All in One Loan, saving 100s of thousands in interest

What do you guys think of this new All-In-One loan where the mortgage account is used like a checking account and all your spare cash is working for you all the time ? Home equity can be pulled out for use when required.

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@nsj I heard it on the desi radio today as well. I dont think its useful for me coz I am starving for cash and there is the risk of variable daily interest (1 month LIBOR + 3.75% is the rate I guess), So it will be 4.75% on a primary. This will increase with the rate hilkes coming soon. You can always take a HELOC on a traditional loan, so not sure how this is attractive

Folks who have extra cash, like you (from your previous post) it seems like a good option?

I want to hear what the others have to say @Jil @manch @sfdragonboy

This is for primary buyers and long term investment holders, but not for flippers or business people who holds real estate short term.

Using HELOC temporarily to buy new home is fine. Otherwise, I would not risk taking money out HELOC. IMO, this always be left for emergency purpose.

Other than this, it is better have first mortgage fixed option.

US had 18% mortgage rate during year 1980 and then reduced to lowest 3.25% this downturn recovery period. This is historic when FED fund rate was held at 0.25% level. Now, FED wanted turn back forever uprate path and already introduced 3 rate hikes so far. They are supposed to increase another 6 rate hikes which will put the mortgage back to 2006 level of 6% to 7%. The intention is to hike and hold the rate forever. In such case, if the economy sags, FED may not raise rate, but hold at same level for additional years. They aim every possibility to keep the rates at high so that economy can be controlled later by reducing rates.

I am locking 4.25% now means the same 4.25% rate even after 20 years ! With inflation going up every year, the $5000 after 20 years is today = 5000 / ((1+inf)^20). If I assume 2% inflation, the $5000 is $3364.

Locking primary home at 4.25% is really great even today. With growing rate hike environment, I would not prefer any ARM or Variable rate.

If we think that FED will reduce the rate in future like last 8 or 9 years, we will be regretting in future.

With this, even today’s 4.25% or 4.75% will become history in future years. This is the main reason, ARM or any other variable rates is not at all good for long term holders.

Why do lender provide low teasing rates to borrower for ARM or variable rate? They are low risk for lender, but high risk for borrower ! After 5 years of ARM, lender can hike the rate with a notice and can reset the rate every period (year) when LIBOR goes up. Borrower is helpless to accept the rate or go for another lender who will also charge similar rates !

Research (google) history about what happened between 1980 and now.

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The math checks out. However I am worried by melting savings account and loan account, it makes spending all too easy. Sometimes I keep money in separate accounts for no reason other than psychological. In theory it’s not as optimal, but I know myself. I need all the psychological clutches I can get.

Sounds interesting, since we tend to hold a fair amount of cash reserves in bank accounts that earn squat. However, this is for only primary and second homes, no investment properties so this is not going to come into play for a lot of us. My primary is a fixed 2.5%, 15 year loan that is nicely going down, so why rock the boat on that? The thing is, we don’t know what the acquisition costs are too to get such a loan. The fact that the rates are also variable and are higher than conventional loans then probably also negates any savings. One probably has to compare in real life getting a great rate from a mortgage broker like my Tracie vs this and actually see which is truly better.