Mortgage payoff on steroids

If all goes according to plan, the system can knock about 20 years off a 30-year loan.

One of the most widely used accelerated mortgage software programs is sold by a Utah company called United First Financial. It costs $3,500 and requires users to stay on top of entering all necessary data to calculate optimal monthly mortgage payments.

United First Financial says it has about 10,000 customers nationwide.

"It's a great contribution that we're making to the American family," said Greg Somerville, a California sales agent for the company.

He said sales have gotten tougher in recent months because of the anemic housing market. As the value of people's homes declines, the available equity for lines of credit evaporates.

As a result, Somerville said he's increasingly steering customers into accelerated mortgage plans that hinge not on lines of credit but on credit cards.

You heard that right. In such cases, you're borrowing from a credit card to pay down your mortgage. And you'd better hope you don't miss any card payments or you'll get slapped with a passel of late fees and see your interest rate soar to around 30%.

"This just makes people be even more disciplined with the program," Somerville said.

That, or it results in people's ruin.

Ted Grose, a West L.A. mortgage broker and former president of the California Assn. of Mortgage Brokers, said tying your mortgage to a credit card is like playing with fire.

"Credit card debt is exceedingly dangerous," he said.

His advice for people interested in accelerated mortgage systems is to stick to lines of credit and to minimize the potential for human error. Grose said he tells clients to look into plans that are largely automated and don't require laborious bookkeeping on the computer.

One such alternative is offered by a San Ramon, Calif., company called CMG Financial Services. Rather than selling software, it offers lines of credit that replace your primary mortgage and that also come with built-in checking accounts.

The idea here is that by depositing your paycheck directly to your equity line, you'll be in a position to devote more discretionary funds to paying off the loan after meeting other expenses.

The company says it has about 6,500 clients using the service.

When I first heard about accelerated mortgages, I figured they must be a scam. As best as I can tell, they're not.

But the plans require steady positive cash flow and an ability to resist eating into your home's equity even though that checkbook in your pocket is making it tantalizingly easy to go out and buy that pricey Prius you've had your eye on for months.

Me, I'll stick with paying an extra hundred bucks toward my principal each month. It ain't flashy, but I'm not losing any sleep at night.

Consumer Confidential runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.

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