The New All-in-One-Mortgage

Seattle-based Washington Mutual, Inc. recently unveiled a new type of mortgage designed to give consumers more options than ever before. The loan is expected to surge in popularity and will likely be imitated by other mortgage lenders around the U.S.

Washington Mutual, the country's largest savings and loan institution, pioneered the first installment mortgage loan back in 1890. Now, they've broken into new territory by offering an innovative product called Mortgage Plus™. As the company launches a nationwide marketing campaign, other lenders may be pressured to introduce their own versions of the loan, which offers inexpensive and hassle-free options in lieu of refinancing, and gives consumers more control over how they pay it back.

Combo package

The new instrument provides both a first mortgage and a home equity line of credit (HELOC) bundled together as a single loan. Because everything comes in the same package, there's only one set of documents and one application process. Once you have your mortgage, you can reset the interest rate and choose between fixed and adjustable rates. If you want to alter your payment arrangements, you can pick an interest-only option, or choose to make fully amortized payments of both interest and principal.

Consumers who choose Mortgage Plus™ when purchasing a new home or refinancing an existing one are able to adjust their loan terms after origination twice within the same calendar year. They can move from one fixed rate to another in about 15 minutes, either over the phone, or by visiting their lender. The first reset is free, and additional resets are a flat fee of $250, up to two per year. Consumers can always move from a fixed-rate option back to a variable rate at no cost. Best of all, you can do all of that without having to apply for a refinance.

Tapping equity

Once borrowers begin paying down their mortgages, they'll be able to tap into their equity with a check, cash advance or, in most states, a credit card. They'll be required to pay a minimum of 10 percent down, but Washington Mutual charges no origination fees and waives various other costs that homebuyers typically pay, such as appraisal and title fees. The available line of credit will continue to grow over time as you pay down your mortgage balance, giving you easy access to equity in the form of quick cash.

Avoiding refinancing

Since refinancing can be expensive and time consuming, the new mortgage is designed to help consumers make significant changes in their loans without the paperwork or cost of a traditional refinance. One downside is that the new loan will carry slightly higher interest-perhaps half of a percentage point more than average rates-but for most homeowners, the added flexibility is worth a little extra interest.

When homeowners make major changes to their mortgages, they often switch mortgage companies in the process. Washington Mutual believes that Mortgage Plus™ will help them retain customers and be more competitive. That's a plus for both the bank and you.

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