Australia. The land down under they call it. It's known for kangaroos and shrimp on the barby. They also have their own beer. What else are they known for? AC/DC is one thig that springs to mind. Besides AC/DC, Australia has another export, the Australian Mortgage. No, this mortgage doesn't come with an accent, but it does provide a way for you to pay off your current mortgage in a half or a third of the time as a conventional 30 mortgage. The Australians and Europeans have been doing it for years
What is an Australian mortgage? Quite simply it is a mortgage accelerator. It decreases the amount of interest you pay while increasing what you are paying on your principal.
The mortgage accelerator is nothing new. This is simply being packaged differently and sold to Americans with the neat name of Australian Mortgage.
The Australian mortgage is a based on a HELOC, which is short for Home Equity Line of Credit. You replace your current mortgage with a HELOC. The HELOC will have a higher interest rate that can change regularly. This is controlled by how the HELOC is managed. In short, the HELOC replaces your checking and savings account. All of your income is deposited in your HELOC, which is your mortgage account. All of your monthly expenses come out of this account. While the money sets in this account, prior to you paying bills, your principal is of course less, which means for that time period you are paying less interest.
Sound simple enough. Do they work? Yes they do. However, you better have a positive cash flow every month. You had also better be really good with your money. There are of course other drawbacks. The bank can freeze your line of credit. This is extremely rare, but something you should be aware of. Also, there can be some tricky tax ramifications involved with an Australian mortgage. Have an accountant or a tax advisor handy at all times to make sure that you aren't opening yourself up to a visit from the IRS. Finally, if you are a person who overspends, having your mortgage be your own private ATM machine might not be a good idea.
Finally, is an Australian Mortgage for me? Like we said before, do as much reading as possible to find that out. You must have at least 25% equity in your home, an excellent credit rating, and as we mentioned before positive cash flow. These programs are only for long term borrowers. In conclusion this can be a great way for your money to work for you.
Australian Mortgage
Brock Timberman is a staff writer for Platinum Web Services.
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