Mortgage Accelerator

See: Mortgage.

We’d love to add some flair to our home mortgage, and also possibly pay it off a lot faster than 30 years, which is why we’re all about the mortgage accelerator loan.

Imagine that a checking account and a home equity loan had a baby. We take out a loan for the amount we need, just as we do with a normal mortgage. But instead of having fixed payments every month that we have to pay out of our checking account, it works a little differently. Our paychecks go directly into the mortgage account, and then we pay our other bills out of that. At the end of the month, whatever's leftover goes toward the mortgage.

Pretty ingenious, eh? At least...it is if we’re making more money than we’re spending. If we’re not, then we risk not paying enough toward the mortgage every month, and eventually taking a lot longer than 30 years to pay off the loan. Also, though mortgage accelerators are crazy common in places like Australia and the UK (and they’re gaining popularity here as well), we need to take a careful look at the interest rate before we get too excited. Since it's such a flexible type of loan, the interest rates can be a lot higher than they would be on a standard 30-year mortgage. And if we’re not in a position to put a nice chunk of change toward the loan amount every month, those interest charges could add up really fast.