A Home Loan Where NO PAYMENTS are Required! (All-In-One Loan Explained)

You don't have to make any monthly payments on a certain property loan type. And if you do choose to make a payment, none of it will be lost to interest. The payment only goes to paying down your principal. This does exist. You can either use it on your own home or rental property. We'll explain it, and if it's right for you, how you can get one. And this is nothing new or experimental. A lot of people just don't know about what's called an all-in-one loan. To see how it works, you want to listen closely here with my great guest. She's the CEO and president of Ridge Lending Group. And if you can hang in here with our example with some real numbers, you'll be rewarded later in the video where we break down how these benefits can reduce the amount of interest you'll pay by tens and hundreds of thousands of dollars. In fact, Ridge is where I've gotten my own loans for rental property for years. First of all, let me just explain why is it called the all-in-one. It's called that because it doubles as both a mortgage in the form of an open-ended revolving HELOC and checking and savings. Both of those two features are combined, hence the all-in-one, as a way of diminishing the amount of interest that can accrue over time. Let me explain. So any revolving account, any account, including a credit card, for example, but first lien HELOC, second lien HELOC, whichever, doesn't matter. Open-ended revolving is the key. Any open-ended revolving account will accrue interest daily based on two factors. The first being that day's balance and that month's, in this case, interest rate, fully indexed interest rate. I'll come to interest rate later. As a result, you now have control largely over how much interest can accrue. Now let's take that statement and transfer it and look at it against an amortized closed-ended mortgage, all right? You sign up for a 30-year fixed mortgage today, let's say it's 7%. Whatever the interest rate is, is really irrelevant. Your principal and interest payment are defined on day one. There is no changing that monthly payment. Now you could certainly accelerate the payoff of that mortgage debt by doing what? Applying additional extra principal payments. Right, but what happens to that extra principal payment when you send it off with your 30-year fixed mortgage payment? It drops your loan balance, but your minimum payment amount is the exact same the next month. Right, and then what happens to all that liquidity that you had prior? It's now illiquid, right? You've just transferred your cash flow into equity. Financial freedom is created by doing the opposite thing and changing equity into cash flow. Very illiquid and not the way an investor typically is going to want to run his or her business. So I want to start by, I usually like to give an example, okay, and provide some visual aid so that people can connect the dots. Let's start with the 30-year or a fixed rate mortgage, just because I feel like especially in the US, okay, this particular loan product or its concept is widely used in much of the rest of the world. In the US, I feel like we're sort of preconditioned here to really only understand that closed-ended amortized mortgage. So I'm going to start with an example there that actually highlights or leads into the concept of the all-in-one. So I want you to imagine a 30-year fixed mortgage and a 15-year fixed mortgage, okay? Both of these mortgages originated or started at $400,000 as the balance on day one. The 30-year fixed mortgage locked at an interest rate of 4%, and the 15-year fixed mortgage locked at an interest rate of 7%. Now, when I go through this exercise and I give this example to people, I ask them the question, well, which one would you choose? And without exception, if they don't understand amortization, they are going to select that 4% 30-year fixed mortgage because they don't understand that it's about speed, okay? When you run the math and you look at an actual amortization table, you'll see that you'll pay $40,000 more in interest on a 4% 30-year or 360-month versus a 7% 15-year or 180-month. So the point here and what I'm illustrating is it's speed, okay? Now, let's segue back over to the all-in-one. It's all about speed and how much interest we allow to accrue over time. So as you had mentioned to kick this off, Keith, every deposit acts like a payment. Now, here's where I struggled with this in learning. And when this was first introduced to me years ago, this part of it really caught me off guard and I had to really dig in and try to focus on what are they talking about? What do they mean? There's no payment due on the all-in-one. I'm going to say that again. There's no payment due on the all-in-one. Think about your 30-year fixed mortgage. If you don't make a payment, what happens? You're defaulting. You're in trouble. You become delinquent, right? So that is not how this loan is set up. And it's not smoke and mirrors, okay? It's nothing fancy. The deposits that you make from ordinary income, from all sources, really, okay? So we want to talk about this is really special for investors because we have access to gross rents, right? The rental income that's coming in before we send it back out the door, along with our net wages and every other source of income deposits that we're getting can be utilized to your advantage. One of the ways in which I describe this is I like to say, you've become your own bank. So you have this line of credit and your gross rents and all of your net wages are going to deposit into your checking account, driving that principal balance down dollar for dollar so that the interest accrual is diminished. Because remember what I said a few seconds ago, the interest is calculated on any open-ended revolving account based on two factors, the balance for the day and the interest rate. So the more you have in depository income and you drop it into your checking account, the longer it stays there, the lower the amount of interest is going to accrue within a 30-day billing cycle. Now, let me just paint one more picture, okay? And then we can open up to what questions come from this. So I want you to imagine this is, I'm going to use easy round math, okay? I want you to imagine that you have an unpaid principal balance on your mortgage, on your HELOC of $100,000, just for round easy math, and that you bring in $10,000 a month in income from all sources. And just to keep it simple, we're going to say that that $10,000 comes in on day one of month one, okay? So here's our $100,000 sitting there. My $10,000 is deposited into my checking account. Now my balance is $90,000, right? That $10,000 is not going to be touched, okay? You will not touch that $10,000 for 29 days out of a 30-day billing cycle. And I'm giving you optimal tricks, okay? This is how you want to use it optimally, all right? So day one, instead of paying interest on $100,000, you're paying interest on $90,000. And you're going to pay interest only on $90,000 for 29 days out of a 30-day billing cycle. Well, how am I going to make all my bills? And how am I going to eat? And how am I going to pay my cell phone? And what am I going to do? You're going to use a credit card or credit cards of your choice, the ones that provide the best points or whichever you prefer. It doesn't really matter to pay all those monthly living expenses. Now we don't want to pay any interest on our credit cards, right? 18%, 28%, whatever it is. No, thank you. So now we're going to go to day 30 of that 30-day billing cycle, right? 29 days, that $10,000 has sat in there. Our balance has been $90,000. Our interest has accrued on that $90,000. On day 30, the credit card has amassed $9,000 in expenses. You've spent $9,000 for the month on food, gas, utilities, car payments, cell phone. Everything goes on that card. Day 30, you go into your checking account where your $10,000 has been sitting, and you write a check to pay off the credit card, $9,000. So for one day of the month, we went from $90,000 in a balance to $99,000, right? $9,000 had to come out of the 10 to pay off the credit card. We had $1,000 left over. Now I want you to fast forward into month two, day one. Our starting balance, because that $1,000 left over was our residual income, our discretionary, our savings. It's what was not spent. But I have full access to it should I need it. So day one, month two, $99,000 is my outstanding balance. I drop in my $10,000 of income. $89,000 is what I'm going to be paying interest on for 29 days of the 30-day billing cycle. So this should allow listeners to connect some dots. There are two components of compound interest savings. The first being daily, right? We've got our income dropping in there. It's just sitting. So daily savings, compound interest savings. And then that leftover savings, that residual, that $1,000 is going to be left in there month after month, 24-7 access. That's monthly compound interest savings. So those are the two components that make this product profoundly impactful in diminishing that interest accrual over time. Why don't I take a pause? So with the all-in-one loan, we're really integrating our consumer accounts with our mortgage. Absolutely right. And is there a way to automate these payments associated with this? Yes, I'm glad you asked. So everything that you have become accustomed to today in your checking and savings is going to be exactly the same with the all-in-one. This mortgage is housed by an FDIC-insured banking institution. It'll be one of two places. Depending on which ends up picking up the rights, it'll be Northpointe or Merchants Bank. Those are the two that service this loan. Feel free to check them out. So when you think about the automation of your checking and savings accounts with your B of A, Chase, Wells Fargo, whomever, credit union, whomever you bank with now, there will be no difference to that experience and this experience. So online bill pay, debit cards, routing numbers, paper checks, should you still use those, mobile apps, if you get a paper check, you take a picture and it uploads to the account. All the same exact automation as you have become used to today will apply with the all-in-one. And you've described how the all-in-one loan is an open-ended loan versus your plain vanilla 30-year fixed amortizing loan, which is close-ended. For those that don't know, what do those terms open-ended and close-ended mean? So amortized is predetermined over the period of time that you've gotten the mortgage for. So whether it be a 10-year, a 20-year, 25, 15, 30, whatever it is, it is closed-ended. So the interest rate that you secured against the loan amount that you've taken, they have come up with the formula, the calculation that says, this is how much interest you're going to pay over this length of time. And the longer the amount of time that you have selected, let's say a 30-year, maybe even a 40-year, those do exist in some cases, the longer the amount of time that closed-ended amortized mortgage is in play, the more interest you're going to pay. Now, it keeps your payment lower for sure, but they're going to make it up in the interest that you'll pay in the long time. Now, the open-ended revolving just means that it is available to pay down and draw up, and pay down and draw up. It is not closed. And then with those conventional mortgages, typically, especially when you originate a new loan, for years, most of your payment goes to interest, which would not be the case with the all-in-one loan. Exactly. Yeah. So anybody that's looked at an amortization table knows, the first 10-ish years, we'll just keep using the most common 30-year fix. First 10 years or so, maybe even a few years past that, 90% of your payment is going to go to the interest. You won't start chunking down any principal until the back end of that mortgage. $180 or complete flip to the all-in-one. Every dollar that goes in there drives the principal down first. Yeah, that is huge. Even if you pay a higher interest rate on your all-in-one loan, you can see how you have fewer dollars out of pocket in interest paid, which is what really matters to you. Exactly right. So think about a 20% interest rate. If you're paying 20% interest on $50,000, then 7% interest on $500,000, you can see how the math will work in your favor, regardless of the number in the interest rate in comparing side to side. And one of the other things that we haven't touched on, and maybe this is a good segue, Keith, is that it's not just the daily deposits, okay? We have clients that take out a million-dollar line of credit, but they have $500,000 sitting idle for whatever it is, their business needs and the e-commerce. It doesn't even matter, but they have this amount of cash that they're simply going to take from this vehicle, a regular checking account over here, and drop it in here, and that interest is saved. That $500,000 that was sitting idle doing nothing over here is now saving interest at an incredible rate. So it's not just the daily and monthly deposits. If you just have idle cash, or you know you're going to be getting a bonus or a tax refund or whatever it is, those monies that would otherwise just sit in a 1% to 2% maybe, right, interest-bearing checking savings account, can now be applied over here, driving down that balance further, dollar for dollar, saving in that interest. So we are opportunistic investors here. When we see an accumulation of equity in a property or cash in an account, we want to get that moving. So with this all-in-one loan, again, which is like a first lien HELOC, I would imagine that when we get plenty of room to borrow more in there, and there's been plenty of paydown, we might want to draw against it again for another purchase and let this thing be flexible like an accordion back and forth as you're drawing the balance down and you're extending it out again. So really the way I see the flexibility with the all-in-one loan is that you don't have to go through another Morgan's loan origination each time you want to buy a property. You can just draw against this account. And we're still just scratching the surface in what this thing does. Exactly right. And I've said this twice now, you've become your own bank. If you pay it down over a short period of time, let's say that you had a half a million dollars and you were able to reduce that down to $300,000. There's a $200,000 spread there that at your discretion, you don't have to re-pre-qualify and pay closing costs again. You don't have to ask permission or get it approved for some reason. Those are your funds, your equity, your dollars to do what you want, when you want, how you want. The other thing too is probably a good place to point this out. Safety net, okay? As long as there is a spread between what you owe and the credit limit, right, whatever that is, if something were to happen that was unfortunate, some unfortunate set of circumstance befell the family, whatever, and no income was coming into the household, zero, okay? What would happen if you, we talked about this earlier, if you didn't have money to make your 30-year fixed mortgage payment, you're going to ruin your credit and go into default, right? Well, the reverse is true with the all-in-one. If there is a spread between the balance and the limit and you needed to not make any deposits, the only thing that's going to happen in that case is interest is going to accrue on top of that balance. The only time a payment deposit is mandated with the all-in-one is when the balance is about to exceed the limit. That's the only time. Now, I'm not saying that that's the way people are going to use it, but that's the reality of it. So what if this, let's take this down the rabbit hole for a second. If you couldn't make a deposit, you're not going to go into default, right? You're simply going to add some interest on top of the existing balance. But what if you needed to draw from it for living expenses for a couple of months? Yeah. What if you needed, you know, $5,000 a month for three months until you got back on your feet, whatever it is, you have access to do that. There's your safety net. You just simply draw from it. As long as there's a spread between the balance and the limit, those are your funds to do with what you choose. Gosh. So if one takes out, you know, a HELOC, whether that's in an all-in-one loan form or not, you know, something that I've advocated with my listeners for years is that, you know, now you do have this line that you can draw against. To your point, Shaley, it's effectively another layer of insurance for that borrower or investor. So if you're interested in keeping down your insurance premium, you can get a HELOC or an all-in-one loan, increase your insurance deductible, which can lower your insurance premium and increase your cash flow. Good point. You know, I hadn't even thought about that before. That is a new one on me. That is actually brilliant. Yes. Now, we had a listener quite a while ago, Mark from Granite Bay, California, right in. Mark's a great longtime listener. When he found our show, he wanted to go back and re-listen to all the old episodes, and he listens to several episodes multiple times. And Mark wrote in because he heard you on the show quite a while ago, and Mark says, I've been using the all-in-one loans amazing mortgage balance deduction, but as a GRE listener, I know I can't be lured in by that alone. I also need to utilize its leverage. I just use my all-in-one loan, Mark continues to say, probably like a lot of others, and then refinance that loan into a Fannie Freddie 30-year from my all-in-one loan simulations. And Chaley has an all-in-one loan simulation on her website that she'll tell you about. But to finish Mark's question, Mark says, I have gathered in these simulations that as long as properties are cash flowing, the best use of the all-in-one seems to be to keep repeating what we did on our first duplex purchase, use the all-in-one loan to buy properties in all cash, and then later refi it into better debt or leverage, and then continue to repeat the process. Is that a valid way to use it? That's Mark's question. Absolutely, Mark. Well done, sir. And there's a few points here that I want to take a minute and peel back, Keith. So one of the first things that I would say that's really great about that philosophy or that strategy is going to be that on a cash-out refinance of the property that was paid cash using the all-in-one, we get to use the appraised value. So under the circumstances, if you paid $100,000 for it, and perhaps it valued at $110,000, $150,000, $120,000, whatever it is, then we as the lender are going to refinance on a cash-out refinance using that higher appraised value. So you'll have a little bit more leverage there and potentially get more in that loan-to value when you're comparing what you're getting back versus what you put in. We can go through some simulations there in a second. So that would be the first thing that I would say. The other thing, obviously, is that when you're dealing with a turnkey or a seller or an agent, whatever, everybody knows that when you can come to the table with cash, right, you become the more desirable buyer. Okay, so there's that obvious piece. And then in terms of that strategy and that simulation, so please, yes, that is absolutely the first thing that I'm going to do with anybody that calls in is I'm going to get on the phone with them, a Teams call, and we're going to do the simulator together. But I encourage everybody to get in there and play around with it. If you're not quite sure what data points it's asking for, let us know or we'll do one together. But that simulator is going to allow you to compare the all-in-one to either an existing mortgage on a primary rental property or a new traditional mortgage. Let's say you're thinking about buying an investment property with a 30-year fixed and you want to compare that to the all-in-one or maybe you want to refinance one of your existing properties. So you can compare it to existing versus new. And then within that simulation, it will allow you to forecast additional spending that will allow you to say, I want to take out $50,000 in month 22, right? And it'll reformulate where the simulation of saved interest, payoff time, all of those things will be available to you within that simulator. It's very slick. And now that you, the investor, have the ability to pay all cash, not only can you close faster, but a lot of times sellers are willing to give you a discount since you can close faster and pay all cash. And then it's up to you down the road to go ahead and refinance that into a conventional product or however else you want to do it. Chaley, what else should we know about the all-in-one loan? A couple of things I would share. First of all, the qualification metric for the all-in-one is going to be a little bit more restrictive than a traditional 30-year fixed mortgage, okay? So be prepared for a little extra brain damage. I know that getting qualified for mortgages is not everybody's favorite activity. I get it. There's a lot that goes on to it. It's not like the good old days where some remember you can fog a mirror and get a mortgage. But the all-in-one does take it to another level, even beyond what you're used to now. So debt-to-income ratio, I'll give you the specifics really quickly. So just be prepared. I like to set that expectation. Debt-to-income ratio caps at 43% on the all-in-one versus 50% that we would have from a traditional Fannie Freddie 30-year fixed. The reserve requirement is calculated based on the line limit. It's dependent on the debt-to-income ratio. I'll just leave it there. It'll either be 10% or 15% of the line limit. So if the limit was 100 grand, 10,000 or 15,000 is the reserve requirement. And then the minimum credit score requirement, owner occupied is 700, non-owner occupied is 720. So a little bit higher on the bar for qualification for the all-in-one. Who is this for? And who is it not for? It is for anyone generally that has at least 10% discretionary income at the end of the month. Typically, everybody's circumstances are different. I encourage you to play with the simulator, get on my schedule, let's do it together. But more often than not, we find that 10% left over at the end of the month is generally enough for it to work for the individual. And for those of you that got 2% interest rates during the pandemic, I just want you to know that I'm running the simulator against those loans day in and day out. And I would say, I'll give you a 65% of the time, the all-in-one is beaten the you know what out of a 2.5% 30-year fixed mortgage. Wow, that is really interesting. Well, there's a lot of opportunity and flexibility with the all-in-one loan. Is there any last thing that we should know about it? Start doing your due diligence. This does take a minute to unpack. Don't get overwhelmed by all the information. We've talked about some real tangible stuff here, but there's still quite a bit that there would be to uncover. So take your time, call us, we'll walk through it step-by-step. Yeah, and get started on that simulator and really see what it can do for you. To make that actionable, Chaley, where should one start? Head to our website, ridgelendinggroup.com. You can email us info at ridgelendinggroup.com. And obviously we're always a phone call away at 855-74-Ridge. And again, you can find that all-in-one loan simulator where you can plug in some real numbers and see how it can benefit you. A friendly representative from Ridge can help you go ahead and do that there. So there's a lot of excitement about the all-in-one loan, especially for an investor that has a GRE mindset philosophy and thinks about the opportunity of dead equity. But now that we've talked about that, tell us just quickly about some of the other products that you offer in there at Ridge. Yeah, so I think one of the real value adds for us is that we're not a one-size-fits-all. We have an extremely diverse menu, as I like to call it, of loan programs. The all-in-one is at the top of a short list of my favorites for some individuals. You've got the Fannie Freddies, you've got non-QM, which includes DSCR, debt service coverage ratio, bank statement loans, asset depletion loans. We have ground-up construction for those that are interested in that. We have our short-term bridge loans that I talked briefly about, where if you need fix-and-flip, fix-and-hold, potentially you need shorter-term money. Commercial loans for commercial products, commercial loans for residential in a cross-collateralization way, if that is to your advantage. So as you can see, it's quite diverse. It's been valuable as always, and I definitely learned a few extra things that I did not know about the all-in-one loan myself. Shaylee Ridge, it's been great having you back on the show. Appreciate it, Keith. You can watch this one next.