California: Mortgage Product for the Disciplined

By: Kathleen Pender: SF Gate
A lender in San Ramon, Calif., is offering a new financial product that combines a mortgage with a checking account as a way to lessen the pain of principal payments and help borrowers pay off a home loan faster.

CMG Financial Services' "Home Ownership Accelerator," allows customers to deposit their entire paycheck, and any other checks they receive each month, into the mortgage account, which reduces the principal balance. At the same time, money taken from the home loan during the month for other expenses increases the loan balance.

At the end of the month, interest is assessed on the daily loan balance, and the monthly interest charge is added to principal of the loan. CMG says the new product "is ideally suited for homeowners with a stable salary, good credit, and financial discipline," not for Americans earning barely enough to cover their expenses.

The product, which carries an above average adjustable interest rate, technically is an interest-only loan for the first 10 years, with amortized principal over the next 20 years.