Suited for The Times

Bob and David Hanson Offer a New Product for a Changing Economy

By Karen Nitkin

Bob and David Hanson, who built their Premier Mortgage business on the benefits of the One Percent Mortgage Solution, are now offering an even bolder mortgage product: The Mortgage Interest Buster™.

On their daily radio show and in print, the Hansons have been extolling the benefits of harvesting dormant equity from a home and putting it to work to create wealth elsewhere for years. Their initial mortgage product, the One Percent Mortgage Solution, allowed homeowners to do this while keeping a low mortgage payment.

Bob and David’s new type of home loan, The Mortgage Interest Buster, not only gives homeowners access to the dormant equity in their homes, but also the cash that sits for many days each month waiting to be withdrawn to cover expenses, earning little or no interest in their bank accounts.

Out with the Old, In with the New

“Americans have been conditioned to view their mortgages as one-way instruments…money can go in but it can’t come out,” Bob explains. “The Mortgage Interest Buster or MIB™ changes all that. With this program, homeowners are given access to the available equity in their home and can draw it out or pay it down at will.”

Hanson explained that the new type of mortgage doesn't constrain homeowners. They simply deposit their entire paychecks into their MIB mortgage account each month, and then write checks from that account to pay their normal expenses. This leads to lower payments, Hanson said, because the paycheck money that is stilling in the account is working to bring down the average mortgage balance, thereby reducing the amount of interest that will be charged.

“The compounding effect of running all of their income though their Mortgage Interest Buster account has the effect of paying off or paying down their home much faster, saving them as much as hundreds of thousands of dollars in mortgage interest,” Hanson said.

Hanson argued out that traditional 30-year conventional mortgages are profitable for the banks but not particularly favorable to the homeowner. “For the first several years of the loan, hardly any money goes toward reducing the principal,” he said. "It takes years to significantly reduce the principal balance owed, and during that time, more interest is paid.”

“But with the Mortgage Interest Buster” he said, “your principal mortgage balance can be reduced by as much as thousands of dollars each month simply by keeping your money in your mortgage account for most of the month instead of letting it languish in your checking account waiting to be withdrawn to cover your bills.”

“It's a small change with a big impact,” he said.

For example:

If a homeowner takes out a new $200,000 traditional 30-year mortgage at a 6% interest rate, the loan will have a required payment of $1,199 per month. Of the first payment, $1,000 goes toward interest and only $199 is applied to reduce the principal balance.

At the end of the first month, the unpaid principal balance would be $199,801. The second month’s required payment is again $1,199. But this time, the interest charge has been reduced to $999 (from $1,000), and the amount left over to be applied toward principal is $200 (up from $199). That means the unpaid principal balance on the loan is now $199,601. You can see from this example why it takes so long to significantly reduce the principal amount owed, while monthly interest payments remain high.

But now consider the same situation with a $200,000 Mortgage Interest Buster loan. Since the homeowner will be able to maintain access to her money, she deposits her entire $5,000 monthly paycheck into her MIB mortgage account. That immediately reduces her principal balance to $195,000. During the month, she writes checks from her MIB account for $3,500 toward bills and living expenses, thus increasing her balance to 198,500. But since most of her check sat in her MIB account for much of the month, her average daily balance was only $197,000.

Her first month’s interest when calculated on that amount is only $985. The $515 that she did not spend from her paycheck that month stays in the MIB account for now, continuing to depress the average daily balance and thus reduce her interest charges. Her unpaid balance is now $197,485 versus the $199,801 she would owe on a traditional mortgage. 

In her second month, she again deposits her full $5,000 paycheck into her MIB account, thus reducing the unpaid balance to $192,485. Like the previous month, she spends $3,500 paying her bills from the MIB account and running the principle balance up to $195,985. But because much of her paycheck sits in her MIB account for much of the month, her average daily balance is only $194,000. So her interest charge for the second month is only $975. Her unpaid mortgage balance is now $196,960, versus the $199,601 she would owe on a traditional mortgage. Even in this modest example, this homeowner would pay her house off completely 12 years earlier than a traditional 30-year loan, and save $129,828 in mortgage interest.

First introduced in Australia decades ago, the concept of the Mortgage Interest Buster home loan has since spread to Great Britain and Canada, Hanson said. It has only recently come to the United States. Asked why Americans have not heard of this loan sooner, Hanson speculated that banks in the U.S. have had little incentive to bring such a product here.

“If you are able to pay off your home in 7 to 12 years on the same cash flow that traditionally would have taken you 30 years of payments and in the process save say $200,000 in mortgage interest, that means that your bank will make $200,000 less interest income," he said. "I suspect that’s not a prospect that sounds very good to the ears of your banker.”

From Words to Action

Hanson, who grew up outside Philadelphia and graduated from the Naval Academy, started his company about six years ago. Before that, he was a Vice President in the Washington Post Company for many years and owned various businesses. He and his son David host a syndicated radio show that is broadcast several times a week both here in Annapolis and from Leesburg, Virginia. Their plan is to add more stations and markets.

Hanson said the introduction of the Mortgage Interest Buster program has sparked new interest from people who listen to his show and read his published articles and advertisements.

Bruce Johnston, from Upper Marlboro, was one of the first of Hanson’s radio listeners to sign up for the program. “It just rang a bell with me, he said. “This new plan of paying off your mortgage sooner was far better than anything I had heard before.”

Johnston called the toll-free number he had heard on the show, and a few days later, Bob Hanson was in his home, modeling on his laptop Johnston’s present mortgage payoff compared to a new Mortgage Interest Buster.

“The model showed me that given my existing income and expenses, I would be able to pay off my home in just 7.8 years!” Johnston said. “My overall interest savings was over $250,000… with no change in my current monthly cash flow.”

“The real beauty of it is that my home’s equity remains liquid and fully accessible to me,” Johnston continued. “So if I need money for my children’s education or other necessities, I can have it simply by writing myself a check from my MIB account.”

Another of Bob’s early MIB clients was David Canale of Annapolis, an international tax consultant and a partner in one of America’s “Big Four” accounting firms. Canale pointed out that the concept of using an open-end line of credit to pay off a home far surpasses the old American plan of using a closed-end mortgage with a 15-year or 30-year amortization schedule.

“By using this type of mortgage, a consumer is certainly going to be applying more of his monthly mortgage payments towards principle and less toward interest” said Canale. “The borrower is effectively becoming his own banker, deciding for himself how and when to best utilize his home equity reserves. The MIB account can become an important part of a strategy that allows homeowners to access equity for other wise financial investments.” 

“One more thing” added Canale. “It was actually fun to work with Bob to discover how much mortgage interest we could save. This product is ideal for anyone wanting to save themselves many, many thousands of dollars in mortgage interest.”

For more information or to schedule a free, no-obligation consultation, call Bob or David Hanson at 1-888-MI BUSTER (1-888-642-8783).

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