New Home Loan
June 20th, 2006 by Grant in: Real Estate
I saw a quick blurb on CNBC yesterday about a new home loan that takes on the appearance of a savings account tied to equity.
Essentially, each month your paycheck is automatically deposited into your loan account, thereby lowering the principal and interest and raising the equity by that amount. Then, you make withdrawals from that account to pay your bills, lowering the equity and increasing the principal. You can draw on your principal but not your interest payments.
I’ve been searching the internet for more information on this new loan program, and haven’t come up with any details…
I can see how this loan would look attractive for those why lack discipline to make principal payments on their home loan, but I also fear that it would make it easier to make withdrawals on your built-in equity…
If anyone else heard about this loan and has more information, please share it!
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June 20th, 2006 at 1:48 pm
That sounds really, really dangerous.. I can see people using that as sort of a short-turnover savings account. You put the money in, you wait a few days, you take the money back out. Most people do not have the discipline for that kind of setup.
June 20th, 2006 at 1:54 pm
I agree Kira. I’m still trying to figure out how this type of loan could work to someone’s advantage…
Still looking for more information though.
June 20th, 2006 at 2:38 pm
My thought is that there is no way for it to work in someone’s advantage. It sounds like another one of these loan programs that lenders are coming up with to get people into homes they can’t afford. All the lender has to do to convince someone they can afford the home is point out that their paycheck is more than the monthly payment on the home, therefore they can afford it.
It sounds really kooky, but I’m sure it would work.