Understanding All-In-One Mortgages - SmartAsset

An all-in-one mortgage provides an opportunity for homebuyers to access the equity they’ve built in their property through a bank account. This relatively unique mortgage option could be the right fit for your finances if you’re looking for a mix between a traditional mortgage and a home equity loan. If you aren’t sure, then consider working with a financial advisor to get help in determining the right choice for your situation.

What Is an All-In-One Mortgage?

All-in-one mortgages are not especially common. But the product combines a few elements from your everyday financial life. Essentially, this mortgage product acts like a cross between a traditional mortgage and a home equity loan. But it functions similarly to a bank account.

If you set up a regular deposit to your all-in-one mortgage account, the deposits will lower your mortgage balance. And with that reduced balance, you’ll save money on interest payments. If you are regularly pulling funds out of this all-in-one mortgage account, the principal balance will rise when you take out funds and the amount you can withdraw varies. But at the very least, you’ll want to keep up with your regular mortgage payment.

It’s a great option for borrowers who want to eliminate their mortgage as quickly as possible. However, it keeps some liquidity available for borrowers twho may want to tap into their equity along the way.

How Does an All-In-One Mortgage Work?

Borrowers with an all-in-one mortgage typically have the goal of paying down their mortgage balance as quickly as possible. As the borrower makes extra payments, these funds will pay down the mortgage principal.

As your equity in the home builds, you’ll still have access to that cash you’ve stashed in your all-in-one mortgage. If an unexpected expense pops up, you can pull out the funds you need directly from this account to pay for it.

The withdrawal style varies based on the lender. But a few options include writing a check, transferring funds from this account to your regular checking account, or using a debit card. Once the all-in-one mortgage has been set up it is designed for easy access to the funds just as a HELOC is designed for.

All-In-One Mortgage Example

Let’s explore an example of what an all-in-one mortgage might look like in practice.

Let’s say that in this case, you have a $250,000 mortgage loan with a 5% interest rate. The monthly payment for this 30-year fixed-rate loan is $1,300 per month. You have an extra $200 in your budget that you’d like to put towards your mortgage repayment. But you want to have access to these savings along the way.

As you start making this extra $200 payment, your principal balance will decrease. The regular payments will allow you to save money on interest payments.

After 10 years of making regular payments, you discover that you need a new vehicle unexpectedly. Instead of applying for a high interest car loan, you decide to withdraw the funds from your all-in-one mortgage. You don’t need to apply for any extra loans to make this withdrawal, so you can efficiently purchase the vehicle you need.

Ultimately, this product gives you the ability to work towards the goal of paying off your mortgage, but you won’t have to entirely give up access to those extra savings. If used correctly it can be a lifesaver when you need it and save you money when the unexpected happens.

Advantages and Disadvantages of an All-In-One Mortgage

Every financial decision has pros and cons, and an all-in-one mortgage is no different. It’s important to weigh the speed of getting access to capital versus the costs you’ll have to pay. Here’s what to consider about this unique mortgage.

The advantages, or pros, of an all-in-one mortgage, are:

Liquidity: You’re able to get access to funds extremely quickly when you need to. Plus, you can work to repay your mortgage without completely losing access to the savings you have in your mortgage.
Speed: If you need to use your home’s equity, you won’t need to apply for a new mortgage product. You can get funds within a day in some cases.

The disadvantages, or cons, of an all-in-one mortgage, are:

Too easy to access: If overspending is a temptation, this could be an issue because you can get access to this type of mortgage fairly easily if you meet the qualifications.
Higher interest rates: Most lenders have higher interest rates on all-in-one mortgages than other more traditional mortgage products. This could cost you quite a bit more over the course of your payback period.

All-in-one mortgages are relatively hard to come by. If you find a lender that offers this option, you’ll likely need an excellent credit score to qualify and you may need a bit of equity in your home already. This could mean that you’re putting a significant down payment into your home, which is money you might find better off investing in another way.

All-In-One Mortgage Vs. Home Equity Line Of Credit

In many ways, an all-in-one mortgage feels very similar to a home equity line of credit (HELOC). After all, a home equity line of credit offers the chance to tap into the equity you’ve built in your home. But there’s a major difference between these two mortgage options. Most importantly, the all-in-one mortgage doesn’t require you to apply for a separate loan product when you want to access your home’s equity.

If seeking a HELOC, you’ll need to go through an entirely new loan application process. The application process can cost time and money. With that, an all-in-one mortgage option is undeniably more convenient.

Convenience is a double-edged sword. If you can easily access your equity, it could be a temptation to overspend. But if you know that you can prioritize your financial goals without overspending, then an all-in-one mortgage is a more streamlined solution.

Bottom Line

An all-in-one mortgage is just one option for homeowners. The mix of liquidity and interest savings might be attractive. However, this is a product that is difficult to find because of how easy it is to pull money out of your home. Many lenders won’t provide this type of product for you and if they do it will typically be difficult to qualify for. However, if you have one it can be a great way to get access to funds when you need them for things that are unexpected or to save you from borrowing additional money.

Tips For Buying a Home

The right mortgage product makes a big difference in your personal finances. A qualified financial advisor can help determine which mortgage is the right fit for your situation. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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