What Is a CMG Plan?

A CMG plan was a hybrid mortgage plan launched in the United States in the mid-2000s by CMG Financial. It uses a checking account to reduce the mortgage loan amount, allowing the borrower to pay less interest each month. The savings balance held in the account caꦍn be used to lo🃏wer the principal of the mortgage balance.

The CMG plan has since been rebranded as 澳洲幸运5官方开奖结果体彩网:all-in-one mortgages, with 澳洲幸运5官方开奖结果体彩网:other lenders also offering the loans.

How a CMG Plan Works

Wit🌊h CMG plans, paychecks are deposited directly into the mortgage account, and that amount reduces the mortgage balance. These types of mortgages allow borrowers to pay down their mortgage balance f๊aster.

As checks are written against the account during the month, the mortgage balance rises. Any amount deposited in the account that is not withdrawn through the check-writing process is applied to the mortgage balance at the end of the month as repayment of𝕴 principal.

The CMG plan is similar to the 澳洲幸运5官方开奖结果体彩网:offset mortgage plans used in the ജUnited Kingdom and Australia. Offset mortgages cannot be used in the United States due to tax laws. In the United Kingdom, interest from the savings account can offset mortgage int🌸erest for tax purposes, but in the United States, it cannot.

Pros and Cons of a CMG Plan

As with any financial product, ꦫthere are potential benefits and drawbacks to the CMG mortgage plan.

Pros

Saves interest by reducing the outstanding loan balance: When the paycheck or other deposit is deposited in the account, it reduces the mortgage’s average monthly outstanding principal balance. When the outstanding principal balance goes down, the interest charged may be reduced. Also, since interest accrues daily under this type of plan, even if the 澳洲幸运5官方开奖结果体彩网:principal balance at the end of the m♒onth equals the beginning of the month, you have paid off interest by depositing funds.

Liquid and fast access to funds: The CMG mortgage allows borrowers to tap into the savings without the need to apply for a 澳洲幸运5官方开奖结果体彩网:home equity loan or l🌠ine of credit (HELOC). This liquidity and ease of access can help with emergency expenses, such as a car repair or medical bill.

Reduces mortgage term: The plan also assumes that a minimum of 10% of the paycheck remains in the account at the end of the month to reduce the loan's principal balance permanently. A 10% rate of savings results in a more significant monthly reduction of principal than is required under a traditional 30-year 澳洲幸运5官方开奖结果体彩网:amortizing mortgage. As a resu🉐꧒lt, the mortgage term is substantially shorter, and additional interest charges are saved.

Cons

Higher interest rate: A CMG mortgage plan can carry a higher 澳洲幸运5官方开奖结果体彩网:interest rate than a traditional fixed-rate mortgage.

Too easy to withdraw funds: The CMG mortgage makes it easy to withdraw funds and overspend. As a result, the ease of access to the savings allows borrowers to spend the money. Conversely, with a traditional mortgage, you must apply for a 澳洲幸运5官方开奖结果体彩网:home equity loan or line of credit to cash in on♊ your equity, making it less tempting to overspend.

Get the same result with a conventional mortgage: A borrower can accomplish the same early payoff of the outstanding loan balance by making extra principal payments on a conventional amortizing mortgage. The result is the loan gets paid off sooner, saving on total interest.

The Bottom Line

The CMG plan, by CMG Financial, was designed to allow U.S. borrowers access to a similar mortgage product used in the United Kingdom called an offset mortgage. This hybrid-style mortgage uses a checking account to offset or reduce the loan amount, helping the borrower save on i💙nterest.

With a CMG plan, borrowers make smaller monthly payments to reduce the loan principal versus one large payment typically done with a conventional mortgage. The CMG plan has since been rebranded as an all-in-one mortgage, with other lenders also offering the loans.