St. Cloud, MN - Real Estate Blog

I'm posting this entry a little in the dark because I do not currently have a Home Ownership Accelerator account, nor have I had any clients utilize this service.  Nevertheless, this new home loan (not really a loan) product is extremely intriguing.

The Home Ownership Accelerator (HOA) is basically an account that you set up against your home vs. using a tradition mortgage.  The reason for using a HOA is that as you deposit your paychecks into the account and it automatically pays off the principle balance of your mortgage first.  This keeps the amount of interest that you owe at the end of the month significantly lower because your principle balance has decreased in advance.  Over the month, as you need money for bills, etc., you pull money against the home.

This philosophy is undeniably great.  A person with a $200,000 home loan could feasibly pay it off in under 15 years and save over $100,000 in interest payments.  But there is another side of this that some people have to seriously consider.

Living paycheck to paycheck is not really an option with a HOA.  Also, for those of you who are not the most fiscally responsible people, and you know who you are, having free reign on the equity that your home is creating can be very tempting.  It would become very easy to justify a huge plasma TV or new car purchase with the savings you have created.

This would be my personal checklist for anyone who is thinking that a HOA is the right product for them:

1) You must have at least 15-20% equity in your home.  I don't recommend this product (nor do I think it's available) to anyone who is "equity challenged" in their home.

2) You must have at least a 5-10% surplus of income at the end of each month.  Similar to a credit card, not making a full monthly payment can really put you in a hole.

3) You must be able to recognize the difference between an asset and a liability.  For those of you who knew the difference off the top of your head, great.  For those of you who did not, I recommend reading "Rich Dad, Poor Dad" by Robert Kiyosaki to get you started in the right direction.  The reason for this item in my checklist is to remove many frivolous spenders before they get themselves into trouble.

4) You must be capable of maintaining a budget and monitoring your results.

5) You would like to save money.

I would love to hear some response to this post from people who are currently utilizing a HOA and/or lenders who have this product available to their clients.  This is a learning process for me as I do not have any direct relationship with someone who is currently utilizing a HOA.  More specifically, lenders - I might be interested in refinancing my personal property to a HOA if it's the right product for me.  I am interested in learning more about HOA's and how they might benefit my personal and my clients' situations.

Jason Tangen - Real Estate Broker Associate with Edina Realty of St Cloud

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