deduction? [answer]
Why is the margin
on this loan higher than on other adjustable rate loans? [answer]
Why is there an
annual fee? [answer]
1. Why hasn’t this loan been offered to the
public in the past?
It's simple. Banks have historically dominated the mortgage market,
and they make money by paying small interest rates on deposits, and
then loaning that money back out in the form of mortgages, earning a
profit on the “spread” between their loan rates and deposit rates.
If banks offered this to their customers, their spread would
disappear, and with it, considerable profits.
2. How does CMG make money on this loan, then?
CMG is a mortgage banker, making money on originating the loan and
marketing the underlying financial asset to investors in the
3. Will my loan be sold? Who will service it?
CMG works with subservicing partners, who power the transactional
aspects of the product (the ATM card, checks, electronic transfers,
etc.). We may sell the underlying asset to investors, but this will
be transparent to borrowers.
4. What is my “credit line”?
Your credit line is the maximum amount you can borrow under the
terms of the mortgage. This is usually higher than your first draw
amount, which will typically be used to pay off an old mortgage (in
a refinance) or complete a purchase transaction. Your credit line
will remain the same throughout the 10-year interest-only period,
and then it will decline by 1/240 per month throughout the
subsequent 20-year repayment period, reaching zero at the end of the
30-year term. You'll need to keep your principal balance below this
line throughout the term of the loan, meaning that you'll at least
need to be making progress against paying down principal during the
final 20 years.
5. How do I make payments?
Every time you make a direct deposit of your payroll, or add funds
from another account, you're in effect making a payment. Then at the
end of each monthly statement period, we add a charge for interest
based on your daily principal balance. This charge is simply added
to your principal balance. You actually only owe interest-only for
the first 10 years; after that you'll be in the “repayment period”,
where your credit line starts to decrease regularly (1/240 per
month) so that you do pay off in 30 years, and you'll need to be
making progress against both principal and interest during that
6. Can I make extra lump-sum payments in addition to my payroll
Anytime, and this can be beneficial. Moving funds from low-interest
deposit accounts or poorly-performing assets into your mortgage will
reduce your principal instantly, and save you even more interest,
allowing you to pay off even sooner. And, you have access to the
additional equity this creates.
7. Should I put all of my available cash into the mortgage?
While we do not recommend putting “all of your eggs in one basket,”
if your cash is earning less than your mortgage interest rate, it
could be an excellent idea to move a portion of it into the
mortgage. Instead of “earning” 1-2% on your deposits, for example,
you'll “save” 5-6% on your mortgage. In effect, you get the same
advantage the banks now enjoy with your money. Again, you have
access to your available credit line if you need it.
8. Should I close my old checking and savings accounts?
To maximize the effectiveness of the product, you will want to flow
as much of your cash finances through the account as possible. The
more funds you “park” in the account, the lower your daily principal
balance, and the more interest you save.
9. Are my payments FDIC insured?
No. This is a line of credit mortgage, not a savings account, and
therefore not FDIC insured. You are paying down your mortgage, not
making a deposit in the traditional sense. Years of traditional
banking has trained us to think we need to have a “pile” of money
somewhere, when in reality, the banks are using it to loan money to
others. In this new approach, you access your wealth in a completely
new way — it's in your real estate investment.
10. How and when does my payment change?
The interest due on your loan may change monthly, based on the LIBOR
interest rate index.
11. What is the LIBOR index?
The London Interbank Offered Rate Index (LIBOR) is an average of the
interest rates that major international banks charge each other to
borrow U.S. dollars in the London money market. It is one of the
most common indexes on which to base mortgages.
12. What happens when I pay off the loan EARLY?
If you pay off the loan early, you still have access to the
accumulated equity, up to your credit line amount, until your
30-year term is complete. If you continue to make deposits into the
account, and your loan is paid in full, those deposits will earn
interest at a competitive rate.
13. What happens if my home loses value?
Just like any mortgage, you owe the amount you've borrowed,
regardless of what happens to the value of your home. The problem
some people have when their home devalues is that they end up owing
more on the house than the house is worth. However, since the CMG
Home Ownership Accelerator allows you to pay down principal faster,
you'll stand a better chance of avoiding being “underwater” on your
loan as compared to a traditional loan.
14. Do I have to pay off my loan early?
No. You can pay off over the full 30 years if you wish.
15. How do I find out how fast my loan should pay off?
To get an advance estimate of your payoff timing, interest costs,
and to evaluate different interest rate environments, visit
www.cmghome.com to use our interactive calculator.
16. What happens if I miss a payment?
The loan is ideal for people whose income might vary. During the
first 10 years, you only owe interest, which is automatically added
to your principal balance monthly, so there's really no “payment” to
make as long as your principal balance stays below your credit line
amount. The only payment you need to make is to stay below your
credit line amount.
17. How do I access the equity in my account for expenses?
Just like you access your bank account. You have online access to
view your account balances and transactions, and you can access
funds via check, ATM, EFT, ACH and bill-pay.
18. Do I need to change my spending habits?
No. Generally that will not be necessary, and since more of your
income will be going towards principal, you'll likely come out ahead
even then. However, you'll find that if you can find a way to trim
expenses even more, you'll pay off even earlier.
19. Is there a maximum amount you can draw from the account?
You can draw up to your credit line; the amount you have available
is the difference between your principal balance and the line
20. Isn't access to all that equity a bit dangerous?
As with any of your finances, you need to be disciplined. You
probably get several credit card offers each week, and can easily
open a home equity line of credit to access your home's available
equity. Any of which offer you the same ability to get into
21. Can I use this loan as a platform from which to make other
Absolutely. Sophisticated investors will see it as an opportunity to
“borrow” money from their available equity and “reinvest” it in an
outside investment at a higher rate of return, netting the
difference between the two.
22. What portion of the interest I pay is tax deductible?
Since this is a mortgage, the interest you pay may be tax
deductible; consult your tax advisor for more guidance.
23. Won’t paying less mortgage interest reduce my tax deduction?
Of course it will. Unless you're currently a renter, paying a dollar
in interest to get a thirty-cent tax deduction is a no-win game. If
maximizing your interest tax deduction really made sense, you'd want
to pay a higher interest rate on your loans, right? So minimize
overall interest with the CMG Home Ownership Accelerator, and own
your home sooner.
24. Why is the margin on this loan higher than on other
adjustable rate loans?
The margin on this loan may be higher than that of other loans
because of the highly transactional nature of the product, which has
a cost. However, most borrowers will find that the higher margin
will have a minimal effect on the overall payoff timing,
particularly when compared to the costs and lengthy payoff times for
25. Why is there an annual fee?
Most mortgages do not have the ability to do transactions, and
traditional home equity lines of credit only let you write a low
number of checks (often with a minimum draw). This is a mortgage
which gives you full transactional capabilities, which is what the
annual fee helps offset. Compared to the amount of interest you'll
be able to save, it's a relatively small fee.
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