Advantages of an All In One Loan

Blog posted On October 18, 2018

Do you want to own your own home, but don't want to drain your entire savings to accomplish this? You may want to consider an all-in-one mortgage. This product allows you to combine your mortgage and savings. Let's take a look a look at how it works.

The IRS will not allow taxable interest paid and received to cancel each other out as in Britain and Australia; each must be reported separately. Therefore, the "offset" loans available in the U.S. cannot technically be called by this name; in order for these loans to meet IRS guidelines, they must combine a checking account, home equity loan, and mortgage into one account. One account does not truly offset the other as it does in Britain. The single account offers all of the amenities of a normal bank account, such as an ATM and debit cards, automatic bill payments and a checkbook. But it allows every spare dollar the homeowner has to be used to pay down the mortgage until it is used.

This unique feature benefits the homeowner in several ways. First, because the homeowner's bank account is built directly into the mortgage, the homeowner will receive a much higher return on their deposits, because the money is being used to reduce the amount of interest assessed on the loan – which will almost always be at a much higher rate than what traditional demand deposit accounts can offer. Second, this type of account still offers instant liquidity in a way that traditional mortgages or even home equity lines of credit cannot. While some home equity lines of credit do offer access via checkbook or even debit card, they do not have the flexibility of this hybrid product. If the homeowner does not have the cash to make a payment on the loan in a given month, then no minimum payment is required because the minimum interest due is simply advanced from the available credit line. Finally, all-in-one loans are fully reversible; extra principal paid can be retrieved anytime, which solves a major problem inherent in trying to accelerate traditional "one way" mortgages, or even the offset loans available overseas.

Read more at Investopedia.com.