What Is an All-In-One Mortgage?

The term all-in-one mortgage refers to a mortgage that allows a homeowner to pay down more interest in the short-term while giving them access to the equity built up in the property. It combines the elements of a checking and savings account with a mortgage and home equity line of credit (HELOC) into one product. Great for people who have good credit, an all-in-one mortgage lets homeowners pay off their loans sooner without the need to refinance.

Key Takeaways

  • All-in-one mortgages allow homeowners to pay down more interest in the short-term while giving them access to the equity built up in the property.
  • They combine a bank account with a mortgage and home equity line of credit into one product.
  • Payments are applied to the principal and interest of the mortgage but are still accessible to be withdrawn.
  • All-in-one mortgages require a lot of financial discipline because the more a homeowner draws, the longer it takes to pay off.

Understanding All-In-One Mortgages

With a traditional mortgage, a homeowner makes payments so they can lower the principal and interest. But the lender doesn't offer any other perks with this kind of mortgage. An all-in-one mortgage, on the other hand, allows the mortgagor to combine a savings account with their mortgage, working much like an offset mortgage or home equity line of credit (HELOC). In an offset mortgage, a savings account is blended together with a mortgage, where the savings balance maintained in an account may offset the mortgage balance. A HELOC, on the other hand, is a revolving credit line that works just like a credit card.

Here's how it works. Payments are applied toward the principal and interest portions—just like a regular mortgage—with one key difference. With an all-in-one mortgage, the payments are deposited into a savings account, so they're accessible for withdrawal. This type of mortgage decreases the amount of interest paid over the life of the loan. It also cuts down on any fees that may be incurred when a homeowner decides to refinance which can add up to tens of thousands of dollars over the typical 30-year life span of a mortgage.

A homeowner can use the equity from an all-in-one mortgage however they choose, whether that's for everyday expenses such as groceries or for emergencies like home repairs and medical expenses. Homeowners can access their equity in a few ways including making withdrawals with a debit card, writing checks directly from the account, or by transferring the funds from the mortgage to a traditional checking or savings account. Withdrawal methods vary between institutions—all lenders allow limitless draws as long as the accounts are paid as agreed and there are funds available. Any withdrawals must then be paid back.

All-in-one mortgages are intended for people who spend less than they earn.

Although this kind of mortgage allows the homeowner with access to liquidity, a seemingly endless amount of equity can be a huge disadvantage—especially for people who aren't financially disciplined. That's because a homeowner with an all-in-one mortgage may continuously draw on their equity as it builds and never fully pay off their mortgage. And unlike other mortgage products, the all-in-one-mortgage often comes at a slightly higher interest rate.

All-In-One Mortgage vs. Refinancing

When a homeowner wishes to change the existing terms of their note, they can refinance their mortgage. The reasons for refinancing can vary from wanting to take advantage of lower interest rates to removing a spouse after a divorce.

To refinance their mortgage, a homeowner must take some of the same steps they did when they first purchased their home. They will need to contact a licensed mortgage broker or loan agent to review their income and credit to verify that they will qualify for any changes they wish to make. The home will still need to meet required standards and, depending on the loan program, there may be document verifications required as well.

Once a refinance application is completed and approved, the homeowners must undergo a closing procedure. This generally has less paperwork than the original purchase, but still requires a new mortgage note and deed to be executed. These contain the new terms of the mortgage.

As with a cash-out refinance, an all-in-one mortgage allows a homeowner to draw on the equity of the home. But, as mentioned above, homeowners can save a lot of time and money with an all-in-one mortgage because they can do away with all the paperwork and fees associated.