Mortgage Accelerator Loans

Mortgage acceleration plans might not be very well known in the United States, but these unique mortgage loans are the home-buying choice for about ¼ of homebuyers from the UK and 1/3 of Australian homebuyers. What separates these loans from their more traditional counterparts? What are the perks that have caused so many of our overseas friends to decide upon them?

This type of loan is not yet widely available in the United States, as it is a specific program that currently is offered by only a few American lenders. Citizens in about half of the U.S. may be able to acquire such loans. The lenders Macquarie Mortgages USA and CMG Financial Services are the most well-known lenders of accelerator mortgages in this country.

The main purpose of an accelerator loan is for the borrower to pay off his or her mortgage more quickly than would be the case otherwise -- in some cases, the goal is to cut the repayment period by as much as half.

How Accelerator Loans Work

When borrowers decide to obtain an accelerator loan, either as a first mortgage or as a refinance, they take out their mortgage along with a home equity line of credit (HELOC). A traditional HELOC is a type of revolving credit based on the equity in your home from which you may draw. In the case of an acceleration mortgage, the HELOC also takes on many of the characteristics of traditional checking accounts.

Depending on the program, one may write checks, pay bills, establish direct deposit, and withdraw money from the ATM via the HELOC. Some people also have a credit card attached to their accounts.

The key aspect of this situation that makes loan acceleration possible is that the borrower deposits his or her entire income into the HELOC each month. All income that remains after paying the monthly mortgage payment and all other expenses is applied directly toward paying off the remaining principal on the mortgage. By applying all of your disposable monthly income to your mortgage balance, you will pay off your mortgage more quickly than would be possible otherwise. You also should be saving money in interest by keeping your average balance to a minimum.


If a borrower has more expenses than income each month, then obviously an accelerator loan will not work in the intended way. These mortgage types work best not only for individuals with positive cash flow, but also for those people who are focused on the big picture. The monthly payments associated with many accelerator mortgages actually are interest-free for the first ten years or so, so such mortgages sometimes take a while to really pay off.

Accelerator loans also may be useful for borrowers who need a bit of help staying disciplined at paying of their mortgages. Truthfully, any individual could reap the benefits of accelerator loans on his or her own simply by taking out a traditional mortgage and consistently applying the remainder of his or her monthly income manually instead. (Check to make sure there is no prepayment penalty in this case.) This is difficult for many people, however, so accelerator loans keep such borrowers right on track.

Things to Consider

There is another significant perk that goes along inherently with accelerator loans. Your HELOC provides you with a great “safety net” of sorts, should you find yourself in need of money unexpectedly. If there is a family emergency, for example, then you would have the ability to borrow money from your line of credit. If you had a more traditional mortgage in this situation, then that same money would be untouchable. Of course, you could just take out a HELOC in addition to a traditional mortgage to satisfy this purpose.

Before you decide that the benefits of an accelerator loan make it a good option for you, however, you must also know the costs. Not everybody saves money by using an accelerator loan, and some financial professionals actually are quite skeptical of the whole system. If you are considering an acceleration plan, there are costs to consider when determining whether it really will save you money in the long run.

• Annual fees of about $30-60

• Closing costs are similar to the closing costs on a more traditional mortgage. If you are considering using an accelerator loan to refinance, it might not be “worth” the money you can save through acceleration.

• HELOC interest rates are variable and generally higher than the average on 30 year fixed rate mortgages.

Mortgage acceleration loans are useful in shortening the repayment period of a loan, but really do not do anything more than you can do yourself without incurring extra costs. However, for those borrowers with a positive monthly cash flow who would like the security and consistency of an accelerator program, these unique mortgages might be just what you need.