CMG Plan

What is a CMG Plan?

A CMG plan was a hybrid mortgage plan sent off in the United States during the 2000s by CMG Financial. It utilizes a checking account to reduce the mortgage amount, allowing the borrower to pay less interest every month. The savings balance held in the account can be utilized to bring down the principal of the mortgage balance.

The CMG plan has since been rebranded as all-in-one mortgages, with different lenders offering the loans too.

How a CMG Plan Works

With CMG plans, paychecks are deposited straightforwardly into the mortgage account, and that amount reduces the mortgage balance. These types of mortgages allow borrowers to pay down their mortgage balance quicker.

As checks are written against the account during the month, the mortgage balance rises. Any amount deposited in the account that isn't removed through the check-writing process is applied to the mortgage balance toward the month's end as repayment of principal.

The CMG plan is like the offset mortgage plans utilized in the United Kingdom and Australia. Offset mortgages can't be utilized in the United States due to tax laws. In the United Kingdom, interest from the savings account can offset mortgage interest for tax purposes, however in the United States, it can't.

Upsides and downsides of a CMG Plan

There are possible benefits to the CMG mortgage plan. To start with, when the paycheck or other deposit is deposited in the account, it reduces the mortgage's average month to month outstanding principal balance. At the point when the outstanding principal balance goes down, it might reduce the interest charged.

Interest gathers daily under this type of plan. Thus, even if that principal balance toward the month's end is equivalent to what it was toward the beginning of the month, you have paid off interest.

The plan likewise expects that a minimum of 10% of the paycheck remains in the account toward the month's end to reduce the mortgage's principal balance permanently. A 10% rate of savings brings about a more critical month to month reduction of principal than is required under a traditional 30-year amortizing mortgage. Subsequently, the mortgage term is substantially more limited, and extra interest charges are saved.

The expected downsides of the CMG mortgage plan are that it could carry a higher interest rate than additional traditional mortgages and that a borrower can achieve similar exit from any 9 to 5 work of principal by making unscheduled principal payments on a conventional amortizing mortgage.

Features

• This hybrid-style mortgage utilizes a checking account to reduce the mortgage amount, allowing the borrower to pay less interest every month.
• CMG plans allow borrowers to make smaller payments toward the loan principal instead of one large payment (done with a conventional mortgage) every month.
• The CMG plan was introduced during the 2000s by CMG Financial as a method for allowing U.S. borrowers access to products like the offset mortgage utilized in the United Kingdom.