BUILDER Magazine, an international resource
for the homebuilding industry
features the system used in the ICFE's new Certified
SmartEquity Specialist program.
A homeowner advocacy group and software
promote a system that can help pay down mortgage loans.
By: John Caulfield
Special Introductory Price for the
Certified SmartEquity Specialist Course - $199
A generation ago, more than half of all homeowners in the
U.S. owned their houses outright, with no mortgage payments.
Today, that number is less than one-third, and falling.
The culprit has been the propensity of homeowners to
refinance their mortgages multiple times, which extends the term
of the loan and interest paid on it. And that interest is a
killer, even without re-fi's: For a 30-year, fixed-rate mortgage
with 6 percent interest on a $250,000 loan, the owner ends up
paying $539,598.47, of which $289,595.47 is interest that
accounts for the bulk of the payments in the first 22 years of
But if an owner were systematically paying down more of the
principal in the early years the loan, the term and total amount
of the payout could be reduced significantly. That's the
simplified premise behind SMARTEquity, a software program
devised by Canadian company ComCorp Communications that is now
being offered in the U.S. through a partnership with the
Washington, D.C.-based National Organization of American
"What we have to do is get people out of this re-fi mindset,"
says John Walsh, NOAH's founder and chairman. Walsh thinks the
best way to get homeowners thinking about this is during the
buying stage, and NOAH recently started pitching SMARTEquity to
builders as a free incentive they could give to buyers, like a
granite countertop. "If we could get 1,000 builders to offer
this to 50 buyers each, by this time next year this program
would be viral." NOAH's optimistic goal, he says, is to have 70
percent of all homeowners mortgage-free within 10 years.
Cash flow systems such as SMARTEquity have been popular in
Australia and Great Britain for decades. ComCorp Communications,
a real estate investment firm based in Ottawa, Ontario,
developed SMARTEquity about five years ago, and more than 5,000
Canadian homeowners have used it, says its president and CEO
The key to the system is what's known as a "sweep account."
Here's how it works: Let's say a homeowner borrows $250,000 to
purchase a house with a 30-year, fixed-rate, 6 percent loan. He
establishes a separate line of credit or savings account, from
which he draws $2,500 per month and applies that amount to the
mortgage principal. By doing so, the total mortgage loan is
recalculated and the owner saves himself more than $12,000 in
future interest payments. The owner uses the line of credit like
a checking account into which he deposits his monthly income and
pays bills. The owner is able to zero out this credit line in
eight months and pays only $66.52 interest on it.
By repeating this process over the course of the mortgage,
the owner would retire his house loan in 16 years and reduce the
total interest paid by more than $100,000. The interest on the
line of credit, on the other hand, would be under $1,700.
For builders, the "high perceived value" of SMARTEquity as a
buyer incentive could lead to more referrals, says Montserin.
And builders buying in bulk could lower the software's
$1,600-per-user cost to under $1,000, he says.
When asked why homeowners need the software, Montserin
asserts "the short answer is: systems work." To make his point,
he notes that while most overweight people know they should eat
less and exercise more, few do without following some kind of
regimen. The same is true about mortgage reductions. Only 3
percent of people now actually pay down their principal, "and if
you don't have a system the chances for success are slim to none
that you will."
The ICFE's Special Introductory Price for this
ICFE eNEWS is available FREE upon request by visiting our
Web site and filling
out the contact form, with the words "eNews request" included in
the comments field. Please pass this eNEWS on to your peers and
interested others and invite them to subscribe for free.
Certified SmartEquity Specialist Course is $199,
a savings of $176 off the regular enrollment price.
Paul S. Richard
President - Executive Director
Institute of Consumer
Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.