Mortgage Checking Accounts
May 19, 2009 | Mortgage Acceleration | 
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Considering the shape of our banking system its time to take a good look at what we can do to get more out of our money.
Our monthly cash flow generally earns nothing. We earn no interest on our checking accounts and so little on savings it is hardly worth it. Yet most of our monthly cash flow runs through these accounts.
The banks get $12 for every dollar you deposit from the FDIC and flip that back to you in credit cards, car loans, and mortgages. So, your cash flow is funding the banks earnings.
In Australia and the UK they have used mortgage checking accounts for years as a means of combining the mortgage, checking and savings accounts into 1 account. This enables the homeowner to earn interest on their monthly cash flow by reducing the principal balance on the mortgage. Think about it. If your mortgage interest rate is 5% and it was tied to your checking you would be earning 5% while your cash flow sat in the account. Even though it will be used for bills throughout the month it generates a savings that is converted to principal payments…automatically.
This new mortgage checking account takes advantage of your cash flow to accelerate the payoff of your mortgage. More importantly, it enables you to use the account as a holding source for any funds earning less than the mortgage rate. This means that savings accounts earning only 2% can be re-routed to the mortgage thus lowering the balance and reducing the amount of interest you pay on the loan.
With your standard 30 year amortized loan you can not do this. Any payments applied to principal are permanent. This is why we use a separate checking and savings account. It holds our liquid capital. Yet this is not earning anything.
Mortgage checking accounts are actually a special equity line that includes all the features of your checking and savings accounts. Unlike a standard equity line offered by all banks, these accounts include unlimited check writing with no per check fees, no monthly fees, no per check minimums, and an ATM - Visa card so that you can setup any auto bill pays you are accustomed to. As a result, you can use the account as your checking and savings account. Now all your cash flow is earning interest which is converted into paid principal yet you remain just as liquid as with your current checking and savings accounts. The key is in the features of the equity line. The banks do not offer this type of equity line because it threatens their chief source of income….your checking and savings accounts. The equity lines they offer have multiple restrictions and fees which negate the benefits.
For more information on how this works as well as free software to map out an acceleration plan check out:
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