Posted in Finance, Accounting and Economics Terms, Total Reads: 243
Definition: Mortgage Accelerator
Mortgage Accelerator is a mortgage loan instrument in which an account is maintained for the borrower and the balances are directly deposited into the mortgage loan which reduces the principle and accelerates the payment towards mortgage finishing it earlier than otherwise.
This scheme leads to reduced interests over a period of time. The mortgage accelerator has its own fee but the fees mostly is less than the interest saved over the mortgage loan.
Suppose, a person has taken a mortgage on his home of 50,00,000 Rs and has been paying 2,00,000 every month for say 20 months. With mortgage accelerator he can finish of the loan early on and get freed from the debt obligation of principal repayment.
• Reduced term of mortgage
• Getting freed from debt obligation early
• Carries a higher interest payment compared to longer term of payment