If you want to put more money toward your house payment, but also want to keep plenty of cash on-hand in case of an emergency, then an all-in-one mortgage might be a good option for you. A popular choice in England and Australia, the all-in-one mortgage is a fairly new option in the United States. A recent article on the Equifax Finance Blog, “Everything You Wanted to Know About an All-in-One Mortgage,” explains the ins and outs of this new product.
What is an all-in-one mortgage? Well, it combines a homeowner’s checking account, savings account, mortgage and home equity line of credit into one account. The all-in-one mortgage checking account is used the same way as any other checking account: You deposit your check, pay bills and buy essentials.
What makes an all-in-one mortgage checking account different is it is tied to your home loan. So, all of your extra money goes toward your mortgage, rather than your savings account. Essentially, your savings account is your home, but with a much higher rate of return.
An all-in-one mortgage allows you to pay off your house quickly. You just need to spend less money than you earn.
Of course, you could always put more money toward your house payment every month without having an all-in-one mortgage. However, once you send in that extra money to your lender, you can’t access it again. The only thing you can do is to take out a home equity loan, meaning you don’t have the flexibility you have with an all-in-one mortgage. Because of this, many people won’t put extra money toward their house payments because they’re afraid that they may need the money for an unexpected bill: A concern that you won’t have with an all-in-one mortgage.
Though this may seem like a good deal, there are some things you need to consider. First, this option is best for people who consistently spend less money than they make. If you constantly overspend or borrow from your home equity line of credit, it could actually take you longer to pay off your home loan and you could pay more interest in the long run. And, you may be subject to fees.
Second, many financial experts caution borrowers from paying extra money toward their home loans. With today’s low interest rates, it may be more beneficial to put extra money in a 401(k) or an IRA.
To learn more about all-in-one mortgages, read the full article on the Equifax Personal Finance blog.