An access bond allows the owner a unique money management opportunity. That opportunity is to use your home loan like a savings account with the balance being the equity in your home. If you take money out of your access bond, you are taking the money out as a loan against your home equity. That the loan must be paid back, and it will be at the interest rate currently on your home loan.
How to Obtain an Access Bond:
A homeowner must apply for an access bond mortgage when purchasing a home. Some banks will allow a traditional mortgage to be converted to an access bond mortgage after the fact, but that will usually involve closing costs, appraisal fees and additional insurance costs. The ability to obtain an access bond is on the same plane as getting a mortgage. When the economy is good and the applicant’s credit is decent such bonds are easier to obtain than in a downturned economy when credit applications are not as easily approved.
What an Access Bond Can be used For:
An access bond can be beneficial to provide short term loans to the home owner. If you have a low mortgage rate, your loan rate will be low and more than likely it will be lower than a traditional loan from a bank or other lending institution. Such loans can be used for emergency repairs around the house, to purchase a new vehicle or make repairs to an existing vehicle, take a vacation, make a tuition payment or any other reason a few bucks may be needed.
Some banks allow a homeowner to move additional funds into the access bond account. When that extra money is deposited into the account, the outstanding mortgage is lowered, and the equity is raised. For each day the extra money is in the account the interest payment for those days is also lowered.
The Downside to What Seems Like A Very Good Thing:
Like everything in life, everything positive has a disadvantage to it. The downside to an access bond is when you take money out of your access bond you are reducing the equity in your home. This can become an issue if you have to sell your home in a hurry.
Since the access bond is a secured loan, your home is used as collateral and a default on the loan is a default on your home, and the homeowner runs the risk of foreclosure. When your home is sold the loan must be paid in full. If property values are low, this could prevent a challenge for the seller if a large loan debt is outstanding. The seller might not get enough from the house to repay the access bond.
When used responsibly, an access bond account can save the homeowner a lot of money over the life of the loan. It may allow the homeowner the opportunity to do work on the house that may not get done otherwise or afford the family an extra luxury or two along the way.