This loan is known as many different names. Our company rolled it out in the summer, but pulled it back due to compliance issues with the disclosures with the investor. We plan to roll it out as soon as the compliance issues have been resolved (soon). I can tell you, that the loan is not for everyone, however it is a great loan for many.
Its a 1st mortgage line of credit that you can draw on for a full 30 years compared to a standard HELOC with a max. 10 year draw period. The loan is intended to take the place of your existing checking and savings account. To make this loan work the best for you, you want to deposit all your monthly money into the HELOC account and if all goes as it should, you keep more in the account than what the minimum interest only payment is. By doing this, you will increase the amount of available credit to draw on and also pay down your mortgage faster.
The way that interest is charged is on a daily basis, so if you have a large deposit at certain times in the month, and there is lag time before you have paid all your bills out of the account for the month, that means your charged less overall interest at the end of the month, and therefore your balance comes down quicker. This can be a huge advantage to those that save a good amount of money each month. Also, you can always draw on the account up to your maximum limit, so its not as if your money is permanently tied up?
This loan can be compared to a fixed rate loan (your existing mortgage) side by side and can show you that regardless of the higher and adjustable rate, it will out perform a fixed rate as far as bringing the balance down quicker and also giving you more and more access to the equity. A standard 1st mortgage you can't get to any of your equity without refinancing, this one you can.
The reason no one knows about it, is that its only offered by limited companies. The loan has been around for years, but most companies are not aware of it or they don't want to take it on and have it compete with their normal HELOC's.
This loan is also great for investors. You can do up to 70% CLTV on this product and you can have up to 10 HELOCS of this type out at any one time. Go find that feature anywhere.......you wont, because its not out there.
If there is any one drawback with this loan, it is that the loan requires the borrower to have 10% of the line amount as reserves. So if your have a $250,000.00 HELOC, then you must have $25,000.00 liquid in reserves at the time of closing. Other than that drawback, its a great loan and an incredible tool if used correctly!!!
