Using an All In One Loan to Reduce Total Interest Expense
Finding a property to purchase is a big undertaking. From determining your list of requirements to working with a realtor and touring one building after another, every step you take will be tailored to your particular situation. Financing, of course, is no exception.
Unless you’re among the small minority of real estate buyers who can finance an entire investment in cash, an outside lender is generally going to be a must-have in order to close on a transaction. However, not all lenders and lending situations are made equal. Some buyers prefer a conventional mortgage from a bank or broker, while others choose to seek alternative financing. Further, some embrace the concept of an all in one loan. Compared to a conventional mortgage, an all in one loan offers substantial savings on interest payments and can provide leverage during the repayment process, no matter how much you need to borrow.
What Is an All In One Loan?
An all in one loan is not a mortgage, but instead, a home equity line of credit. Lines of credit are unique because they are flexible, two-way instruments allowing you to apply as much money as you desire toward the balance without losing access to your funds. An all in one loan provides 30-year access to home equity dollars, has a great low rate, and no hidden fees or required balloon payment. Additionally, the all in one loan works just like an ordinary checking account, effectively bundling home finance and personal banking.
This revolutionary design allows you to use your everyday cash flow to offset your loan’s balance and save mortgage interest without requiring a change to your budget.
Deposits made into the all in one loan pay down principal first and remain available 24/7 through the banking features. The loan comes with ATM cards for all users of the account, secure online bill-pay, unlimited check writing, direct deposit and bank-to-bank wire transferring. Your monthly interest payments are computed on each day’s ending balance, so even as you withdraw money from your account for regular expenses, your loan’s daily balance is kept lower for longer, which equates to less interest being charged than with a conventional mortgage.
In effect, you reduce the amount of interest that accrues on your loan by using your regular cash flow to reduce your average daily loan balance, effectively earning more than what you could typically earn on those dollars in a regular checking account. Less of your money spent on monthly mortgage interest means more of your money left over to help you meet other financial objectives.
The Benefits of an All In One Loan
As with most forms of real estate lending, there are numerous benefits to all in one loans.
First, an all in one loan saves a step in your standard banking and borrowing needs. Rather than having a separate checking account and property loan, this concept consolidates the two. All of your financial management can be handled through your all in one loan, and all money deposited, such as paychecks, are applied toward your loan principal.
Accordingly, an all in one loan keeps the balance of your mortgage lower. Since all amounts deposited reduce the principal of your loan (while still being available for withdrawal at any time), you will be able to pay more toward your mortgage than you would if you were maintaining separate savings. The lower principal on the loan also means that you will pay less interest over the life of the loan.
When to Use an All In One Loan
As a hybrid concept, an all in one loan isn’t right for everyone. However, there are a few situations in which this particular type of loan can benefit you.
When You Are Great at Budgeting
With a device like an all in one loan, a budget is very important. Unlike a conventional loan, in which one regular payment a month is required, deposits into an all in one loan can be made at any time. This features works well for those who regularly deposit more capital into their account than they withdraw, but budgeting is a necessity. Without an ability to manage cash inflows and outflows, this form of loan may not save money in the long run.
When You Anticipate Varying Cash Flow Needs
Some situations require more money than others, and cash use can fluctuate from month to month. If you are in a situation that may require borrowing against your home’s equity or that could hinder your ability to make standard payments on a fixed schedule, an all in one loan can alleviate the pressure, giving you a way to make payments while still keeping cash available and on hand to use if necessary.
When You Want to Get Out of Debt Faster
Debt tolerance is a personal preference. Some investors are willing to carry obligations with a plan to turn them over later, while others prefer unencumbered assets. If you would like to pay down your debts as quickly as possible, an all in one loan can assist you. This format allows you to apply all of your excess cash toward your mortgage, reducing payments and total interest expense in the long run.
The Bottom Line
So, do you need an all in one loan? As with most things in real estate, the answer depends on your specific circumstances. If you are great with budgeting and cash flow management, are in a situation in which cash flow is essential, or want to pay down your debt as quickly as possible, this mortgage structure can be an effective way to help you reduce debts without tying up cash.
With liquid access to your property’s equity in times of need and the ability to invest all leftover income each month into the principal of your mortgage, you have the option to pay off debts and save on interest expenses in one fell swoop. For property owners with unique financing needs, an all in one loan could be the perfect solution.
Scott Clift is a licensed real estate broker with Westpark Equity Group and the private lending division of Westpark Loans. He has been in the real estate industry since 1994. His team of seasoned professionals specialize in providing real estate loans for investors and other self-employed individuals. When you are ready to invest in real estate, call Westpark Loans to secure your financing at (844) 574-LOAN or by visiting westparkloans.com.