All-In-One Mortgage
The Swiss Army knife of financial operations, an all-in-one mortgage puts together aspects of three popular financial products: a mortgage, a home equity loan and a bank account. The all-in-one provides the liquidity of a bank account (meaning the customer can always get at their money), while allowing them to pay down their mortgage as fast as possible.
Basically, when you deposit money into the all-in-one, those dollars go to pay down the mortgage. However, if you need to take money out (you can still use things like ATMs and automatic bill pay) that money is returned to you in the form of a home equity loan.
The background machinations are a little complicated, but from the customer's point of view, the money in your bank account (which usually earns a fraction of a percentage point of interest) can now be used to pay down the mortgage, potentially shortening the period of the loan and lowering the overall amount that will have to be spent over the life of the mortgage. But, unlike a traditional mortgage (where the bank keeps any prepayment), you still have access to the money put into the all-in-one.
For this privilege, the bank usually gets an annual fee on top of the normal interest payments. Also, the interest rate typically tops that of a traditional mortgage.
Related or Semi-related Video
Finance: What is a Reverse Mortgage?6 Views
Finance allah shmoop What is a reverse mortgage All right
people let's start with a normal mortgage You put one
hundred grand down borrow three hundred grand and are the
proud new owner of this baby in palo alto california
You make payments for thirty years at five percent interest
and then you retire their debt free So that's a
mortgage but what's a reverse mortgage Like one of these
egg trump Well kind of at least financially the payments
go in the opposite direction of a normal mortgage Like
you're old you just want to live out your remaining
years with the basic comforts Shower seats stair lift high
absorption adult diapers You own all of your home No
mortgage on it You paid it all off The home
is now worth a million box Nice shoebox There you
can do a reverse mortgage pledging your home is an
asset and basically just receiving a payment of l say
five grand a month from that reverse mortgage and you'll
get to deduct interest costs as you go Justus if
it were a normal mortgage well after forty months you
you know croak in that time period you've taken out
Forty times five grand or two hundred grand in loans
plus some interest and you sell your home for a
cool million Rather your heirs dio So what happens now
Well they just take the million bucks from the sale
write a check for two hundred grand and change to
the bank to pay off the reverse mortgage that you
had accrued while you were you know wasting away to
nothing and your heirs end up happy like they miss
you But you know a free stair lift Who are 00:01:37.997 --> [endTime] you
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