What Is a Sweep Strategy Mortgage and How Does It Work?

Updated as of January 2, 2024 | FirstLienHELOC.com

Good to Know

More than 50 million Americans have a mortgage, and the average housing loan balance has risen to more than $200,000 each. 

Most homebuyers use a fixed-rate 30-year mortgage to finance their homes. But even with a low interest loan, that’s a long time to stay in debt and a slow way to build equity.  

A sweep strategy mortgage is different from a traditional mortgage. It utilizes a first lien HELOC and integrated account management to help home buyers pay mortgages faster and get out of debt.

Is a sweep strategy mortgage right for you?  Here's what you need to know.

First Lien HELOC for Maximizing Loans

HELOC is an acronym that’s short for Home Equity Line of Credit. A HELOC allows you to borrow money against the equity in your home. It works similarly to a revolving line of credit, allowing you to borrow cash and repay it as needed.

A HELOC is often treated as a second mortgage or lien, taken out in addition to a traditional home mortgage (the first lien). First lien status gives the traditional mortgage lender first dibs on foreclosure if the homeowner defaults on their housing loan.

Second lien HELOCs are limited by the amount of equity you have in your home. For instance, if your home value is $200,000 and you still owe $100,000 on your 30-year mortgage, you’d have $100,000 equity. If you still owed $150,000, you’d have $50,000 in equity, etc.

With a second lien HELOC, you’d still make your regular monthly mortgage payments, and you’d need to make payments on the HELOC too. A first lien HELOC replaces your mortgage and gives you access to your entire home value. And a HELOC often has a lower interest rate than a traditional 30-year mortgage, saving you money. 

Maximizing loans while reducing expenses gives you a better return on investment (ROI). The flexibility of a first lien HELOC makes it easier for homeowners to pay off mortgages faster. 

How a Sweep Strategy Mortgage Works

A sweep strategy mortgage combines a first lien HELOC with an integrated sweep account. A sweep account links your checking account with your HELOC account so that money can be easily and automatically moved where it’s needed.

The linked accounts help you pay off your housing loan faster because your cash is never left sitting idle. 

At the end of each day, any money remaining in your checking account is swept into your HELOC account, where it’s applied as a payment against your principal.  When you spend from your checking account, money is automatically transferred from your HELOC account (adding to the principal) to cover the charges. This eliminates overdraft fees and insufficient fund rejections. 

Minimizing expenses is one of the goals of the sweep strategy mortgage. So, you should never pay a fee for a sweep account because free accounts are available. 

A first lien HELOC is usually a low interest loan, often lower than traditional mortgage rates. That saves you money that you can use to pay off the principal faster, further reducing the amount of interest you pay. 

Your Sweep Strategy Mortgage Options

The idea behind a sweep strategy mortgage is paying off housing loans faster by maximizing loans while minimizing expenses. It offers flexibility and an ROI you can’t get from a traditional 30-year mortgage. 

Want to see what your budget, cash flow, and housing loan would look like with a sweep strategy mortgage using a first lien HELOC? Sign up, and we’ll connect you with a qualified lender who can put together a detailed plan based on your individual goals and circumstances. 

Achieve Financial Freedom

Sign up on FirstLienHeloc.com to get connected with a licensed lender who can deliver an all-in-one 1st Lien HELOC. They’ll walk you through the application process and help outline your budget, your numbers, and exactly how much you can save by replacing your mortgage.