What is a 'mortgage freedom account'?

[schmidtjas]

I saw this mentioned in the thread 'eliminating debt is my main FIRE goal' but I couldn't figure out exactly what it is that they were talking about. I did some searches but I just get a lot of unrelated threads (apparently the words 'mortgage', 'freedom', and 'account' are used a lot here ).

I'm just looking for a quick explanation, or a webpage link that goes into detail.

 

[REWahoo]

I think it is a generic term for a savings or investment account set aside for the specific purpose of paying off the balance of a mortgage.

 

[ziggy29]

I've also heard terms like this used for schemes which pay off your mortgage with a HELOC where you deposit your paychecks into it and pay bills from it directly -- thus implicitly applying all of your savings to increasing your equity.

 

[Sarah in SC]

Scheme is the right word for it. Not a smart deal.

here's some of the preposterous language used to describe this, ahem, strategy:

Home Equity wealth puts you ahead of the race to Mortgage Freedom. This is the key to Consumers Wealth. Refinancing that Home Equity gives the cushion to work with. This system shows you how to find extra dollars to pay down the Principal on your existing Mortgage extra fast. It is all about using Other Peoples Money, OPM. Get a Line of Credit from your equity, like a HELOC. Use that money wisely to build your wealth using our Insurance Investing techniques, for example. Think of the new, HELOC money as the seed money that attracts other dollars like a magnet to put to work in the fast mortgage repayment system. But. Don’t get lost in the appeal by Lenders who offer a HELOC so you would take the equity in your home to go on a cruise. Holidays are fine, but you must focus on the your goals. Your seed money cannot be consumed but nurtured into a Money Tree. The Smart Mortgage Early Repayment Plan (SMERP) gives that financial nurturing.

The underlined parts are my favorites! <snort>

 

[ziggy29]

Scheme is the right word for it.

Sometimes I type before I think, but this time I very deliberately chose my words.

 

[KB]

I think a mortgage freedom account could be an acct where the person saves their property tax and homeowners insurance payments until the annual bills were received. I used to save a specific amount monthly to pay those bills as I never had an impound account for my mortgage.

 

[freebird5825]

Isn't the Money Tree that thing in the front yard that my Mom used to say was out there when us kids begged for something we couldn't possibly afford?
I looked and looked, but never found it. I finally gave up when I was about 10.

 

[CCdaCE]

I started this thread about alternative mortgages awhile back. Might be similar to what you're talking about.

Basically, if you have a high interest rate on your existing mortgage, lots of cash flow during the month, and a large mortgage amount, it might work. But the fees will probably kill most of the benefit.

-CC

 

[growing_older]

When I've heard the specifc term "Mortgage Freedom Account" it was referring to a side account earmarked for mortgage payoff. The idea was instead of prepaying the mortgage any excess "principal" payments were directed to the side account. If nothing unexpected happened, the side account would eventually meet or exceed the mortgage balance and you could decide to payoff the morgage in full at that time (or not, as you wish). Until then, if the unexpected happened, house prices tanked, prolonged unemployment, financial emergency at a time when HELOC was unavailable, etc, you could tap the MFA for whatever money you needed under circumstances where you might not be able to tap home equity (if you had been paying into the mortgage). It was also supposed to help allow the option to walk away from an upside down (non-recourse) mortgage if a small downpaymet deal went bad in a housing crash.

Because everyone seems to love Freedom in the name, it seems like the term is now being used for all type of plans (and schemes) which are mortgage related. You have to get more info about what someone means when they use this term now.