Mortgage company offers buyers different loan option

David Gardner expects to be a homeowner, free and clear, by age 50.

He’s now 45, and he’s been paying on his mortgage for only a few months.

Gardner, who lives in Columbia, is taking advantage of a unique mortgage opportunity on offer at Chapel Hill Mortgage, a local mortgage company. The company, located at 1517 Chapel Hill Road Suite 200, offers a number of unique mortgage options they claim can potentially reduce the time to pay off a mortgage by decades.

Gardner is using the company’s Loan Equity Accelerator Program, or LEAP, to pay off the mortgage on his primary residence, and expects to pay his home off in less than six years. He estimates he will save about $120,000 in interest versus a traditional mortgage.

LEAP mortgages differ from fixed-rate mortgages by allowing borrowers access to their home’s equity at all times by setting up the loan as line of credit into which borrowers deposit all their money.

“What’s the point of leaving money in checking and savings when it’s not making anything for you?” said Sam Bodine, vice-president of operations for Chapel Hill.

Bodine instead recommended putting that money into a mortgage and taking advantage of interest savings. The savings, he suggested, would be greater than any interest earned in a savings account.

In a LEAP loan, more money is applied to the loan’s average daily balance, decreasing interest accrued and allowing borrowers to pay off their mortgages far faster than traditional loans.

All bills are paid through the checking account, but the money sits in the credit account keeping the average daily balance low and thus saving interest.

Gardner, who works in sales for Shaw Manufacturing, said he has not changed his spending habits, but has had to get used writing checks against a $5 balance in his checking account. As per the terms of the loan, money overdrafts for free into the account in $100 increments to cover checks, and anything over $5 left in the account automatically goes back in against the loan.

Garder heard about the program through Chapel Hill advertising.

“I was very skeptical on the front side,” he admitted, but said Bodine convinced him of the program’s worth.

“He (Bodine) has done nothing but be a wealth of information on the program, and the program works just exactly how he said it would,” Gardner said. “It’s just a remarkable deal.”

LEAP loans are tied to the Prime Interest Rate, but can still save mortgage owners even if prime rises, Bodine said. And, just in case, the loan also offers borrowers the opportunity to lock in a rate at some point.

The program isn’t for everybody. Only about 30 percent of homeowners qualify for LEAP,         Bodine said.

“The lenders make sure that you’re financially disciplined, and if you’re not, you’re not going to qualify,” he said. “If you’re just living paycheck to paycheck, you’re not going to qualify.”

Typical borrowers have less than a 40 percent debt-to-income ratio, a credit score above 680, and a decent amount of money left in the bank every month.

Borrowers can finance up to 80 percent of a home’s value through LEAP, Bodine said. If there’s enough equity available, other debts, such as a car or credit cards, can also be rolled into the loan.

There are limits to what can be purchased. Foreclosed properties don’t qualify, for instance.

The typical cost of the loan is 2 percent of the loan’s value, Bodine said, though options for a higher start rate in lieu of the fees are available.

LEAP is based on another unique offering, the Homeowner Acceleratorship program, a similar loan based off the London InterBank Offered Rate, or LIBOR, index.

The loans started in Australia about 15 years ago, and became available in the United Kingdom shortly after. In the four years the program has been in the U.S., it has seen only two foreclosures, Bodine said, and both were due to divorces.

Chapel Hill, which has itself been around for just under two years, started offering the program in November 2007. Borrowers on average expected to pay off their mortgages in less than 10 years, Bodine said.

The company also has an option for those without a lot of cash on hand with the Client First Group software suite. The Web-based program helps people create a budget that will help them pay off their debts using methods similar to LEAP and the Homeownership Acceleration program.

Until recently Chapel Hill also offered the Homeownership Accelerator program, but that loan is for now on hold while seeking new investors, Bodine said. He expected that mortgage to be back on offer in the coming months.

The accelerated mortgage programs are now the most popular loans Chapel Hill offers, constituting an estimated 70 to 80 percent of the company’s business. About 70 percent of the accelerator loans are refinances, Bodine said.

“That’s pretty much all we do,” he said. “We do everything, but at the same time, we specialize in that. We have no competition. Nobody in Columbia does it but us.”