CMG Plan

DEFINITION of 'CMG Plan'

A mortgage plan in which a borrower's mortgage is structured like a checking account, where paychecks are deposited directly into the mortgage account and the mortgage balance is reduced by that amount. 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 Any amount deposited in the account that is not withdrawn through the check-writing process is applied to the balance of the mortgage at the end of the month as repayment of principal.

BREAKING DOWN 'CMG Plan'

The potential benefits of the CMG mortgage plan are that when the paycheck is deposited in the account, it reduces the average monthly outstanding principal balance of the mortgage on which interest is charged (interest accrues daily under the plan) even if that principal balance at the end of the month is equal to what it was at the beginning of the month.

The plan also assumes that a minimum of 10% of the paycheck remains in the account at the end of the month to permanently reduce the principal balance of the mortgage. A 10% rate of savings results in a greater monthly reduction of principal than is required under a traditional 30-year amortizing mortgage. As a result, the term of the mortgage is substantially shorter, and additional interest charges are saved.

The potential drawbacks of the CMG mortgage plan are that it might carry a higher interest rate than more traditional mortgages, and that a borrower can accomplish the same early retirement of principal by making unscheduled principal payments on a traditional amortizing mortgage.

RELATED TERMS
  1. Mortgage Accelerator

    A type of mortgage loan program popular in the United Kingdom ...
  2. Offset Mortgage

    A type of mortgage that involves blending a traditional mortgage ...
  3. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  4. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  5. Primary Mortgage Market

    The market where borrowers and mortgage originators come together ...
  6. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
Related Articles
  1. Investing

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  2. Investing

    Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  3. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  4. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  5. Investing

    Score a Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
  6. Personal Finance

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  7. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  8. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  9. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  10. Personal Finance

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
RELATED FAQS
  1. Is there any limit on how much I can pay toward my mortgage principal every month?

    I understand that I'll be paying more interest and less principal for almost the first half of my mortgage term. I'm planning ... Read Answer >>
  2. What is the process to take over a mortgage through a loan assumption?

    My landlord wants me to take over her mortgage.  ... Read Answer >>
  3. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  4. Why does the majority of my mortgage payment start out as interest and gradually ...

    When you make a mortgage payment, the amount paid is a combination of an interest charge and principal repayment. Over the ... Read Answer >>
  5. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  6. I've come into a large amount of money. Should I invest it or pay off my mortgage?

    There is no simple answer to this question as it depends on a number of key factors, namely the aspects or criteria of your ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center