Is a Money Merge Account a Good Way to Pay Off Your Mortgage?
Monday, 1st October 2007 (by J.D.)This article is about Choices, House and Home, News
Over the past few weeks, I’ve received several questions about money merge accounts (sometimes called “Australian mortgages”). I haven’t paid much attention to these because I’m unfamiliar the products. But when Abbie wrote last week, I decided to do some research. Here’s what she said:
My financial guy handed me a DVD for United First Financial the last time I spoke with him. Apparently they are a company that uses “sophisticated algorithms” to compute how to best pay down a mortgage using a HELOC and a Money Merge Account, with the end result being that the mortgage is paid off in fewer than 30 years. (Their preferred statistic seems to be 11 years.)
I’m new to the whole homeowner thing, and know there are differing opinions regarding paying off a mortgage early, but was wondering if you’re familiar with this system. I’d appreciate any information or opinion you have regarding money merge accounts or UFF; a bit of web research comes up with inflammatory chats and the company’s own claims, but nothing from a reliable third party.
I spent three hours researching money merge accounts, and was unable to find any better information than Abbie did. From what I can gather, here’s how they work:
- The homeowner sets up a home-equity line of credit (HELOC), borrowing against the value of his property.
- Some large sum is withdrawn from the HELOC and used to pay down the primary mortgage.
- The homeowner does not deposit his paychecks, etc. into a traditional savings account, but applies them to pay down the HELOC.
- From time-to-time, another large chunk of money is taken out of the HELOC and applied to the primary mortgage.
- In case of emergency, the homeowner takes more money out of the HELOC.
- Though the HELOC will likely have a higher interest rate than the primary mortgage, it’s actually cheaper to maintain because of the way the interest is calculated.
In the case of United First Financial, all of the timing for these actions is prompted by proprietary software, for which the homeowner pays a one-time fee of $3500. These prompts are not mandatory, but if they’re not followed, it defeats the purpose of the program.
The consensus on the web seems to be: yes, these programs can help you pay down your mortgage quickly; however, they don’t do anything that you could not do yourself for free. The expense might be worthwhile if:
- You want to pay off your mortgage.
- You don’t believe you’ll have the discipline to pay down your mortgage on your own.
- You do not intend to move — you believe you’ll be in your current house for many years.
But most people with the financial resources to accelerate mortgage payments are able to do so without the assistance of a third party. The easiest (and most flexible) mortgage acceleration program is the one you control yourself: simply send extra money to your bank on a regular basis (being sure to note that the extra ought to be applied to principal). You’ll save nearly as much as you would with a money merge account. (Proponents of MMAs admit this!) If you find after a couple years that you lack the discipline to do this on your own, then you might seek a reputable source for a money merge account.
You can read other discussions of money merge accounts at these sites:
- It’s important to note that the Australian Securities and Investments Commission doesn’t like money merge accounts. “Consumer organisations … concluded years ago that there were no savings to be made, and that promoters were engaged in unlawful conduct.”
- Fat Wallet Forums: United First Financial — Looking for the truth contains 52 pages of discussion on this subject.
- Fat Wallet Forums: Mortgage accelerator/offset accounts facts and myths
- Real Estate Blog: Money merge accounts: Good fairy or demon?
- The Simple Dollar: Money merge accounts: Are they a good deal for home borrowers? (742 comments and growing!)
- Asset Builder: Accelerated home ownership thru line of credit
Before you begin a mortgage repayment program of any kind, be certain that you understand the consequences. Accelerating your mortgage payments may provide psychological comfort, but there may be smarter financial choices. Last year the Federal Reserve Bank of Chicago released a study [PDF] that found:
About 38% of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice. For these households, reallocating their savings can yield a mean benefit of 11 to 17 cents per dollar.
All of this discussion about money merge accounts is just theory. I’d love to hear from somebody who has first-hand experience with them. Do you love the idea? Hate it? Do you think it’s worth the cost? Let us know!
Note: Just as I was finishing this post, I recieved another e-mail about money merge accounts. They seem to have reached some sort of critical mass.
Dave Ramsey covers this product (and it’s variations) on his program. While he likes the idea of paying off the mortgage early, he states that you don’t need these programs to accomplish the task. You can do the same thing on your own without spending $3000 for a piece of software and go through the trouble (and risk) of a setting up a HELOC. The worst part is when these programs claim that you can just follow the program and don’t have to change your spending habits - as if these programs “create” money. They most certainly can’t. The only way to get there is a budget folks.
These sound like much more complicated versions of what in the UK are referred to as current account mortgages. I’m sure I’ve heard that they are generally considered to be worth doing only if you have a very variable or irregular income e.g. quarterly deposits of your earnings.
I have two basic issues with programs like this.
1) The person still has to control thier expenses or they gain nothing, in fact in this case they go backwards because everything is tied to a HELOC now. Unfortuanetely it sounds like a lot of people view this as the easy way out. It isn’t.
2) If someone pays off credit card debt or other unsecured loans with this they have essentially take a bunch of unsecured debt and tied it to thier home. So if the worst case scenario happened and they lost everything including savings, or equity in the house, their debt is now tied to the home and they can be foreclosed on. If you keep unsecured debt unsecured worst case is a few bad marks on your credit report, but you maybe work enough to pay the house payment.
I have been hit with this offer as well. It smells of multi-level marketing to me. The literature I read gives no option to get into the program without going through a referral of some sort. At the end of my research, I am with Alias (Comment 1). Save the $3500 fee and apply it as your first payment against your mortgage.
If you apply a $3500 lump sum to the principle of a $200K 30-year conventional mortgage (6% interest) in year five of the loan, you will knock a whole year off of the term saving nearly $12K in payments over the life of the loan. The only risk is the missed opportunity of risking the money elsewhere with investments.
J.D, if you’re interested, we have a product in Canada called the Manulife One mortgage which is similar to the “merge accounts” that you mention here. From my review, it would be cheaper to get a discounted mortgage rate than to pay full price for the “merge account”.
Here is my review of the Manulife One Mortgage.
I watched a pitch about these accounts about a month ago, and as I was listening I opened up excel and was able to recreate all of their results by using a biweekly payment structure. Only with the biweekly method you also got to keep your $3500.
I honestly don’t see a case for these products at all.
You are being sold a product, not a solution.
can’t comment on the US situation (I’m UK/Australian-based), but certainly in the UK situation, current account mortgages aren’t worth it. You pay generally higher interest rates (1-1.5%), and there is a danger that if you aren’t disciplined, you just keep spending your mortgage, because it’s effectively just a giant overdraft.
If followed correctly, I am sure that these programs (and other programs like bi-weekly mortgage payments) promise as delivered. However, if they work, then you can do it yourself and save on the expenses.
Essentially, you are using your average daily balance that you would have in your checking account as a way to lower your average principal and your interest payments.
The most simple solution I have found to accelerate your mortgage payments simply involved direct deposit and automatic payments. Take you mortgage payment, and divide it by twelve. Add this amount as an extra principal payment, each month, and have the mortgage company automatically deduct it from a savings account. Then, take this total payment (with the extra principal) and have half of it directly deposited into the savings account with each payment. What you get out of this gives you the bi-weekly effect, but with the extra principal applied monthly, instead of as a lump sum at the end of the year, an extra payment sitting in the savings at the end of the year, plus interest sitting around. You can then take the extra and have 14 payments.
Couple that with a $3500 initial principal payment, and you can substantially knock-down your principal and term, and save on interest without a huge difference in your realized lifestyle.
I we paid off our mortgage on our older, smaller, house by making large payments every month–the amount we would have spent if we had moved out of our “starter” home and into the mini-mcmansion that we could “afford” according to the mortgage calculators. I don’t think we lost that much money by not investing the cash elsewhere–after all, there was very little possible downside, by paying off the mortgage as early as we did, I think we got some insurance against any future devaluation of housing stock; we literally paid less, so our house is worth more to us now, no matter what happens in the overall market. The discipline of making those payments also meant that after we paid off the house, I continued to put less, but still significant amounts into investments. And, of course, there’s nothing like not having the mortgage payement–it gives one a sense of freedom from one large bill each month, so you can absorb extra expenses, or think about working for less income…
It’s hard for me to consider these programs to be anything more than a scam. Sure, it can work in theory, but you can make extra payments on your own. There is no way it is worth $3500. Someone simply devised a good system for taking money from people who have just enough to be dangerous, yet not enough discipline to get out of debt on their own.
Um, maybe I’m missing something here (and I definitely do not claim to be the most knowledgable on this subject), but if you have an extra $3500 to spend and know you don’t have the discipline to prepay your mortgage without help, why wouldn’t you just use that money to refinance to a 10 or 15 year mortgage?
Of course this is a scam. 3500 dollars for what’s probably nothing more than an Excel template?
It’s also highly misleading about what you are actually doing with your money or how this works in reality.
If you have the discretionary income, and want to pay down your mortgage quickly, the easiest way to do it (assuming you have no discipline) is to set up an automatic payment plan directly with your mortgage company (or via bill pay on your bank’s online banking) and set the amount to be slightly above your usual monthly payment so that it adds up to the number of extra payments that you want to make over the course of a year.
The easiest way I heard of to pay off a mortgage faster is to round the payment up to the nearest $100 to start, then add $1 or $5 or $10 a month. So a $1465 payment becomes $1500, then $1501, then $1502, et cetera.
The idea being that if you can pay $1500, then you can afford a dollar more. Or $5, or $10.
If you’re doing automatic payments, then bump it up each year. Not as gradual, but same idea.
The “Money Merge” account reminds me of insurance / property tax escrow accounts. Yes, you can pay the nice bank the extra each month so they will have money on hand to pay your property taxes & insurance - but why let the nice bank earn interest on your money? Why risk that the bank will screw up send your premium to the wrong insurer or county? Just put the money into savings each month and you’ll have it on hand when the time comes.
As an aside, HELOC as emergency fund is better than no emergency fund - but an actual emergency fund is better
I read all of the above comments. I just wanted to share my experience with this program. I am a user of this program and have been for over 3 years. I have also worked in finance and banking for more years than I want to admit.
For those of you who have never used this program, please keep an open mind. A little over 3 years ago, I had the same opinion. “Why would I use this program, when I could do the same thing on my own?”. At that time, I decided not to get on the program. Then 3 months later, I over heard someone I know talking about what this program was doing for them. I asked if I could take a closer look at their situation. They were well ahead of where they would have been normally, and they said they also said they could do it on their own, but decided to get on it after they found out their financial planner was on it also. They also said that while they feel that they could do something similar on their own, they never would have.
Now that I have been on this program for over 3 years, I completely agree. This is something I understand and could probably do on my own if I had a lot of extra time each month. But I have found that using this program completely changes your thinking. Sorry for the long post. I just wanted to share my personal experience. As a veteran in finance, I personally recommend this. Don’t take my word, do your homework to see if it right for you. I am not selling this program, as you can see I have not included my contact info.
-Thanks!
This sounds like a complicated way to do it. There seems to be too much room for error too, which could land you in a load of trouble.
Like you said, there are ways to do this for free. You can do bi-monthly payments, or even get a 15yr mortgage. Or just send a lot of extra payments in to the company yourself marked with “principal payment” and do it that way.
I’ll make a littlebusiness proposition right now: For a payment of just $2500 ($1000 off the original offer) I will call you once per month and yell at you to pay extra on your mortgage. I will throw in a monthly call to make a budget and another to stick to the budget for free!
Lol.
I’m guessing these people hope that if they HAVE to do it they’ll be more likely to do it. So I’m willing to get in on the business and intimidate with random phone calls.
“The consensus on the web seems to be: yes, these programs can help you pay down your mortgage quickly; however, they don’t do anything that you could not do yourself for free.”
I was one of the folks sending you emails on this topic.. and the above is pretty much the conclusion that I came to as well, searching on my own. But I’m very glad to see that you & others have come to the same conclusion. Thanks for your extra effort on our behalf!
With many thousands of satisfied homeowners on this program across the Untied States, there must be something to it. My neighbor who is the vice president of one of the nations largest banks is on this program. He has nothing but positive things to say about his experience on the program.
I have not heard of or used such a product, but it sounds to me like the “software” is actually a mask for getting people to use the HELOC trick and increase their principal payments. I know that 11 years is doable, especially if you start paying down the principle in your first year. I played a game with myself on our mortgage: I would pay double the principle amount every month. In the first months it was just an extra $5 or $10, but it rose each month by just a little. Also, when there was “extra” money, like a bonus, tax refund, or Christmas gift, I applied as much of it as I could to the principle. Using this “system” it took almost exactly 11 years to pay off the house and it did not require a HELOC or a $3500 piece of software.
It does interest me to know if the claim is true that HELOC interest calculations are more favorable to the home owner. It makes sense that they would be (since these are not fixed length mortgages and therefore interest cannot be calculated and frontloaded as it is on traditional mortgages). Were I just starting to pay a mortgage I would be now be furiously investigating the claim to see if it would help our financial situation.
_______________________________
Wishing you a prosperous future,
Daiko
One thing to bear in mind is that mortgages (and the laws that govern them) vary widely from country to country. A MMA is very much a variation on the “one account” mortgage that’s used in Australia and the UK; similar mortgages are available in Canada as well.
Personally, I am more in favour of simply paying down a mortgage by sending in extra payments on a regular basis, but I don’t need somebody else to impose that discipline on me; I can do it on my own.
If I am not mistaken, there are 2 MMA offers in Canada now
Manulife One - $14/month fee
Canadian Tire - no fee
In short, one big HELOC that you use as primary account, and pool every penny possible to pay the mortgage down faster, even at prime rate - Instead of paying fixed mortgage, and save at 4+% at the high savings account
Note: you need strong principle to NOT withdraw from HELOC easily!
I have one of these mortgages (although there was no $3500 “software fee”. maybe that is new.
Yes, you can pay off a standard fixed rate mortgage early by paying extra against principle, but how much over do you pay? You need to be conservative in those extra payments, because they’re gone (unless you get some home equity loan…). You have to guess “how much will my upcoming emergency cost?” and keep that money aside.
With these loans, you can put it all against the house, paying it off as early as possible barring emergencies, yet having they money available if you do need it.
It is dangerous - if you’re not disciplined you can spend too much of the money in your account since there is no mortgage payment, and you end up in the hole. That’s why you usually need pretty good credit to get into it in the first place.
You can probably do better by investing the money and managing it, but that’s too much work for me. This is easy, it lets me pay off the house as quickly as possible, and I still have emergency access to the funds.
I have a friend who was refinancing and without ever discussing it with her, the mortgage broker was setting her up with this sort of deal. She figured it out in time and changed plans to a normal 30-year fixed-rate, but I personally would have walked completely out of the office when I found out I was being railroaded into something I didn’t understand and that we’d never discussed.
If the situation really happened like she described, it’s probably happening to lots of people, and that may explain the upswing in questions about it.
Like many other commentors on this article, this seems like a product with no value add. I smell a SCAM.
Not sure why you’d want to increase your illiquid, high transaction cost, low return savings (your house) instead of your fully liquid, low transaction cost, historically higher return savings (stocks/bonds/savings accounts).
Is anyone here open-minded? I don’t have an MMA, and I’m not selling them, but I have a friend who has one and absolutely loves it. Also, I have looked around and all the negative comments always come from people who are simply making assumptions and people who don’t have a Money Merge Account and never plan on getting one.
Is this a scam? I don’t believe so. Is it for everyone? Absolutely not. If you can do this on your own, then go ahead and do it. I wish you luck no matter what decision you make, because in the end everyone wants the same thing . . . their house paid off. (And if you don’t want your house paid off, I still wish you luck.
TTFN - Ta Ta For Now)
You do not need to buy a product for something you can do yourself
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Yes, it is a scam if they are charging you big bucks for the service. And I wouldn’t be shocked some of those promoting it in comments are those being paid a commission to sell it.
I’m sorry, but break it down: All you are doing is spending all of your discretionary income on paying off your mortgage. To say, “With these loans, you can put it all against the house, paying it off as early as possible barring emergencies, yet having they money available if you do need it,” is to say that you can always borrow money if you screwed up and needed that discretionary income. At interest of course.
The notion of taking advantage of the average daily balance to save on the interest just doesn’t compute into big savings. First, you have to have interest parity between the mortgage and the HELOC, at a minimum (and preferably a HELOC that has a lower interest rate). Look around. If you have low, fixed mortgages, I’m gessing you won’t find one. The HELOC at my local banks is already 3% higher than my mortgage! It isn’t rocket science that borrowing money at a higher interest rate to pay off a loan that is at a lower rate isn’t the way to successfully play the interest arbitrage. But assume there is an interest rate arbitrage to take advantage of, calculate it out and I think you will find that the amount of interest you earn on the float is modest at best. And then compare that to the fees they intend to charge you for the software/service and I suspect you will be in the hole every time.
The only way this works is because of the power of making higher payments. It has nothing to do with the float, really. If you are worried about “emergencies” as those promoting thse try to suggest will solve, set up an emergency fund or set up a traditional HELOC and not use it until the emergency happens.
Just make sure you don’t go with one of these and find yourself paying 3500 for what amounts to maybe 500 bucks of interest savings based on the float.
wow,
I’m Australian, and I think I have what you’re talking about (our jargon is a bit different).
We call them offset accounts - any money you have in the linked account ‘offsets’ the interest on the mortgage. so if your mortgage is $100k and you have $60k in the account, you only pay interest on $40k.
thats it. no swanky software. you still have repayments into the mortgage, and while it’s possible for us to redraw from the mortgage, it’s still a separate account.
anyway. there are three situations my friends are in where this sort of account is a good thing:
- my friend Pete is part of a farming family. they get a bulk payment for their wheat at the end of the year, and a portion of it sits in his offset account until needed - effectively knocking out 80% of the interest on his loan.
- we are planning an ‘income-free’ period for 3-6 months next year. we are madly paying into our offset account at double our minimum repayments. it’s saving us interest in the short term, but will also be the fund that all the repayments go from next year.
- if you have a rental property in Australia, the interest on the loan is a tax write off. And it’s calculated on the balance of the loan, not the interest repayments. If you have the money in the offset account, instead of the mortgage, you’ll be able to write off more interest than you pay. (or so an account friend assures me)
I just ran into this posting. I use this product and it works better for me than any previous attempts I have made to pay my mortgage off early.
Just the educational features in this program were worth it. This product goes beyond banking tools. It incorporates educational tools which follows the individual changes in your day to day finances. Type in the words “behavioral economics” in Google and you will get a better understanding behind this. Just my 2 cents.
Thanks,
Casey
Wow, I’ve never heard someone suggest this is an example of behavioral economics. As someone who studied the discipline, I have to say that’s a stretch.
Look, here’s the simple thing to ask any promoter of one of these products: How much will you save if you assume that you have no discretionary income at all?
That’s the bottom line question. Because the answer to that will give you the true value of the program from a savings perspective. And it is that that you should compare the costs of it against. Not how much you will save because you are pre-paying your mortgage. Notice most of these programs simulations refuse to let you enter that math (they require you to be a saver) so they can hide the ball on that.
If you need the help disciplining yourself to pre-pay, fine, pay for what you think is valuable. But with the plethora of free tools, automatic bill pay through banks, etc., I don’t see why 99% of people would go for this except because they are fooled into thinking theirs some magical gimmick out there that can reduce their mortgage without actually using their dollars.
I think the Australian poster explained it best.
This mortgage allows you to put cash into an affiliated account that offsets your outstanding mortgage balance and you are not charged interest on the equivalent amount in your mortgage. The twist is that you can pull that cash out if you need it, effectively ‘reborrowing’ the money. This makes more sense than letting cash sit in a savings or checking account with a lower interest rate.
If you have a HELOC, you can start prepaying your mortgage with a lump sum from your emergency fund since you can borrow that sum back from the HELOC. You then rebuild the emergency fund with the money you would have used to prepay the mortgage. Each following year, you use that rebuilt emergency fund to prepay the mortgage for the next year, and so on.
Paying $3500 for this setup is theft.
I don’t understand why you say I should specify that extra payments must be applied on the principal. On what else could it be applied to ?
Wow, sure are a lot of comments from people who apparently have not personally checked out the MMA. Pontificating about sending in money you cannot afford to send (and what amount would you send in each time?) is ludicrous. So many people wish to sound smart…look into it and get educated.
Impugning the credibility of some postings that are positive about the MMA is silly. Get your free analysis and see what the numbers come back with. THEN, see if you can match that pay off date and interest savings. If you can’t then cease with the uniformed blather until then.
As for the person who stated that he designed an Excel spreadsheet that did the same thing as the MMA: get real. I’ve heard that so many times but each time I’ve examined them they were miserable failures.
Is it for everyone? No, of course not. Is it for most people? Clearly yes. Is it about discipline? Not really. All the people who are prone to blowing a HELOC to the wind with wanton spending habits have already done so. This is for people serious about getting 100% out of debt—note that the MMA pays off the mortgage last of all. To all the nay sayers: stop yammering and get educated.
I don’t understand how this sort of thing could help, since mortgage interest is calculated and compounded monthly, not daily. It’s not like paying off a car or a credit card, where the average daily balance really does come into play.
Or maybe I’m wrong.
Daniel,
You just nailed it, learn more about the product and it will all make sense. Before purchasing the product consult a financial planner, run the numbers.
Jason, that’s just it. I’ve looked into them. Perhaps I’m just too much of a skeptic, but it doesn’t make sense to me.
Also, maybe it’s just that I’m paid monthly, so all of the gimmicks would not work for me that would work for those who are paid weekly or bi-weekly.
The comments made are nothing new, nor will these points of view stop from those unwilling to do some deep thinking here.
The methods for paying off mortgages have always been around. So why haven’t the majority of homeowners done so? Why all the mortgage problems and consistent debt and negative savings in the country?
Because we simply point a finger with one hand and say it’s one way, while our other hand does the exact opposite.
Consider something:
Billions of dollars in profit are made on all of us each year. The mortgage industry is based not just on math—but on HABIT.
We know for a fact that we, as homeowners, refinance every 5-7 years. The industry accurately banks on it. That’s not math–it’s a character flaw in people, worth billions of dollars.
So while posters are saying the same old ‘I can do this on my own’, know that IF you can, you are NOT the rule—you, in fact, are the exception.
Try throwing the ‘Habit Factor’ and the ‘Life Happens’ factor into the mix then see if you can actually do this on your own–at least as well as my clients do on a program with all the support.
I see a lot of opinions but have you who have left opinions either way, actually viewed or listened to how this is done?
I have nothing to gain or lose but I’m considering this. I’ve been talking/listening about it with United First Fed and, after listening to exactly how it works it appears to me that nobody on here has actually learned more about this than just having heard what the general gist is. There is so much more detail. I’d be interested in seeing opinions from people who have actually done this or have been thoroughly educated in the process, not just knowing the basic idea of it.
I was very skeptical as many of you are. I took a chance because I am one of the multitudes that could not get my financial stuff together. I’ve tried for nearly 30 yrs. For me this program is a god send. It has enabled me to focus like I have never been able to focus on my finances not just my mortgages. In short, we’ve stopped the financial leaking/flooding.
No, MMA is certainly not for everyone but it was perfect for us and our life situation.
It was my wife that first saw the possiblities, I just scoffed and was uspset that she had gotten us involved in what I to considered a scam. That was until I decided to take a good hard look at the program. It is NOT a scam for people like myself but rather a very good tool that has given me a target date. We have been in the program for more than three months and we love it.
Our situation is such that we have 6 years and 3 months to payoff the 1st and the 2nd mortgages. When we realized both of us could retire after the above time, it was a very emotional moment.
Check out this Channel 3 in Las Vegas news report. http://www.sydneyfinancialgroup.com/articles/nbc-report.php
The funny part about that video Mark—is that it’s on Sydney Financial, and yet it has nothing to do with them—except showing that these principles work.
Sydney Financial tries so very hard, if you watch Google and paid adverts–to ride on the coat tails of United First Financial, and they are not the same program.
Watch that video closely, watch the screen, and you will see the tab saying “Money merge Account”. Thats UFF’s actual software–though it’s an older version.
Again–funny that Sydney has it on their own site. The story was not about the concept–it was about our specific program, but the News Station could not/would not promote a specific program.
Keep all this in mind when watching the video, and who’s promoting the video.
Daniel,
Talk to an agent who has substantial experience with the program. Though there are many UFF agents out there—the majority of them simply cannot correctly teach you why it works. You can talk to any of our staff here at The Jubilee Project, and we can do so–without the pressure to purchase the program.
We want to educate first.
http://www.thejubileeproject.com
Mark, let me echo the previous statement about the NBC Channel 3 news clip: it is about UFF’s MMA, not Sydney’s product. You can tell by looking at the screen shots of the software. CMG and Sydney both use that in their presentations–but they both differ significantly from the MMA. Another example of the confusion out there.
My experience is that most UFF Agents can properly explain the program and why it works…sad to see the the in-house parsing by Jubilee.
Steve, just offering help.
If someone is needing information, how to you suggest they get it?
Wish for it, perhaps?
I suggest you go from site to site anywhere on the web, and see how much information you will find in detail.
We have no problem, nor feel any shame in offering help in sharing what we know about the program. People matter to us, and if you don’t want our information, simply don’t click on the link.
Easy enough.
Jamie,
Jamie, no one said there was a problem with you giving information; the issue is with your comment:
“Though there are many UFF agents out there—the majority of them simply cannot correctly teach you why it works. You can talk to any of our staff here at The Jubilee Project, and we can do so–without the pressure to purchase the program.”
You are stating that other UFF agents are ignorant and your team is not. How can you know that about the first? It causes me to doubt the second. Please do not disparage other agents you cannot have knowledge about. We’re a team, remember?
Ahh, Steve, you mistake my intent and I did not phrase myself well.
I apologize.
Can I say I know these people? No.
Can I say I name them all? Of course not.
Can I watch trends, watch what policies and procedures are enacted by corporate? Yes, I can.
Is your drive to protect the agent—or to protect the client and and program?
Mine is the latter.
I believe you will find that is the stand of UFF as well.
Daniel said he has looked into the program, he has looked into it…and it doesn’t make sense. What happened to the ‘pro’ who showed him? Do I take that Daniel is ignorant, or the agent?
I naturally assume he needs someone with more experience to explain it until he DOES understand it. Is that a slam? I certainly don’t think so Steve.
It really has nothing to do with UFF, this program or it’s validity. You are right to call me to smooth my words out. I am known for bluntness in an arena where many desire a soft touch.
However Steve, I did NOT say my ‘Team’ is not ignorant. My team reaches through all 50 states and that was never implied. I stated my “staff”, which I have trained personally,can teach you correctly why the Money Merge Account works. A handful of people who all sell this and teach it, every day…full-time.
They know this program inside and out. They are not ignorant.
Everyone has a learning curve. I had it–you had it, everyone does. However, not everyone is equally qualified to answer questions right out of the gate, and some I know personally still cannot explain all the aspects of the program after 6 months to as year.
It sounds like Daniel needs more than a DVD to explain it. If you have that knowledge—by all means, you explain it. I certainly wouldn’t mind.
Be careful in judging me as well Steve–Jubilee promotes other agents all the time, including from our site–even agents NOT on our team. Because, as you properly said: we area team.
If you want to discuss this issue further, I suggest you contact me personally, or even call me if you like.
To all the readers, I hope that clarifies my intent.
I suspect it might be more effective to employ early in a fixed interest rate period. Once they have you trained, they have your money even as the trick becomes less useful…
I would also be concerned about any fine print that allowed the bank to reduce the credit limit allowed on the HELOC at their discretion. If you happened to have 10-20,000 dollars available (in an emergency fund, say) and used that to pay down your mortgage because you had the line of credit to fall back on if you needed it and the bank later decided you were a risk and unilaterally reduced your credit line, or you missed a payment somewhere and they then were allowed to RAISE the HELOC interest rate…
In the US, most first mortgage loans are non-recourse - if you go through foreclosure, you walk away and the bank takes the house and tries to get their money back. For a recourse loan (like most REFINANCE and also HELOCs ?) they can continue to hound you if there is any shortfall in the banks recovery of the loan after the house sells.
Might also be differences in the new bank-friendly bankruptcy laws between home loans and HELOCs.
All I understand the link is from Sydney Financial the reason I put that link on this thread is cause it cannot be accessed through UFF any longer. The idea is for people to see that this sort of concept works.
By the way I am a client not an agent.
Matt, one of the wonderful aspects of this program is that the rate doesn’t matter on the HELOC. It’s based on an average daily balance and should be a variable interest rate–though we can work with a fixed.
As a matter of habit, I run a clients numbers at the current rate of the industry, and then another run of the numbers at 19%.
The pay off is usually only 1-3 months further out at the most. Very impressive.
My experience in researching the MMA program shows that paying extra $$ towards principal each month is not as effective and using the MMA. The MMA also uses the power of interest cancellation because the HELOC is based on the daily average balance. I’ve been on the program for a few months now. So far it is working quite well. I have decreased my 1st mortgage by $13,000 and am paying a little bit of interest on the average daily balance of around $6,000. If I stopped now, I would have already earned my $3,500 back…but I’m not stopping. This is working way better than the $100 extra dollars per month I have been sending for a year. I believe the program works especially well for my family because we are paid weekly. I would assume that the program is far less efficient for someone who is only paid once per month.
The product can work, but it is not for everyone. As for the company, they are milking this for everything they can using MLM, agent fees, marketing material fees etc…. Since when does a reputable company charge their agent for a consumer brochure? That is the reason I am now a former agent and recruiter. Something just smelled “fishy” and “short-term” about this company if you know what I mean?
Contrary to what some might think. The MMA does take effort and discipline.
The people that the MMA can work for probably are financial savvy and disciplined enough to accomplish the same thing on their own. For everyone else, the MMA will only work in theory, as most people will give up using it after just a few months. Again, I say MOST people.
In the long run it will hurt people more than help them.
With an open equity line of credit, you are inviting these homeowners to get into more debt. We are a consumer nation. Shopping spree anyone? Why not, I’ll just “MMA” my bills. LOL!
Give somebody credit and they will take it. That is why this product is not for everyone, just like the ARM loans were not and we all know what is happening with that now.
Unfortunately, our country is not ready to be debt free just yet….and may never be ready.
When/if we are… we wont need a $3500 software sold by a mortgage broker to get out of debt.
No, David…I don’t know what you mean, and I certainly don’t give much credibility to your remarks. Nor will anyone with moderate intelligence.
Reputable companies everywhere charge for their marketing materials—when those using them happen to be independent business owners, which is what we are.
We are also free to NOT use their materials and create our own within certain guidelines…something franchisees are not allowed to do in many respects.
Being self-employed for nearly 20 years, I have had to pay for everything. I make a profit on all I do, and there are costs associated with making those profits. We are not employees David, or I would agree with you on that point.
Sure the Money merge Account takes effort and a measure of discipline. This isn’t fairy dust. It’s not a magic pill. However, it has the highest success rate and user rate of any program I have personally studied–over 98% userability. That means after a year…not a “few months”, people are still using it and getting ahead. Get your facts straight.
Now, frankly David, I believe you to be a liar. I hope you are, and not just a bitter individual. I’d like to think you’re simply another ticked off opponent who’s mad because we took your clients from you, to save them from debt, instead of creating a deeper hole through refinancing.
Either way, your comments shouldn’t bother any reader, because you have no credibility.
-You haven’t made an accurate statement about the program in any way, displaying your amazing ignorance of this program, thus I doubt you are an agent (or were).
-If you WERE an agent, and now you’re bashing it, why would someone listen to an individual who ‘jumped on the bandwagon’, not using their intelligence to first check the opportunity out? Why didn’t you investigate this before signing on the dotted line? You screwed up once, what makes anyone believe you’re not screwing up again?
-If you were an agent, but now defected, and you apparently don’t understand the program or how it works—what gives you any credibility, even with your own opinion when it comes to describing this program?
You don’t have your facts right David, and certainly don’t know about the company you ‘allegedly’ were a part of. Our track record is impeccable. Our results guaranteed. If you want to prove your credibility, share with us your UFF number, and I’ll stand corrected.
Otherwise, you’re simply not believable.
ANYone can get a credit line without us, David. Don’t point a finger at UFF.People who make bad financial decisions can do so again, regardless of a program—that’s not our fault, nor inherit in our program. However, I have seen several who said they can “do it on their own” do exactly what you predicted.
Why? Because they don’t know how to maintain the variables in their financial lives. They didn’t REALIZE that those who say our program is nothing but a “excel spreadsheet” have all assumed that the ANALYSIS SOFTWARE was the “client software”. LOL. Uh–no.
Our analysis software IS a glorified excel spreadsheet of sorts, but that’s NOT what the client buys. The actual software is completely unique and we have created the industry standard in this area. So, assumptions are made and people walk off to do their own things–and fail.
We seem to have more faith in the homeowner than you do David, so again, if you WERE a UFF agent, I’m very grateful you walked away. Your ignorance is astounding about this product and program…and your comment about the country “not ready to be debt free” just sends a cold chill down my spine.
People deserve the right to choose for themselves. I believe in people. You should. People always have the possibility of falling. Again, this has nothing to do with our program—it’s inherit in human nature David. Sure, they may fail…but what happens if they don’t?
The great thing about this program, is that there are many ‘diets’ out there. Ours works. People stick to it. People win and win big.
Thank you for walking away from this opportunity David, so that those of us who care for people, their welfare and helping them get out of debt can do their job.
-Jaime Buckley
The Jubilee Project
PS, Steve–David here proves my point exactly about agents. Again, if he WAS actually an agent.
Jamie,
Sorry I have not been on line lately, business is great (gotta love that warm market) and even though I’m new, I’m very busy.
I second everything you said–except your PS: I would not impugn our UFF agents’ good names by linking them to David’s remarks. On one hand you dismiss David as a fraud seeking credibility by claiming previous employment with UFF; on the other you hold him up as an example of why people should go with Jubilee. Logically that’s call a non-sequiter, bordering on an ad hominen attack. Personally, I think your insights are spot on: he’s a disgruntled mortgage person who is unhappy that UFF does not require a ReFi with every MMA. Other products do and that is the basis for such postings, as you so adroitly pointed out.
David, your experiences do not match my experience of UFF and the MMA. The company is made up of wonderfully helpful and intelligent people who client’s can and do depend upon (Jamie, addressing our previous conversation).
Moreover, the capability of this software is so far beyond Excel that they do not reside in the same software genus. It’s akin to comparing an abacus with a PC.
I too tried to create an Excel to emulate MMA results :). But just take a moment to think about the complexity of managing the interest rates of both the First and the HELOC against different monthly spend rates and fluctuating income streams and THEN try to figure out how to aggressively pay down the first while being conservative with the HELOC balance.
Jamie is correct about the HELOC interest rate being irrelevant. I just returned tonight from signing a client; I ran their analysis at the 9.6% HELOC they’re getting and again at 19%. The minor time/dollar difference represented noise level money. Why and how? I’ll use a couple of examples to make the case. (BTW, they had reviewed Sydney’s offer and went with UFF/MMA—if you want the details I’ll happily divulge the blow-by-blow).
The MMA avoids the potential trap of CMG-like products by dealing with the existing loan rather than refinancing the entire loan it into a “super HELOC”, subject to the variables and vicissitudes of the financial market with its fluctuating interest rates. So let’s say interest rate go nuts and head through the ceiling. Would you rather be on the MMA or a CMG-like product? Put succintly, 21% of ~$5K is much less than $18% of $300K…review the competitors’ websites for more info. The point: the MMA moves incrementally to affect pay off of the First Mortgage, never exposing the client to more risk than their current spending habits and income allow. They need to follow the prompts, nothing more. The software is necessarily complex on the backend—it has a very tough job to do, well beyond the capabilities of Excel (imagine the macros and trying to debug that line of code!)
Conversely, the software must present a use-friendly face to the client or they won’t use it. When good products come along that can address multiple complex situations but present the results very simply we call that “Software Elegance” (we use that term at HP). The military calls it a “Force Multiplier.”
It takes a very powerful piece of software to address multiple types of mortgages—while the brainless method is to simply refinance…which is also another way to earn a commission for LO’s. You don’t have to scratch a mortgage officer very hard to reveal that…I find that is usually at the base of most complaints coming from that quarter.
Kind regards,
Steve
$3500 divided by 144 months(12 years pay off) =$24.30 to be in touch with your finances monthly. What do you spend $25.00 monthly on???
Actually, my group recruited dozens of agents who did some business. I am still technically a UFF rep, buy we are no longer interested in marketing the product to more agents. We chose to pass based on many factors.
The owners of UFF might all be great people, but the way they are marketing the product takes away from their credibility. As for the product, like I said.. it will only work with less than 10% of the public in the long term. As a financial professional, I would not sleep well at night knowing the product I sold my client has a 90% chance of not working for him based on MANY factors which I have stated before.
I am not bitter Jamie. I run a very successful company with a large distribution team and have done so for years. However, after working with UFF and noticing how greedy they have become in terms of trying to make money off their agents, we chose to pass and spend time on more proven products with carriers who support their agents in stead of putting on “ra ra” conventions. Come on Jamie dont deny the true meaning of that convention. It was almost funny.
FYI, ALL of the companies we currently work with DO NOT charge for marketing material. That shows confidence in their product.
UFF supposedly does over 1000 new apps per month. That’s over $1,000,000 a month in revenue. (they keep $1000 from the $3500). I am not even counting the money they make off new agent fees. How much of that money have they put back into agent support or even a national ad campaign so when you sit at the kitchen table with a client they have actually heard of the MMA??
The truth is you ARE self-employed, but you have committed to sell a product that is not yours. The owner of the product should act as your partner and provide support to the better producers and not saturate the market with anyone willing to pay $175 to “start a business”. THERE IS ABSOLUTELY NO VALUE TO A UFF AGENT CONTRACT. Anyone can get one. That says a lot about the company.
This MLM concept and folks contrary to what some “branch managers” will tell you…United First Financial is a true Multi level marketing company. Anyway…. this MLM concept is good for the company, not for most agents or consumers.
Look at the info you get from search engines. If you think those “recruiting” websites make UFF and the MMA look credible, then the coolaid you drank at the home office (Jamie) has really worked on you.
As for the MMA being 98% effective. It is still too early to say. To evaluate a good finacial product one needs more than 18 months…and dont tell me they have been testing it for 3 years. I have heard the pitch before. I guarantee A LOT of the people who bought an MMA last year are not using it today and most were probably former agents. The public is not as interested in the MMA as people who are looking for new business opps are. I know you know what I am talking about.
UFF has done a great job recruiting without spending a dime. Absolutely excellent. They are making tons of money and will continue to do so. However, 98% of the agents who get recruited will not last 10 months. That is not credible.
As for taking a punch on my intelligence without knowing me takes away from yours Jamie. I believe you are a smart hardworking person, but you are buying your own BS my friend. I had enough smarts to see that the company is here for the short term. That is why my organization spends more time marketing with carriers and products with a proven track record.
Good luck to you as I know you try very hard, but I’ll bet you will not be selling MMA’s three years from now and not because you succeeded with them.
David,
A lot of comments, a lot of opinions—but explain to me how you come up with your facts and how you can “guarantee”:
“I guarantee A LOT of the people who bought an MMA last year are not using it today and most were probably former agents. The public is not as interested in the MMA as people who are looking for new business opps are. I know you know what I am talking about.”
No, frankly I don’t know what you’re talking about. Where do you get this data to back up your ‘guarantee? How can you make such statements with any degree of authority? Seriously David, come on…
The funny thing about the web is that people can simply lie. I can, you can—there’s no credibility unless you show yourself. Maybe you’re who you say you are—maybe you are the president of General Motors…maybe you’re working from mothers basement…how can we tell? You can just as easily be a disgruntled person who couldn’t work this business, as someone who just wants to bash for heaven knows what reason.
You have my address from the link, you have access to me website, my phone, my business address—all of it.
…where are you?
Put the facts behind your comments bud. Show me how you prove that this program:
“As for the product, like I said.. it will only work with less than 10% of the public in the long term. As a financial professional, I would not sleep well at night knowing the product I sold my client has a 90% chance of not working for him based on MANY factors which I have stated before.”
Where do you get your stats? If it’s fact—the people you’re trying to “save” should know all this. I don’t claim to be a financial professional. I used to be a cartoonist. No secrets there. Now, maybe that makes people trust me less, maybe not.
All I do, day in and day out, is tell people what this program does for myself, my wife and my children. It has been such a blessing, I started getting my family on it. Then my friends. It’s helped every one of them so far. That, my friend is conviction, fact and motivation.That’s what keeps me going and I only tell readers and potential clients one simply thing:
I personally don’t have all the answers. Maybe I never will. I don’t know how my car works either, but I can drive the blasted thing. If I don’t have an answer, I will tell you. At the same time—if I don’t have an answer, I know where to find it, and if you can respect that kind of honesty, I will do my best to serve you.
David, some people can’t handle that—-many people love that honesty. I make a full time living at this, being of service, because it works. Day in and day out, it works.
Show me the facts. I get mine from United First Financial, and they have the actual guarantees. They spend money day in and day out, and I see this from going to corporate and working with corporate—sponsoring events and working on/in the professional fields. To educate and spread the word.
They create productions, have legal fees and costs you and I are not privy to, so how can you, in all honesty, make ANY judgment on what they make or should make? You’re way out of bound buddy. Again, you don’t quote facts—just an opinion.
UFF bends over backwards and in constantly improving and expanding—which costs are exponentially growing each month. You would know that if you were, in fact, plugged in and active.
My question to you, which floors me about your mind set is: why is it so bad for UFF to make a profit? Why is it wrong for ANY company to make a profit. They give away over 70% in commissions, and then take all the operational costs out of their end. You complain about their marketing materials, but most printing they do has a VERY low margin in it—because it’s outsourced buddy. I know that from fact because we do a lot of our own, and supplied much to our own agents by passing on the printer we used: http://www.overnightprints.com (great service, especially to design your own business cards). I was AT the Branch Manager meeting when they introduced the owner of the company they outsourced to.
So where do you get your information from?
It just doesn’t connect.
Then you say:
“As for taking a punch on my intelligence without knowing me takes away from yours Jamie. I believe you are a smart hardworking person, but you are buying your own BS my friend. I had enough smarts to see that the company is here for the short term. That is why my organization spends more time marketing with carriers and products with a proven track record.”
Again, where/how do you come to these conclusions? You have every right to have opinion about myself, my intelligence or my white fluffy dog—makes no difference. I’m trying to get down to actual facts and what actually “is”, not emotional barf and creative finger pointing.
Look, I know I’m not ’smooth’ in my comments. I call it like I see it. Some agents mistake arrogance with confidence, some people just don’t like me because I just say what I think. Steve above seems to be a very intelligent and good person and I’ve probably offended him by my communications and has responded intelligently. We may differ in opinion, but that’s ok. I see he’s honest and forthright with information, and his opinions are just that: opinions.
I respect that—even if I’m being reprimanded.
Everyone can see me David—show yourself and educate us on how you ‘know’ all these things, because David—you have again, proven nothing but another opinion, not fact. I’m not taking a ‘punch at your intelligence’ so much as saying you simply don’t make sense, and IN MY OPINION, any financial professional worth their salt, would back up their statements with fact.
I’m sorry you didn’t succeed as an agent, but that doesn’t take away from the actual ‘results’. We have hundreds of clients and all of them tickled, making progress and giving us thanks. That’s fact, not opinion.
It also clarifies the fact that you have not gotten on the product, so as to experience how it works. No doubt your next post will tell us you are debt free or have already paid off your home…
Please explain how you come to YOUR conclusions, and how, if UFF can’t claim anything about their program—you can? Don’t tell us, ‘because you know’. That means nothing—and on the internet, when you’re anonymous like this—you only have credibility with readers who have an IQ lower than a potato.
Does any other reader find that David’s comments just don’t make sense?
Oh, and David, as a clarification on your:
“I guarantee A LOT of the people who bought an MMA last year are not using it today and most were probably former agents.”
If you actually knew the conversion rate, you would know that many clients who GET on the program, THEN become agents, not the other way around.
Why?
Because they are shown that they are GOING to tell their friends and family about this program anyway. So why not make the commission on what you will do anyway—and then add it to paying off your home. Some remain agents, some don’t.
Personally, I don’t feel that takes away from the programs credibility at all. It stands on it’s own, and we have found a way to reward people for the efforts they were going to make anyway.
I see that as a good thing, not bad. Some professionals don’t agree, and that’s fine.
I LOVE the FACT that this opportunity is NOT exclusive to the “professionals” and anyone can gain a financial blessing. I am getting out of debt faster, personally—while providing better for my wife and children and being of service to those around me.
That’s one hell of a deal, if you ask me.
You just don’t see it that way.
Thats’ perfectly ok.
David,
Your lack of vision as to how UFF is changing the financial landscape of this nation is forgivable; but your vitriol in attacking it is unusual.
Why is it that some people, when they leave an organization, cannot leave it alone? You might review that with yourself. Wish Jamie good luck and focus on supporting your family. Why the grinding of the axe towards UFF? Because they charge “cost” for marketing materials? Because they charge $175 to get an agent on line with a replicated, fully functional website? Because they have elements of MLM–just like NY Life, Solomon Brothers and Paine Weber? Let it go bro and go live your life. And enjoy it. If you had to say something good about UFF, what would it be?
As for me and my family, the MMA has shaved years off our mortgage and there is no reason to see why it won’t continue.
Peace out,
Steve
Well said, Steve.
Thank you for the nice wishes—and right back at you. =)
-Jaime
[...] Rich Slowly discusses them here in response to some reader [...]
The fallacy behind all mortgage acceleration programs is that they try to prove that you can’t do it on your own.
I beg to differ.
I can prove that anyone can do the same thing on their own, without a spreadsheet, paying off their mortgage within 1 or 2 months of these software packages. Mortgage acceleration really consists of 3 parts:
1) Open a home equity line of credit (HELOC) at least as big as your emergency fund.
2) Taking all your idle cash - emergency funds and checking account padding - and pay down your mortgage immediately using that cash. Expect to use the HELOC as your emergency fund.
3) At the beginning of your pay down, make a one-time payment, the size of your total take-home pay, from the HELOC to pay down the mortgage balance. Then, when your paychecks come in, deposit the amount into the HELOC to pay down the HELOC balance. Then, as your bills come due, pay them from the HELOC. If, after paying the last bill, the balance of the HELOC is less than your total take-home pay, make a payment from the HELOC the size of the difference to pay down your mortgage. If the HELOC balance is greater, do nothing until next month, because this month’s bills are greater than your monthly income.
This is the basic algorithm of paying down your mortgage. 99% of the mortgage is paid from your excess cash, not the shuffling of money in and out of the HELOC. The shuffling lets you get the last ounce of performance for your pay down. The software packages will also tell you to delay paying your bills as much as possible to keep your HELOC balance as low as possible. Another suggestion is to use credit cards as much as possible and pay them off monthly.
As for my proof, I will be glad to trade spreadsheets with anyone.
I have no problems with these packages, as long as they admit they bring little more value than convenience and clarity to the pay off process. Just like I can change my own oil, but I prefer to pay a garage to do it.
Jamie and Steve.
I am not putting down UFF guys. Read my posts, I said they are a great company that is making tons of money and will continue to do so. I just disagree with some of their distribution and marketing methods and think it is not in the best interest of their agents.
I am not bitter, read my posts. It is just that after getting to know and understand how the company works, we chose to pass. I have a good reputation within my business and decided to spend our time and effort on long term stable projects. Bascially, I dont want my agents getting hurt and wasting time.
I am not putting down MLM. Read my posts, I have been involved with MLM for years and currently run a large and successful MLM firm. What bothers me is that UFF was at first and I think still…denying that they are MLM. Go back a watch one of LS’s videos. Why were they?
Listen…I am proud to be involved in MLM. Our MLM structure benefits the hard working agents, not the just the recruiter and our carrier spends some of that money they make to getter the life of it’s agents. BTW, agents dont pay a dime to sell our products, they do have to get licensed through the state however.
Jamie attacked my intelligence when I complimented him on his hard work. Thats OK…he used to be a cartoonist and is now a financial advisor. Boy if it were that easy maybe next Wendsday….I could be an astronaut.
Listen, if you think you have something here…great…. run with it. I posted here because I thought that some people might want to know about my experiece and thoughts about the MMA having been directly involved and instead I got attacked by a couple of brainwashed convention goers.
My experience in financial services tells me…. 1) that the MMA will hurt more people in the long run than help them. 2) UFF’s actions lead me to believe that things will not last.
That is why we passed. There was no way of knowing until we got involved.
Let me ask you somthing guys. Are you making $200,000 per month? Because that is what the top MMA distributor is making. You know how much the top selling agent made? Less than $50K for the year. I have a problem with that imbalance. What that tells me is that most of the people buying this product are agents as they get recruited. Those agents then sell 2-3 MMA’s to friends and family and thats it. That is why the distributor makes so much money. UFF does NOTHING to help with branding or product recognition. I have a problem with that…if you dont…. then good luck to you both…what else can I say?
BTW…this is my last post, cause I dont this conversation will go anywhere.
Have fun.
Hi, I have found Mortgage reduction softwares with prices from 3500 dollars down to Mr. Harj Gills system (He is the orignator of all this from Australia)that sells for ONLY 199 dollars. I have actually tested the 3500 dollar system and Harj Gills 199 dollar system.
The same functionality provided in both as far as I could see. However, the U1st Financial is good if you love MLM are a good sales person who can sell to friends an family. Since it is MLM it has to have a higher price so many levels can get paid.
In the end, you can do this yourelf, however, you will NOT have the “what if scenarios”, and the financial dash board that works as great motivator -let me tell you it is VERY motivating to see that you can pay your 30 year mortgage in 7 years in a nice graph. Totally wortht 199 dollars. I could easily have paid 950 dollar for it without blinking since it will save us 187.000 dollars.
Actually I think it is cheap for what you get.
If you are a broker, banker, realtor or affiliate pro, I think http://www.speedequity.com now offers a great program with 300% gross margins. Not quite sure, but I think I heard something about it.
COMMENT ON blog comment 21. They can be disciplined and do it themselves. Great. But S/he is missing the POINT.
The systems enables you not only to prepay on your principal and eliminate intereste thereby, but also by ELIMINATING interest via smart cash flow system, by floating your current bill payments and borrow money “for free” of your credit card (VERY IMPORTANT to pay off every month though). All this saved interest compounded makes a BIG difference compared to just paying extra on your principal.
Check more out on http://www.youtube.com
http://ewatch.prnewswire.com/rs/display.jsp?a=31896-351831007-929498708&key=D|138220|S|0|x|351831007 - FORBES
http://www.americanmortgageeducatorsinc.com/In_News.html IN THE NEWS
http://youtube.com/watch?v=H_Zjq2CBiqQ
http://www.youtube.com/watch?v=NUWvQD9zbQ8
http://www.youtube.com/watch?v=P5ibPz5mIzE&NR=1 —- NBC CALIF, PROMISED LAND
http://www.youtube.com/watch?v=Nb2vJFAo35Y&mode=related&search=
http://youtube.com/watch?v=uzPN8WPIKlw
http://youtube.com/watch?v=vZbwxsFdVyc&mode=related&search=
http://youtube.com/watch?v=W0fpp5LR7Gc&mode=related&search=
http://youtube.com/watch?v=-OcEz9L8wjc
http://youtube.com/watch?v=-OcEz9L8wjc
[...] October 1st: Is a money merge account a good way to pay off your mortgage? [...]
when i first saw the uff mma i thought “i can do that myself”. after doing some research i determined, using their 200k mortgage, 5k monthly income and 4k of expenses example; that if i tried to follow their method of paying a large sum every so many months they actually paid less interest than i did. i then just calculated what would happen if i put all my disposible income toward my principal and didn’t make payments out of my HELOC and I came out 3k ahead and paid off the mortgage 3 months earlier. that being said, i bought the program anyway. the software is like an expensive diet program that you buy, there is nothing in the program that you couldn’t do yourself but the program gives you structure, discipline, visual feedback and status, and some feeling of guilt of wasting money if you don’t stick with it. i struggled with the decision but finally decided that the software helps me with my goal of trying to simplify. the 3500 price tag is worth it if i don’t have to take time to figure out how i need to change my additional payments to principal when i have unplanned expenses that come up and if it motivates me to stick to the plan no matter how busy i get.
when i tell people about the mma i always tell them that they can do this themselves and they need to decide if the benefits that the mma provides worth 3500. i’m sure for some people the answer is no. if i was single or did not have kids, i would say no, it is not worth it.
for people who do not have a good grasp on how money and finance works it provides a level of comfort to doing something they don’t completely understand and most likely wouldn’t do if it wasn’t for the program.
bottom line… you can buy a hyundai or a mercedes, they both provide transportation and there is a huge descrepancy in price but if you feel that you get value out paying that much more for the mercedes then i’m not going to say that you are getting ripped off. the same goes for the uff mma, it works and if you feel that you get value for the cost of the program then buy it.
I love this program. It has motivated me beyond anything I could have imagined. The saint nailed it exactly for what it is. While it may not be for everyone it certainly has been for me. I now have only 5 years to pay off my mortgage, I started with 26 years.
What happens to your MMR, HELOC/MORTGAGE setup if you house drops significantly in value. Say 20%?
If I refinance my mortgage (which is currently 65% LTV) and pay down early, I can lose 20% on the value of my house and while I’m disappointed about that, it means nothing to my financial situation.
OTOH, if I create an MMR setup, don’t I have significant risk in the event of a 20% devaluation? Because then I’m upside down on my mortgage. Maybe no big deal if I ride it out, but that assumes no job loss or other catastrophe. Does this program put me more at risk if my house value and income drop together?
As stated above, folks can pre-pay their mortgage on their own, save more money, and get better results. Folks don’t need any software, just paper and pen to write out a simple budget.
As for psychological benefits, if any… there are plenty of low-cost alternative budgeting and personal financial mgmt software such as Intuit Quicken and Microsoft Money both of which sell for only $40, are more sophisticated, and backed by large reputable companies.
A HELOC is not necessary in order to take advantage of any potential interest rate arbitrage, which when properly analyzed is de minimis. Likely the HELOC balance transferring voodoo will end up costing folks more in total interest and finance charges not less.
If folks are looking to generate more interest income (discretionary income) from their cash accounts then there are plenty of ‘risk free’ FDIC insured alternatives to the HELOC balance transferring arbitrage scheme. http://www.google.com/search?q=online+savings+account
Don’t be fooled, financially these merge accounts in the USA are inferior to the many free and low cost alternatives, and they don’t replace the need for individual financial responsibility and self discipline!
Find out all the facts, understand your alternatives, and understand the financial decisions you are making. Taking financial advice from unqualified ‘software’ salesman is simply a recipe for disaster.
The interest savings come only from pre-paying principal with income that you earn… it’s not rocket science; it’s just simple common sense! Don’t waste your money and don’t be misled!
http://www.integramortgages.com/financialvoodoo
Most everyone on here is missing the point because you simply don’t understand how mortgages or how the software works. If you put a post on here, know what you are talking about and don’t post assumptions. I was showing a relative my loan balance from using the software and they couldn’t believe it so they did some research and saw these postings on your website that doubt the product so I felt compelled to write my results of using the product. I have had my original mortgage for 5 years and started using this software 3 years ago. My current balance after 3 years using the software would have taken 9 years to achieve by not using the product. Right now it shows that I have 10.4 years left on my loan. I also checked on doing a bi-weekly program but that only would have saved me about 6 years off my loan.
Here is the best thing. I called a mortgage broker and asked him to enter my original loan amount and rate and then figure out how much faster that I would have paid off my loan by sending in one extra payment per year. It only takes 5 years off the loan. Also, if I sent in $100 extra each month instead of one payment per year it would also take off about 5 years off the loan. The problem is that most people including myself don’t have a few grand to send in to their mortgage each year.
With this software I don’t have to “send in more” of my own funds. My paychecks go directly into the Heloc account and then every few months it instructs me to send in a lump sum from the heloc. But the next time I get paid it brings the balance right back down. Although it may not work for everyone, I researched the product, then bought it, and I am extremely happy that its working phenomenally.
I sat through a presentation yesterday on the Ufirst product. Essentially, this will work. It isn’t because of the program although that is what UFirst wants you to believe. The reason it works is because you are using leverage. By controlling your HELOC balance, you can reduce the interest you pay on that account. HELOCs are calculated based on average daily balance. If you put your pay, bonuses, extra income, etc. into your account you can keep your daily balance low. So you don’t pay much in interest. In fact, the average interest is less than 3%. Then you can pull out an amount each month from the HELOC and pay off your mortgage or invest the money. The key is to put this money somewhere that pays more than the 3% you pay on the HELOC.
This program allows you to operate like a bank does. Your bank gives you 3% interest on your deposit and then they loan it at 6%. The spread goes straight to the bottom line and can compound, which is why the MMA accounts can really work.
I am not sold that you need their $3,500 program. I am going to look at creating a software program myself that does essentially the same thing.
@James
Please reread #64. Nobody says mortgage acceleration doesn’t work. If you want to pay for the kick-in-the-pants and the bookkeeping, more power to you, it’s your money to waste.
I emphasize again, the HELOC contributes very, very little, regardless the UFF claims. I can prove it.
Things that make you go Hmmm…….
In the U.S., most of our financial education comes from three sources:
1. Our parents
2. Our family, friends and colleagues
3. The media
As much as I love my parents, they are not financially independent, so they truly never taught or showed me how to be financially independent.
My family, friends and colleagues are not financially independent, so they truly can’t teach or show me how to be financially independent. Even though I’ve been a financial “professional” for 17 years, most of my colleagues are not financially independent (zero debt and job-optional).
The media is primarily controlled by people and companies who have their own agendas - to either sell us their products and/or control our behavior. To that extent, the media has done a tremendous job in accomplishing their goals. We bank the way they want us to bank, borrow money the way they want us to borrow money, and pay money back the way they want us to pay money back.
As a society, we have grown to accept as “normal”:
-Working 40-60+ hours every week, then directly handing over (via “convenient” direct deposit) our hard earned money into someone elses hands (our bank). Then, OUR money works 24/7, 365 days per year for our bank. If we’re lucky, they provide us “free” checking or other “perks”. In reality, our bank makes a LOT more money on our checking, savings and money market accounts than we do.
-Leveraging the bank’s money to purchase our homes. Since most of us can’t afford to pay cash for our homes, we must use someone elses money. Our current system enables us to finance up to 100% of the purchase price and have the seller pay all the closing costs. This means we can literally “purchase” our homes with no money out of our pocket. The lending industry promotes the “positive” aspects of this sytem - promoting home ownership, income tax advantages of mortgage interest, low fixed rate payments…. What they don’t promote is the major problems - Zero equity and how we have to pay the money back - using THEIR rules.
-Paying mortgages back based on the lender created amortization schedule. We have been taught to think that a 30 year fixed rate mortgage of, say 4% would be great financial move. If you don’t think so, just ask any one of your friends if they would like a 30 year fixed rate mortgage at 4%. What we don’t realize is that the reality of borrowing $200,000 at 4% for 30 years equals total payments (out of OUR pocket) of $343,739. Our monthly payments are $954.83. Of the first payment, $666.67 goes to your bank and only $288.16 benefits YOU. 69.8% of YOUR money benefitted the bank (what happened to your 4% interest rate???). Five years into your fabulous 4% mortgage, you have paid $57,289.80 out of YOUR pocket. You still owe the BANK $180,895. In five years, you have built less than $20,000 of equity while paying your BANK $38,184. $350.68 is now being credited toward principal, while $604.15 is profiting the bank. 63.3% of YOUR money is still benefitting your lender, after 5 years of payments at “4% interest”. FYI: The 4% you are being “charged” is 4% of your mortgage balance owed at the end of EACH month. At the end of five years, you are being “charged” 4% interest, yet 63.3% of your PAYMENT is still profiting the bank.
Ask yourself this one question: Why would you send $954.83 every month to your financial advisor, for 60 months (total investment of $57,289.80), if you knew from the start that you would only have $19,104.97 and they would have $38,184??
So….. What we have been taught to believe as “normal” is to have our hard earned money work every day for someone else, then borrow money back from these same people to purchase our homes, then pay them back based off of their rules, all the while bragging to our friends that “I have FEE FREE checking” and am such a good credit risk that I have a “4%” fixed rate mortgage.
Seriously, folks, what part of our current system of banking, borrowing and paying money back is designed to help us succeed financially?????
After spending over 17 years as a mortgage-lending professional, what I realized with United First Financial and the Money Merge Account program is that American families need to realize there is a much better “SYSTEM” for utilizing OUR money AND the bank’s money to OUR benefit. Once we learn to think and act like the BANK, we can obtain very positive financial results for OURSELVES!
Using existing banking tools and rules (an equity line of credit utilized as your primary checking/savings account) makes your money work for YOU 24/7, 365 days per year, to enable you to cancel interest and eventually help you develop wealth. The Money Merge Account software and coaching program acts as your “financial dashboard” or “GPS system” to navigate you from where you are now to completely mortgage (and debt) free in the shortest possible time, with the greatest possible savings.
Before you pass judgement on any new “system”, make sure to truly analyze your current “system”. You just might find you’ve been a life long willing (and losing!) participant in one of the biggest financial “misconceptions” in history.
Banking and lending institutions (even Credit Unions!) are businesses designed to make money for themselves. They utilize their rules and OUR money to create THEIR profits. Why shouldn’t we utilize THEIR rules to help US create a much more positive financial future?
Ultimately, whose future is more important? YOUR’S….or your bank’s?
Mike Smela
Founder, PhysicianLender and NFI Hunters Inc.
Vice-President, Carteret Mortgage
Branch Manager, United First Financial
http://www.u1stfinancial.net/FireYourMortgage
http://www.DebtFreeMichigan.org
There is one thing that would be very helpful for me. I would like to see the mortgage amortization using MMA along with the corresponding HELOC disbursements and dates. I cannot find such an analysis anywhere. It will help me immensely to see the complete cash flow. For simplistically’s sake, please use the following assumptions:
House Value 196,000.00
1st Mortgage Bal: 120,000.00
Term 360 Months
Payment pr and int. 738.86
1st payment date 02/01/2008
monthly income 4,000.00
disposable inc. 825.00
Receive income monthly on 1st of each month.
all bills due 1st of month 3,175.00
Thank you
Bill Voorhees
You won’t find an amortization using the MMA and HELOC because if this were available, no one would need UFirst’s software. So, the only thing you can do is have an agent do an analysis for you and this will give you an abbreviated amortization (broken down by year instead of month).
You can, however, learn more about how HELOCs work in conjunction with the MMA program. You can find information here about HELOCs and creative yet effective methods to reduce the corresponding monthly payments:
http://thepayground.com/heloc_home.html
MMA does not work faster than doing it yourself, nor will you pay less interest. No matter what anybody says, they can’t change the math. Shuffling money in and out of a HELOC adds a layer of complexity and provides no more than 1/2 of 1 percent of your savings. Why? because “interest cancellation” only works on the equivalent of your take-home pay, not your entire outstanding balance.
The interest you pay for your mortgage is for the use of the money the previous month. There is nothing unfair about it.
Contrary to statements made, the smartest thing to do with your money is to invest it for the long-term, instead of paying off your mortgage. Sure, you might pay 1 and 1/2 times your mortgage amount in interest, but you can make over 2 times your mortgage amount in investment returns.
Jimmy,
I’ve watched my stocks go up and down for years; but now I’m watching my mortgage go down–w/out fluctuation. With the MMA I’m not faced with timing issues as I am with my stocks (when to cash them out–buy low, sell high, yadda x 3).
I wonder what all the laid-off Mortgage bankers would choose, if they could choose, between having their mortgage paid off or dipping into their stocks? What if your stock portfolio is upside down when you need the money–or when you retire? The MMA is guaranteed–because, like you say, it’s just math.
Everyone’s portfolio needs a few safe investments–most opt for municipal bonds or CDs–but even those fluctuate with the market and may not be at their optimum when needed (most have interest penalties for early withdrawal).
Not with the MMA–your mortgage balance is always going down…and your HELOC continues to provide needed liquidity for emergencies. Sure would be a bummer if you had to pull from your ‘upside down’ portfolio, wouldn’t it?
Jimmy, do you guarantee that I’ll make money in the stock market? No, of course not; but I’m watching my mortgage balance go down, down, down–via the MMA.
Therefore, in my simple world one thing is guaranteed: I’ll own my home in less than 8 years–whatever happens in the market place. We need to compare notes at that point–the point where I’m mortgage free and can invest even more in the market.
All this hysteria over some new system–and without any experience with it. And the beef over $3500? If any of the naysayers out there could get an effective mortgage of 2.6% for $3500 they’d be all over it. And no one would complain. That’s what I have with the MMA. Cool the whining and look at the MMA as the intelligent ’sure thing’ in your portfolio.
The market is a gamble; MMA is not, especially when it’s used to balance out the portfolio. And that is why I now sell it: I watch it work first hand.
Regards,
Steve
http://www.yourhousepaidoff.com
When I first researched the benifits of MMA, I was not looking at the debate of “pay down Mortgage” or “invest at better yields”. I was more interested in the benefit of paying the mortgage down with the aid of MMA for 3,500.00 or paying it down at the same speed for free. MMA is for the person who honestly wishes to pay his mortgage off as soon as possible but doesn’t really have a clear idea how to do it. The math shows the following: If a person can determine his discretionary income each month, and apply it to his 1st Mortgage, he will match or exceed MMA paydown without paying 3,500.00. Get a free heloc as a safty net in case you guess wrong about your discretionary income any given month. Be sure to then pay off any balance on the heloc with future discretionary income, then get back on schedule. MMA does nothing different except to give constant direction to individuals who need such a discipline. Certainly, if you compare such a person who uses MMA vs. such a person who squanders his discretionary income, the person using MMA will be better off in the long run. Conclusion: I will use the 3,500.00 to pay down my mortgage rather than for the purchase of software.
Bill,
I don’t think you understand how the MMA works. First off, I agree that with some diligence anyone can create an excel sheet to figure how to do this. But, it is not simply utilizing discretionary income to pay off the mortgage as you assume.
What this program essentially does is let you act like a bank. You utilize a HELOC and keep the monthly interest rate on the HELOC between 2-3% per month and pay down your mortgage or credit cards, which are at a higher rate.
Since the HELOC’s interest is calculated on the average daily balance you can withdraw money to pay your mortgage, but still keep the daily balance low by depositing your pay and idle cash in the HELOC.
I was very skeptical at first, and I am still trying to create an excel document to verify the claims. However, the theory behind it is sound. We just need to break out of our trained thinking where we deposit into a checking account and pay a mortgage over 30 years.
@Steve
I agree that if you want to use MMA or its ilk as your “compass” to give you that warm fuzzy feeling that you are doing the right thing, go right ahead. Keeping a HELOC on the side for emergencies is valuable, too. Going for a guaranteed return rather than a market return 10 years from now is also something I can’t argue with as long as you like to be debt-free and cash-poor. Paying $3500 is not worth it to me.
As for MMA being a new system, sorry, been there - done that. You are not getting a 2.6% mortgage. Your HELOC shuffle only offsets the interest equivalent to borrowing your monthly take-home, the rest of the mortgage is paid at full interest. This is not whining, Just math.
@Kirk
Please forget the bank analogy, it’s bogus. If you want to understand what MMA and its ilk does, create the following EXCEL scenarios:
1) A loan amortization table, adding a column that accounts for an extra monthly payment. Don’t forget to put a sum at the bottom showing your total interest paid. If you run your numbers through it, you will see that MMA does not compete with doing it yourself.
2) If you want to see how the HELOC shuffle works, create the amortization table above and create a second amortization table showing an interest-only payment for the HELOC. In the first amortization table, reduce your mortgage balance by your total take-home pay. Apply this amount to your HELOC table. Modify your HELOC interest calculation to include a factor that you set between 0 and 1. This factor models the interest rate reduction you get by depositing your pay into the HELOC and paying bills from the HELOC. Don’t forget to reduce your monthly discretionary income by the HELOC interest you pay.
If you want, I can get a spreadsheet to you.
The January 2008 issue of Broker Banker Magazine is dedicated to mortgage and banking professionals who use mortgage acceleration products to help their clients pay off the homes sooner. It covers the views on their skeptism when they first heard about these programs and what they think about it now. This issues also has dozens us testimonies from clients for MMA and CMG telling what they think of the programs now that they’re on them. Here is a link where you can view the entire issue for free online: http://www.brokerbanker.com/page40.aspx
Best regards,
Brian Topor
JimmyDaGeek,
I would appreciate the spreadsheets if you would be kind enough to send them. I am really trying to get my arms around the notion so you would save me a ton of work. I was planning to create an excel document to test the method.
You can send to my email kkinder94@yahoo.com.
Thanks,
Mark,
I do not suggest that MMA does not help a person pay his debt off faster. I do have a problem paying $3,500.00 for something that can be done just as easily for free and use their hard earned $3,500.00 to pay down their own debt.
I also object to Advertisement which misleads people to sell software. Please see the following 2 examples:
(1)
“With the Money Merge Account system you could have your home paid off in as little as 1/2 to 1/3 the time, with NO increase in your current monthly mortgage payment and with NO refinancing of your existing mortgage. You can even payoff other high interest debts, including credit cards and auto loans.”
This quote leads people to believe that they can reduce their mortgage debt without increasing their Payment when, in fact, they are paying, in addition to their monthly Payment, all of their discretionary monthly income toward their mortgage.
(2)
Mike, you say “You utilize a HELOC and keep the monthly interest rate on the HELOC between 2-3% per month and pay down your mortgage or credit cards, which are at a higher rate.”
Please note that mixing terms is not helpful in making people understand cash flow. No HELOC only charges an “annual” rate of 2-3%. HELOCS charge interest on a daily balance but the annual rate is between 7 and 11% on every cent borrowed.
If anyone who has used the MMA would share their actual heloc cash flow debits and credits along with their resultant mortgage reduction, I would gladly show a side by side comparison which would accomplish the same debt reduction without paying $3,500.00.
Thanks
Bill
Bill,
The premise of
“This quote leads people to believe that they can reduce their mortgage debt without increasing their Payment when, in fact, they are paying, in addition to their monthly Payment, all of their discretionary monthly income toward their mortgage.”
is not quite accurate. What’s really happening is that the income (discretionary and non-discretionary) is being leveraged against the mortgage to cause a compression of the time/value of the money loaned on the mortgage. What UFirst is saying in the ad is that you can pay off early without the “extra” principle payments that nobody does because they know they will never get that money back if they need it. Also, I don’t think the advertisement you quoted is a UFirst approved ad. None that I have seen mention a car, etc. The portion of the 1/3 to 1/2 the time is accurate though.
Other than that, I think you have a great grasp on the concept. The challenge with spreadsheets is that it’s easy to calculate after the fact, but not easy to calculate prior to the fact.
With the concept of interest cancellation, which we teach at my company, the savings are dynamic, meaning that they fluctuate with the ebb and flow of money coming into and going out of the account. This makes it very difficult to track the effectiveness of the savings on a day to day basis.
By depositing money into a loan with an open ended interest structure, the “interest cancellation” effect varies. We have decided to sell the Money Merge Account software because those dynamics/fluctuations are calculated into the overall picture. The software then gives you a 3 month look (forecasting) of the cause and effect of your spending, which our clients are finding very motivating.
To illustrate how important the fluctuations are, here’s an example of the interest savings realized by somebody with $5000 in income getting paid twice a month (bi-weekly) vs. getting paid monthly.
If I have a $0 balance on my HELOC and I spend $5000 (say to pay down the principle balance on my mortgage) on the 1st day of the month, providing that I make an interest only payment on the 1st day of the next month, I would pay $41.67 in interest for the $5000.00 that I borrowed for the entire 30 days. However, if I deposit $2500 toward the line of credit (LOC) on the 15th and another $2500.00 on the 30th, my average daily balance (which is the interest calculation method used on these types of LOC’s) is reduced. Here’s the math @ 10% interest.
10% / 360 gives a daily factor of .000277777
(this is a normal banking calculation for daily interest)
Paid Monthly Example:
$5000.00 x .000277777 = daily interest charge of $1.388885
$1.388885 x 30 days = $41.67
Paid Semi-Monthly Example:
$5000.00 x .000277777 x 15 days = $20.83 (because the balance is re-adjusted by the bank on day 16 when I deposit my $2500.00 on day 15)
$2500.00 x .000277777 = a new daily charge of only .6944425
.6944425 x 15 days = $10.41
So, here’s the comparison:
$41.67 vs. $31.24
Based on the simple concept of depositing monthly or semi-monthly income into the HELOC. That’s an interest cancellation savings of $10.43 or roughly 25%. That means my 10% loan wasn’t a 10% loan, it was effectively a 7.5% loan. If a person is paid bi-weekly instead of semi-monthly, there are some small but additional savings. A key component here is what did I have to change to realize those savings. Nothing, other than where I deposit my money and where I spend it from.
The question now is, was $5000 the optimum amount to send to my first mortgage? (pay the least in interest on the LOC and get the maximum benefit against the 1st position mortgage). The answer is… who knows. Everybody’s situation is different.
What’s missing from my calculation is this. Life. My calculation doesn’t account for how much a person might deposit vs. how much one might spend each month, using the LOC as the primary checking account.
What we LOVE about the Money Merge Account program is that those calculations are all done real time in a completely dynamic format. If I deposit $1.00 less than what I had previously told the software I was going to and I spend $200 more than I had budgeted, the software immediately shows me the cause and effect. We have actually had clients change purchasing decisions because of the effect a particular purchase was going to have on their debt free date.
Our clients love the software and we get an average of 3.2 referrals per client since we really started selling it in December. (we signed up as agents in July but did 3 months of research to verify the product claims.)
Anyway, some good information in this thread, other than the bashfest back in October. The reality is that no financial product is right for everybody. However, the Money Merge Account program is worth consideration if you have not had success in paying off your mortgage and you want to.
By the way, don’t people pay for information all the time. Is this really any different. Not only do our clients get the software, they are completely trained on how to use it, as well as how to maximize the capabilities of it. And, if they ever have a question, product support with a real live person here in America is just a phone call away. So is it worth $3500.00. For some yes, for others no, but it’s certainly not a scam and I contend that for the tens of millions trying to pay off a mortgage, it’s certainly worth consideration.
PS.. Bill, if you want, time allowing, I would be happy to do a one to one webinar and show you the dynamic factors of the real Money Merge Account software (not the static analysis software) so that you can see what I’m talking about. It really is amazing. I wish I was smart enough to figure it out before UFirst.
Travis Mitchell
Debt Free Project
http://www.debtfreeproject.com
Hi Travis
To illustrate a point, allow me to posit 2 scenarios.
1.) Get a case study (or make one up) using a scenario where a 30 year mortgage has (or would be) paid off in a much shorter time using the MMA software and a HELOC with a minimum of 3,500. begining balance for the software.
2.) Using the exact same income and expense scenario, having the income received with the same timing as scenario 1, and paying the same monthly expenses whenever they are due during the month, and applying any extra income at the end of the month to the mortgage balance, This scenario will always pay off faster than MMA and it will cost nothing.
Neither Scenario 1 nor Scenario 2 will work if a person chooses not to adhere to the appropriate discipline.
Thanks,
Bill V
@Travis
I would like to second what Bill just wrote.
The HELOC shuffle works by adjusting the balance so that you are creating an interest-only loan equivalent to the monthly take-home pay. It looks a lot more impressive in your software because peoples’ financial lives aren’t as simple as a spreadsheet.
As Bill pointed out above, you can approximate the effect by simply clearing out your checking account after all your bills are paid.
No one disputes that MMA and its ilk can help people see their savings and change their spending habits. BUT, it’s the discretionary income that provides over 99% of the savings, not the HELOC shuffle.
All I want to know is can I use the software will popping fenfen and working out on my 30 days to rock hard ab’s machine.
All joking aside, I believe the product is helping some homeowners. But this is not the right answer for must people. This product is gaining more press due to homeowner’s mortgage payments being at an all time high. I am all for paying done debt. We as americans have taking debt to an all time high. We need to question the products being sold. $3,500 for a product that promotes something that you can do on your on is not wise. Its funny how this product is being marketed on the savings you will gain, and yet the $3,500 it costs is a fair price. Gee, I wonder if they accept master card or Visa.
@Bill,
We’ll have to agree to disagree. There are lots of math examples at the Ufirst forum that show otherwise. I’m not going to replicate them all here. People can go to http://www.UfirstForum.com to find them.
I do agree with you however that discipline is necessary with both ways. I believe, based on the history of our clients, the Money Merge Account program helps motivate people.
@Jim
There is no doubt that the discretionary income is the most important factor. Anybody who disputes that is mis-informed. However, the leverage that the “HELOC shuffle” provides is also a worthy component because it’s about leveraging the maximum amount possible, which includes the discretionary income.
@JoMaMa
What is the true cost of something that achieves the stated goals? It reminds me of how FAT I am. I have a weight bench and treadmill sitting in my garage. On top of that, I’ve paid $45.00/mo for the past 2 years for a gym membership. I was too cheap to hire the personal trainer that they recommended to help keep me motivated and on track. So, today, here I sit, with $1080 less than I had, 20lbs heavier than when I started and I can’t park my car in my garage. (reminds me of about 70% of my friends and their financial situations)
Because I love the concept of this, I’ll give you another weight analogy. What if I had an amazing new fork. On the end of that fork was a digital readout. Now, what if that readout told me for every bite of food I took; how good/bad it was for me, how many hours I’d have to exercise to burn it off, what it did to my cholesterol, etc. Is it possible that I may take more responsibility for what I ate? Is it also possible I might be more healthy because of it?
My point is that this product is certainly a behavioral product in addition to a math engine. Nobody at UFirst has ever said that you can’t pay off your mortgage early using the plethora of other methods out there. What UFirst is saying is that if you want to pay off your mortgage, and you haven’t found a way that works for you, they have a way that they will guarantee will work, if you’ll follow the plan. Nothing more, nothing less. The product does work as advertised.
By the way, no, UFirst does not take Visa, MC, AMEX, Diners Club or any other credit card.
PS.. We just put a post up at HubPages that does a good job (I think) of introducing the Money Merge Account product with some good links to pro’s and con’s. If your interested in learning more. Address is http://hubpages.com/hub/money_merge_account_intro
Travis Mitchell
Debt Free Project
http://www.DebtFreeProject.com
Jimmy seems to be the poster here making the most sense. Post 64 & 75 are about as good as it gets. In fact, as rates were bottoming and I saw my short term ‘emergency’ money yield approach 1%, I took those funds, refinanced from 6.75% to 5.65%, pulled in the term from 30 years (about 27 to go, at that time) to 20 years, and the payment still dropped a few hundred dollars per month. Two years later, another fee-free refi, and the new mortgage is 15 years 5.24%. So another 3 years cut off. I did set up the HELOC as a source of emergency funds, but in the time I’ve had it, only tapped it a couple times and paid it back within the next month.
In the website from Jubilee, I saw no example of the math at work. Only an anecdote of a Cindy who paid her mortgage in 5 years instead of 28. My TI-35 says that would take about 3 times the monthly payment. I understand the MMA intent is to turn idle money into a savings of say 7-8% (the HELOC rate). Even if one has $10,000 in cash sloshing around, this is a ‘found’ $1000 or less per year, not the $1000 or more per month Cindy would need to reduce her mortgage by 23 years. (I assumes $200K balance, 6% fixed. So 28 years is $1230/mo, but 5 years jumps to $3866/mo. Where in the world did that money come from?)
I would welcome a real example, with real numbers.
JOE
As an certified financial analyst and investor myself, I don’t have a bias towards any side in regard to these product. Does it work? Yes. Is it for everyone? No.
To be honest, this product can really only be catered to very minimal % of people in our country anyways. Why? Because A) most Americans carry more short term debt than they make on their annual incomes, B) it’s a proven fact that most Americans spend more money than they do earn by a whopping -4.5%, C) most Americans own homes that are not only heavily leveraged but are way above what their true financial capacity allows them to realistically own. All of these mean that the majority of Americans don’t have the disposable income to double/triple their payments like this MMA programs wants us to set up to pay down mortgages by 1/2 the time or the extra cash to do it. I mean seriously, for most Americans, it’s already hard enough to make that $1500/mo. payment on their existing current mortgage at 5.5% primary 30-year. Why do you think the market is tumbling and the housing market and mortage companies are shutting down as we speak? The fact is, most people are living way above their means, and to tell someone that all they have to do is dump all of their earnings into their HELOC and let the HELOC pay for everything sounds good and groovey, but one major caveat that isn’t revealed is that you actually have to dump a LARGE portion of your remaining income to pay off your primary mortgage, usually double or triple payment. That’s a daunting number to ask most Americans to do.
The other thing I really don’t understand about this product is that so many people think this is such a great investment opportunity. Can you actually categorize this as an investment? Yes, this society is already cash poor, house rich, and this program only reflects that concept even more. What’s going to happen when one retires and doesn’t have income anymore, yet their home is paid for? Draw from the HELOC to retire or do a reverse mortgage? If I draw from HELOC, I pay a much higher interest in which I can’t repay because I have no more income to do so unless I want to use my SS funds for that. Bad idea. What about reverse mortgage? Well, then that’d mean I’d have to give up my home and trade my current home value (not factoring in future inflation and property growth rates) into an annuity with a company. Another bad idea.
What people don’t realize, or maybe they do, but my concept is much different than those that like these programs, is that this is nothing but the concept of throwing all of your money into one basket, your home. Plus these programs could only realistically be catered to the higher net worth individuals. If my mortgage is $1500/mo. and you’re asking me to dump another $1500/mo. to reduce my interest by 15 years, I’d much rather do it the conventional way, borrow at 30-years at an all-time low 4.5% interest rate. What’s even better is that I can use that interest to deduct from my taxes each year. Say I was in the 35% tax bracket and 7% state level, that’s 42% of the 4.5% mortgage rate that the Fed will return back to me. So my net interest rate is only 2.61%! And yes, conventional mortgages interest calculation are not compounded. Based on that fact, I could invest the extra $1500/mo that I was supposed to use to pay down my mortgage and put it into something like an iBond that will pay me 4.5% compounded interest. That’s arbitrage at it’s best, and that’s exactly how banks make their money.
Or even better, why not take that $1500/mo. that you were supposed to pay with this system, save it for a year in your own checking account, and go buy yourself another property for investment in a highly appreciating area. Everything has it’s ups and downs, but you really can’t go wrong with real estate investments, especially when the opportunity presents itself at all-time lows and buyer opportunities. You can literally use your $18,000 to buy a $150k-$180k house at say a 6.75% interest investment rate. Put a decent renter in there, use a PM company to handle your issues, you can still come out with a + CF. But the kicker is that you are buying the property at an already 20-40% discount from 6 months ago. Wait about 2 years when the market gets better, you are basically guaranteed to double your original $18k investment! Don’t forget that your renters are covering your mortgage payments for you…that’s not where the money is made. What did you do? You just basically earned 40% compounded in 2 years! Can you beat that with this program?
My point is this. This program is for those who’s goal is to pay off their homes as their primary goal and not have to deal with paying it off later. For those looking for better investment opportunities or needing liquidity for emergency purposes, I don’t think it’s appropriate. It really depends on what you are looking for.
I mean heck, if I turn my $18k each year that I’m supposed to throw into paying my mortgage off 15 years sooner, I can do the same thing by investing that into more real estate, wait for the market to correct, sell them all off again, and end up not only paying off my primary home mortgage all at once in the same amount of time, but also end up having a pretty good nest egg for my future retirement with a couple of investment properties (again, can use all these loan interest to deduct my taxes), getting more back on my tax returns by taking a full interest deduction from my primary 30-year, maximizing my additional income to earn me a greater return in the near future than to just save a measley 4.5% (2.61% net if in high tax bracket), and thus, I just created and maximized arbitrage just like banks do when they bring accounts in and pay you a 5% on a CD when they use that money and loan it to someone for 8-10% for a vehicle, personal, or investment loan. What’s the difference? Why not do the same that banks are doing. At least we all know they are banking $billions by people like us who deposit our monies there.
What’s even more surprising to you, and I’m sure many of you never even considered is that there is a HUGE risk you are undertaking by paying off your mortgage too. Have any of you considered what happens if your home burns down to the groud, or if a natural disaster occurred, etc? Do you honestly think the insurance company will pay all your equity that you’ve built up in your home by paying off the mortgage and even give you the allowance to rebuild your house? Think about that. If that were to happen, you just lost every single penny you’ve spent so hard in trying to put double/triple your hard earned money in just your one house. And here’s another finance principal that many have overlooked. If a home were to appreciate 5% per year and your current home was valued at $300,000 hypothetically speaking, you’d have a $15,000 gain. Say you decided to put down 20% and get a 80% LTV loan at 4.5% current rate interest for 30 years. Your $60,000 investment + $15,000/year interest or $75,000 total investment by end of year 1 would yield you a net 20% return! If you did the mortgage accelerator by putting double with your intial $60,000 down payment, your total investment by year end would be $90,000 for a net 16.6% return. Keep in mind that if every year was that way for the next year or so, you’d net a 100% return on your investment of $15,000 in interest vs. 50% return by doubling your payment to $30,000 each year to accelerate your payoff. I am assuming this to be effective for 10 years because that’s how long it’s going to take minimum to pay off the loan at this amount. Then consider the fact that the average American holds their home for less than 4 years and it’s only going to be lower as we have the 2 out of 5 year rule of tax free investment on primary residence.
The fact is, by NOT utilizing this program, you CAN come our WAY ahead of the game. So what if you have to pay double/triple interest payments by doing it systematically for 30-years. The fact is, most Americans won’t even consider living in the home that long anyways. I can take that extra money I have to put in and purchase more real estate, have someone else pay my mortgage, and in 15 or less years, the properties I’ve acquire would be sold off for double/triple the amount I originally paid (if using 5-7% conservative annual returns), plus I’ve never had to pay the interest on it, yet was able to take deductions to offset my income to give me more money in return on my taxes. At that time, I’d have more than enough money to pay off my mortgage, plus some as a solid retirement nest egg to continue to build my empire.
Be smart people…think about it. Someone mentioned the opportunity cost that it’d be dumb NOT to use this program because you can save the 15+ years of interest and substantial savings. If you’re looking at a $300k home, we’re talking about $175k in interest. Seriously, in 15 years, your lost opportunity cost because you decided to dump $18,000 more per year for 15 years is going to cost you a heck of a whole lot more than if you just paid the conventional 30-year loan and took the difference to invest into something that will actually make money for you. Yes, you are taking on more debt, but it’s good debt to have and will pay huge dividends in the future.
Hopefully, you all agree. But like I said before, my philosophy will not be accepted by everyone.
KUDOS Kenneth! Your a gentleman and a scholar… that’s great information and wisdom for folks who are willing to listen and understand!
Hopefully, it will help aide folks cut though all the misleading and deceptive prepayment scheme bull being pedaled out there… and help stop them from wasting their hard earned money.
…
As stated above, folks can pre-pay their mortgage on their own, save more money, and get better results. Folks don’t need any software, just paper and pen to write out a simple budget.
As for psychological benefits, if any… there are plenty of low-cost alternative budgeting and personal financial mgmt software such as Intuit Quicken and Microsoft Money both of which sell for only $40, are more sophisticated, and backed by large reputable companies.
A HELOC is not necessary in order to take advantage of any potential interest rate arbitrage, which when properly analyzed is de minimis. Likely the HELOC balance transferring voodoo will end up costing folks more in total interest and finance charges not less.
If folks are looking to generate more interest income (discretionary income) from their cash accounts then there are plenty of ‘risk free’ FDIC insured alternatives to the HELOC balance transferring arbitrage scheme. http://www.google.com/search?q=online+savings+account
Don’t be fooled, financially these merge accounts in the USA are inferior to the many free and low cost alternatives, and they don’t replace the need for individual financial responsibility and self discipline!
Find out all the facts, understand your alternatives, and understand the financial decisions you are making. Taking financial advice from unqualified ‘software’ salesman is simply a recipe for disaster.
The interest savings come only from pre-paying principal with income that you earn… it’s not rocket science; it’s just simple common sense! Don’t waste your money and don’t be misled!
http://www.integramortgages.com/financialvoodoo
The concept is actually simple
1) Net Monthly Income
2) Minus monthly Expense
3) Equals Discretionary Income
Apply Discretionary income to Debt or Invest it.
If you can invest it at a rate higher than your Debt rate, Do so. Otherwise Pay down Debt.
Oh, by the way, Take the 3,500.00 charge for MMA software and use it to pay down debt or invest it. (Hope I Saved you $3,500. for free)
Thanks,
Bill V.
@ Kenneth,
Kenneth, I agree whole heartedly with your position that this program is not for everybody.
However, based on the examples that you provided above, it is clear that you have not seen the software and have a limited understanding of how it works.
If a person could use it to NOT pay the bank all of that interest by maximizing the leverage of every dollar, which most people currently don’t do, and invest, they would be way ahead, correct?
I’ve put examples on another board, http://www.ufirstforums.com, so I’ll not repost them here, but a client with discretionary income could both invest and pay their mortgage off early, and be way ahead, including the cost of the software. Regarding the tax advantage, that doesn’t go away until the home is paid off, so the client continues receiving that benefit.
Kenneth, although you articulate your points very well, the fact is that the software doesn’t work in the manner in which you described it, so to be fair, you should probably find an agent and take a good look at it. Some of the top agents are financial planners who are using it so that their clients can have their cake and eat it too, so to speak. If you’re interested, let me know where you are and I’ll see if I can come up with a name or two who will speak your language.
By the way, where can I get that 80% LTV for 4.5%? We have some clients who may be able to really benefit from that.
@Ron, you said:
“Don’t be fooled, financially these merge accounts in the USA are inferior to the many free and low cost alternatives,”
We extensively researched the all of the alternatives that we could find prior to endorsing this product. Can you tell me how this product would be inferior to the other lower cost and free ones you mentioned , or was that just a generic statement with no factual basis. I don’t mean that in a sarcastic way either. We are very interested in making sure we are representing the best products that meet the stated objectives for our company. I’d love to know which products you’ve found that have the same financial fundamentals built into them.
Travis Mitchell
http://www.debtfreeproject.com
Travis,
You said “…it is clear that you have not seen the software and have a limited understanding of how it works.”
You also said “…I’d love to know which products you’ve found that have the same financial fundamentals built into them.”
Please show an actual case example from it’s commencement for any period of time and I will be happy to return a side by side example of #95 above and show that #95 above will show better results during any point in your example and will cost the person nothing to obtain those better results.
This invitation is for anyone else who is currently using the system and would wish to submit their actual cash flow anonymously. This is just an honest request so that a real comparison can be demonstrated.
Thanks,
Bill V.
Bill - good luck with that request. Those advocating this system do everything to avoid discussion of hard numbers. I’ve spent quite a bit of time recently trying to find such an example as you requested. The closest I’ve seen is a video from the original company selling the system, and it’s clear that on a $5000/mo net income, that an extra $1000 is funneled to the mortgage. First, who has an ‘extra’ 20% after retirement savings, mortgage, expenses? And who needs the software to tell you to do that? Anything that can’t be explained after the thousands of posts I’ve seen leaves me wondering.
JOE
I’m in the middle of writing a report on 10-12 ways to pay off your mortgage early–the first six as so simple and painless you may wonder why you haven’t done them before. Not sure about the second half of the report yet, and whether it will include six more strategies or fewer. If you want to be notified when it’s available, drop your name in on my website http://www.thegreatmortgagerevolt.com
What if you have no extra money, with regard to the MMA structure. Two points about this:
1) if you spend absolutely every penny you make every month, you can still save money by using your equity to pay off your mortgage faster. If you spend one penny more than you make, you won’t save. You must live within your means.
2) if you have extra money sitting around in a savings account at 5% or less, by all mean pour it onto your mortgage principal. If you don’t, like me, but you’d still like to save $50,000-$100,000 on your mortgage, using a HELOC is a SMART way to do it.
I’m not an advocate of using the MMA. It isn’t a scam, but it’s pricey. You don’t need an aeronautical engineer’s software program. You need a one-page list of instructions.
If you want to know where to get that kind of info, call me. Tollfree in the US.
1-888-664-6651
Lin Ennis
There is 1 way to pay your mortgage off early. Pay more money.
You said “if you have extra money sitting around in a savings account at 5% or less, by all mean pour it onto your mortgage principal. If you don’t, like me, but you’d still like to save $50,000-$100,000 on your mortgage, using a HELOC is a SMART way to do it.
If you have No Extra money, and are able to save $50,000-$100,000 on your mortgage, I would prefer a spreadsheet to a toll free phone number.
Bill
@Lin Ennis #99
It is mathematically impossible to use a HELOC to shuffle your money around if you absolutely, positively spend all your money each month!
You know that “interest cancellation” they are always talking about? That only works if you can put off paying bills until the day before your next payday. Even if you are paid once a month, that means you owe HELOC interest on one day. Where are you going to get that money?
The only possible way to pay down your mortgage if you have no discretionary income is to keep your money in the highest interest rate accounts you can find and use the interest earned to pay down principal.
On a different note, a mortgage is likely the cheapest money one will ever borrow. My current mortgage at 5.25% costs me 3.5% after taxes. A good dividend paying ETF such as DVY is now yielding 3.66% or 3.1% after the 15% tax on dividends. Do I expect the stocks in DVY to grow faster than .4%/yr over the next 10 years? That’s almost certain. Why should I or anyone be so obsessed with paying down a mortgage that has a reasonable rate?
I’ve met people who have ignored their company’s 401(k) match in favor of paying their mortgage faster. Makes little sense to me.
JOE
#101–JimmyDaGeek: I appreciate the thought you’ve given to this. Obviously, there are a few steps to the “money shuffle” that I haven’t spelled out here, though others have alluded to them. So, you’ll have to 1) trust me, 2) buy a book on it, 3) figure it out for yourself, or 4) keep believing a banking inaccuracy. (Hint: yes, banks do this shuffle all the time–for profit.)
#102–JoeTaxpayer: You are so right about it being stupid, generally, to forego a matching fun. Yikes. But Joe, why are you paying so much income tax? Maybe you should look into adding on a home business or setting up some entities. I feel for you bro.
#103-Lin Ennis
Trust you? Not if you are selling MMA and “interest cancellation” as the best way for mortgage payoff. As JoeTaxpayer stated above, show us a spreadsheet. I can show you mine. See #64, 75 & 83.
Hey Jimmy,
Thanks for references to the specific post numbers. Very helpful. Yes, what you described is pretty much the way I did mine, except I did use a HELOC to my advantage.
I didn’t quite understand your reference to a “factor between 0 and 1.” Could you say a little more?
Lin - my tax rate is high because I do well. I’m neither bragging about that, nor complaining about the rate. It just creates an equation where my mortgage cost after tax is barely above inflation, and the alternate investments more desirable than more prepaying. Of course if rates dropped further, I’d move to take advantage of that. My income is from employment, and for me, I’d not look to any schemes to avoid taxes, just the usual deductions and charity.
JOE
#106 — Thanks, Joe. Good for you! I’m with you on schemes. Loserville. I have had several successful home-based businesses since the late 80s.
Did you want to talk about that 0-1 spread?
I am interested in your spreadsheet. I have some I could share, but I’m not a spreadsheet whiz, so I don’t know if I have anything you’d want to trade for.
Lin
Jimmy offered the sheet. Although I can probable describe the 0-1 factor as he intended. Assume one has an income of $5K monthly. 1 would imply that they owe the full $5K on their LOC for the full month. 0 implies they get paid on the first and all bills are due on the 31st, so, in effect there is no LOC, no interest owed. One can look at their back statement for a few months, each month will show the average balance, and one can scan for the maximum balances. It’s that difference that the LOC fills in. But I still think the gains to be made are quite exaggerated. At best, one gains a return of average balance times their mortgage rate. Ok, $5000 * 6% = $300. This seems like much work to do this. And the risk that an LOC carries for those who don’t have enough self control.
JOE
#108–Hi Joe. Thanks. Sorry about the confusion: Joe/Jim–all you handsome guys look alike in cyberprint.
The Mortgage Professor, too, thought the claims were exaggerated. Then he posted a confession. Since you already understand this, I’ll talk freely with you about it–if you promise not to ripoff my product explaining the missing piece.
Sounds like you’re not interested in that.
Maybe this will clear it up:
Over a two year period, I drew four $5000 draws from my HELOC and paid them on mortgage principal.
Cycling money… (churn, churn)
That knocked $50,000 pure interest off my scheduled mortgage payback. A “total” savings of $70,000…but, as you so clearly understand, $20K was my own money that usually sat in a bank account till the next bills were due.
I did pay interest on the HELOC. $208.
The interest I avoided was $50,000.
To me, call me crazy (for others reading over our shoulders), that’s a gain of $49,792.
Phone # 888 664-6651.
Ok, at the risk of going around in a circle. You drew $5000 4 times. Every 6 months or so. At the end of each 6 month period the $5K LOC cycled up and down, but got paid off, right? Slightly different than had you added the $833/mo payment for the same 2 years. 95% (I am hazarding a guess here) of your savings came from the extra money you actually earned and ponied up. And a smidge from the LOC juggling.
I am a spreadsheet guy, although Jim may have had a different thought. When I look at a spreadsheeted amortization table, simple numbers. $100K 30yr 6%, I observe as I think you did, that the first month interest is $500 and a principal payment due of $99.55.
This is enough to tell me that an extra $100 will knock off the last payment, $599.55 or 6X. But that $100 still had to come from some where. I know you are not an MMA salesman, not the $3500 package. They are making larger claims than you seem to be.
JOE
As the saying goes, “There is nothing new under the sun.” Joe is on target regarding the 0-1 factor. The most efficient way to use the HELOC is to minimize your average daily balance by depositing your salary into it and pay bills from it. Depending on how often you are paid and how your bills come due, you want to get the HELOC balance down to zero (or close to it) during the month. As I stated in my previous posts, the savings that the HELOC shuffle provides depends on the difference between the HELOC and mortgage interest rates. In terms of absolute savings, it’s not more than about 1%.
I sent my e-mail address to you so you can give me yours and i will send my spreadsheet for you to play with.
o.k…..I was just about to go with an MMA until I read these blogs. I do have the discipline so I should do this on my own. But let me get this straight. All I need to do is pay my regular mortgage payment and another payment that is the amount of that months principal every month??? Is that right??? I have the disposable income to make that happen with no problem. What if I get a 15 year mortgage, can I do the same principle and pay it off in 7 years???
Please let me know
Saint
#112: Dear Saint, I’m almost finished with a report that covers the technique you mentioned (pay this month’s bill plus next month’s principal). You can get notice of when it’s ready by getting my confidential financial letter from my blog: http://www.thegreatmortgagerevolt.com.
However, I’d recommend you get the manual that explains four major techniques, including the HELOC technique. (The HELOC technique is not covered in the free report.) Click “Order” at the address mentioned above to *read more about it*.
Or call me directly. I’m out a lot today, but I urge you to get more info. Happy to talk with you, so you don’t make the mistakes some of us have made.
tollfree: 888 664-6651
I am good at excell but not great. What I really need is someone to send me an excell spread sheet that has the formulas that covers a 500,000.00 mortgage at 5.4% fixed for 30 years with a column that shows interst paid by month and principal paid by month. With this spread sheet I will play with it and see how long it will take me to pay off a mortgage by paying extra principal every month. Can anyone send me this.
nosaint803@hotmail.com
Thanks
#114 — Dear Saint–to see an amortization schedule, go to http://www.bankrate.com, click calculators, then mortgage calculators and type in your specifics.
To see how much you could save using a HELOC to accelerate payoff, go to http://www.letriches.com/calculator.php
Best wishes! –Lin
Saint - I will email you later tonight with the sheet you requested.
Lin - I followed the link you posted. Amazing that if one has a $600 monthly payment due, and total monthly income of $600, that any system can still accelerate their loan. Too bad the calculations aren’t transparent.
JOE
Listen… here is the bare bones about it…
Here are my credintials.. (The reason why my opinion is important - Unlike many of the above that give people advise regarding their finances without taking the time to study the question - Highly irresponsible)
First - I am Customer of United First Financial
Second - I too had my doubts and did much research… I spent two months trying to take the program appart.. during the process I came to understand the mathematical principles behind the program.
Third - I am an electrical engineer and business owner - it took me two months to be convinced because the principles behind the MMA program involve numerous variables.. one of them being time and another compounding.
Fourth - I am paying off my house in 6.25 years… and as smart and organized as I am.. could not do it without the program.. yes.. I could pay it off in less time by sending money to the principal, but that logic misses a few key points:
a) The mathematical algorithms optimize your results… in simple terms.. you will loose more than $3500.oo by not using your money to it’s highest potential.
b) The program does much more than what is told above… It reorganizes your liability (how much you owe) structure…. In simple terms.. it teaches you how to better manage your money and lower the effective interest rate on your overall debt.. this means that at the end of the month you pay less interest to your debtors… The part of the interest that does not go to them is income you did not have before.. this money now goes to pay down the principal of your debt..not the interest… and this means that you are not pulling extra money out your pocket to accelerate the payment of your house…
Wow.. I can’t beleive I wrote this much.. It;s my first time writing in something like this.. but like many engineers that I know.. I hate ignorance and those who tell others what to do without “knowing” what the they are talking about.
Finally…. go to whomever talked to you about the program and thank them… They are trying to give you knowledge.. and knowledge is truth… and the truth my friends will set you free!
#116–Yeah, Joe, that’s what I’m saying. The HELOC is almost magical in its fluidity in saving money. (I’d try to sell you my book, but I know you don’t need it, so I won’t. It *is* cool though!)
Lin
re 117–But if your *aren’t* an engineer, you can do this by buying one of the books on the topic…like *Let your Mortgage Make You Rich!*
Hey Moe-117
I am curious to know how you figured you would lose $3500 by not using MMA, when you spent an extra $3500 by using MMA? I am also curious to know what is your effective HELOC interest rate vs. your real rate?
Here is my algorithm on doing it yourself - #64, 79 & 83. I also have a spreadsheet that models various payoff methods
Moe
You say “..but like many engineers that I know.. I hate ignorance and those who tell others what to do without “knowing” what the they are talking about.
The best way to eliminate such ignorance is to show us your “complete” cash flow resulting from following MMA. You don’t have to show what your expenses are, but just show as income and expense and the resulting loan balances for your mortgage and heloc. With that complete cash flow, it’s possible that a comparison to other methods may reduce or eliminate the ignorance of many on this board.
Thank you
Bill V
Moe - as Jimmy observed and I agreed, there is an opportunity to capture the difference that one is earning on their average balance in checking and their mortgage rate. Lin has a site which claims that without an extra cent of income, one can use a system which takes a $100K mortgage whose 30 yr 6% payment is $600, and reduce it to 16 years. This would normally take payments of $811. Indeed, there’s a magic beyond us engineers or mathematicians. And yes, it so magical, no one can ‘explain’ it.
JOE
Re: 122 — Joe and Moe– Joe, thanks for such a cogent post.
I do believe I explain it very well in my eManual. While I try to be supportive and educational online, the real skinny comes only by buying my $97 manual–which is $3403 cheaper than UFF and a LOT easier to use! I’d give it away free, but then I’d need a $3000 backend course to support myself.
Does this seem too cheesy and self-serving? Or is $97 fair for charts, comparisons, etc?
Lin
#100–Bill: My explanation is the way I may my living. I’ll explain it to you over the phone or by spreadsheet. What are you willing to pay for my time and expertise? The manual sells for $97.
Well, Lin, to be blunt, in my ‘perfect world’ people would understand the math enough to know that $1 at 8% over 30 years knocks off about $10 from the last payment. But this is not that world. So, yes, I’d rather see 36 people buy your book that one poor sucker waste his $3500.
(The subprime mess proves the average mortgage customer is pretty clueless. Too bad)
JOE
#125 — It sucks, doesn’t it? The weird thing…and a dirty little secret I think people don’t realize, is that on a 30-year loan, people pay interest on the last principal payment for 358 or 359 months (I’m not sure which, but it’s basically 30 years minus a month or perhaps two).
This is why I constantly tell people that a 30 year loan at 6% adds up to 115% interest! That’s why there’s SO much to be saved by paying off a home early.
Some people disagree with the basic premise of early payoff. I think it depends upon goals and values. How about you, JoeTaxpayer?
Well, in my hierarchy of saving, I say to first make 401(k) deposits to get the company match, if any. Next, address any credit card debt that goes month to month. Next, fund the IRA or Roth, depending on bracket. For most people, that’s all they can do. If they have extra at this point, the pay down is fine by me. If the rate is low, they can consider long term investing, but that’s a personal choice. A ‘guarantee’ of 5-6% or long term return of 8-10%. Admittedly, that 8 is not guaranteed. I do think there’s a mortgage rate where prepaying makes less sense, say at 5% or so. Do you pay off early or put the money in T-bills earning 6% (when rates creep back up). I am often reminded that the ’sleep’ factor has to come into play. A paid off mortgage is a load off someone’s mind.
JOE
Hey Joe,
I’ve decided to pay someone to create an Open Office spreadsheet for me to pass along to my customers. It should be static and protected so they can’t bungle the formulas. Their input fields will be loan amount, interest rate, term (or term remaining) and two cash infusion columns (one for HELOC injections, and one for extra payments which might start and stop according to personal preference). Is yours close to this, or is this something you’d like to consider?
Otherwise, I’ll go to a freelance outsource.
888 664-651
PS: I do have spreadsheets–probably some pretty good ones. I built one where each tab provides a comparative scenario. Then halfway through I bungled the links back to the loan terms and had to create new “names” for the same fields in different scenarios. Inelegant.
you can send me your email address thru my blog, yours was not posted that I could find. I can probably do what you need, but would need some clarification on the variables. I will be back on line tonight, and can discuss terms/details. Heading out to appointments now.
JOE
Using Lin’s logic that a 30-year mortgage @ 6% per year has a 115% interest rate, it makes more sense not to pay off a mortgage and invest the money instead. Every $1 you invest each year at a conservative 6% per year will accumulate to $998 at the end of 30 years, giving you a return of 182%.
182% sure beats 115%
Ok, Jimmy, ya lost me.
$1/mo, 30yrs beginning of month deposit, ends at $83.80 @ 6%
$1 invested for 30 years is $5.75 at 6%, $10.06 at 8%.
Lin, I actually followed. A $100K mortgage paid over $30 years has payments which total $215K. I didn’t say I agreed, just followed. It kind of ignore time value of money. The math is right, the words are ‘worng’ (sic).
JOE
JoeTaxpayer
$1/mo, 30yrs begining of month deposit, ends at $1,009.54 @ 6% annual rate
you said $1/mo but you actually used $1/yr.
HTH
Bill V
Ooops, right. Jimmy must have meant month as well. Thanks.
For those looking for more actual numbers and analysis:
in addition to doing your own at http://www.inintgramortgages.com/financialvoodoo
and http://www.integramortgages.com/Mortgage_Equity_Accelerator_References
.
.
.
Robert has some great numerical info on his blog:
http://floridamortgageplanner.typepad.com/certifiedmortgageplanner/2008/01/money-merge-acc.html
and http://floridamortgageplanner.typepad.com/certifiedmortgageplanner/2007/10/money-merge-a-2.html
It should be enlightening for those willing to open their eyes and see the truth. Unfortunately the many financially ignorant and fanatic salesmen who ‘drank the cool-aide’ just want to believe… and they don’t want to understand.
At the end of the day, it’s all nothing more than simple common sense, but the devil of understanding it is in the details!
Spreadsheet, helocs, software, and other schemes are not necessary to pre-pay your mortgage!
Ron, the fact that the proponents (salespeople) for the programs claim a power beyond arithmetic should be people’s first clue. I agree, in general, there’s no need for HELOC or software, but you must agree with me that a simple spreadsheet can help someone see the impact of the extra payments and can be used to strategize on the payment plan they’d like, if early payoff is their goal. Need? No. But it sure can help.
JOE
Agreed Joe…
Any Free or low cost tools, spreadsheets, budgeting software, library books, websites, news paper articles, etc… can all be great tools to help and assist folks.
Education is the key!… but folks don’t need to pay exorbitant fees and waste their hard earned money for a get rich quick placebo.
Personal responsibility, education, understand your own financial decisions, and then rolling up your own sleeves to get the job done… is the only solution.
Kudos Joe.
For the most part, I believe that the discussions on this board are the result of people trying to check the validity of MMA claims.
The fact is, if you wish to pay your mortgage faster, you must either reduce your interest rate without reducing your P&I payment, or pay additional principal to your loan.
MMA can help one to accelerate his/her payoff but one can very easily accomplish that task without paying an uninformed ’software’ salesperson $3,500 to do so.
My best advise for anyone who still has a question about whether or not they can reduce their debt without paying $3,500 is to seek the advice of a Financial Planner who is knowledgable, ethical, and who does not sell MMA software or its ilk.
My thanks to the person or group maintaining this web site for providing a forum for this type of discussion.
Bill V.
I have an agent speaking with me about this software. He just started working with it himself and is not able to convey every aspect without the help of the UFF site videos. I have recently opened an unsecured LOC with my credit union and this seems to work very well for its intended purposes. It is open ended, fixed interrest. I(wife included) am in a financial nightmare myself. I am completely maxed out on all credit cards, no savings whatsoever, no extra money to pay more than minimums. The LOC was a god send when everything was about to crash. I have a new mortgage and very little equity to start with. This MMA seems to be an answer if I can stay diligent or a nightmare(worse) if I can’t. What I would like to know(before there is an emergency that pushes me over the cliff) is, would the fixed rate LOC I currently have achieve the same results if used properly. Should I start depositing all my income into this LOC and use it periodically to make all my credit card and normal expense payments? Since it is fixed rate, would it just cause more problems? Do I need to wait a while til there is at least say $6000 available credit at all times, or would it be ok to liquidate a high interest(30%) credit card even if it maxes the LOC? Any help would be appreciated. I would rather not spend the $3500 dollars(which they will gladly “absorb” as first charge to the HELOC) if my current setup can be used for this purpose. Thank you. Please feel free to ridicule as well. I need to know everything, even if it hurts.
Tim
First, and most importantly, you do not need to pay 3,500. to a software vendor at this point in time.(or ever for that matter) Please seek a qualified credit counselor in your area and get a clear understanding about your income and expenses, Then put together a solution that is perfectly clear to you. There is no way to suggest a solution to you without a thorough discussion of the facts. That discussion should be be with a Qualified Credit Counselor.
Good Luck in your search for an answer.
Bill V
Tim,
Congratulations on recognizing that you need to make some changes to get out of your current predicament. I have a couple of thoughts for you regarding your post. We have had several customers in a similar situation recently where the MMA was a very effective tool. It sounds to me like your agent should be looking at your situation with their Branch Manager or their assigned mentor. Those managers are there to help train them to service you better, and are rewarded for training new agents.
Bill V. mentioned working with a Qualified Credit Counselor. I don’t disagree with him, but I don’t agree either. We have not had great success for our clients using CCC’s. Although many Consumer Credit Counseling agencies advertise that they are “Non-Profit”, they still come with a fee. More importantly, even though they state that they won’t hurt your credit rating……. your file is tagged that you are using them and your score will drop, most of the time significantly.
Here is what I would suggest for your situation.
1. Do you have a budget? You will never be successful in getting back on track until you know how much you are spending and where it is going.
2. If you use your LOC for “interest cancellation”, it must have certain characteristics to make it compatible with the MMA program or any other program using the “interest cancellation” effect.
3. If you decide that the MMA program is for you, there are some basic strategies that we teach that will maximize the effectiveness of the program for you.
The MMA works very well for your situation, but as with any program, you’ll need to make sure to maximize its effectiveness with correct strategies. You can contact me or join one of our free web events to learn about them. Also, if your agent (who it sounds like may be a friend of yours) is in need of support, I would invite both of you to join our web events. We teach about many principles of financial management, including proper use of the MMA as part of your total financial picture. All of our web events are FREE.
Also, consider posting at http://www.ufirstforums.com for answers from UFirst agents regarding your specific situation.
Best Regards,
Travis Mitchell
Debt Free Project
http://www.DebtFreeProject.com
By the way Bill, I haven’t ignored your request for a case study. I’m working on one but have been to busy to put together the full scenario. I’ll let you know when I have it done.
Travis Mitchell
Debt Free Project
PS.. Re: your post #137, does that mean that people shouldn’t use a financial planner who is recommending the Money Merge Account software? Did you ever think that maybe the thousands of CFP’s out there recommending this program have found a use for it which compliments a long term financial plan?
Travis - I would steer anyone away from a CFP recommending this program just as fast as I would steer them away from an Aggressive variable annuity salesman. Tim, above, does need to get a grip on his budget, and it would seem he can least afford to throw away $10, let alone $3500.
He should take his situation to the newsgroup (available thru google groups if he has no newsreader) misc.invest.financial-plan where he can get some good advice from some knowledgeable people.
JOE
Joe,
I think you diminish your credibility with such a blanket statement. No financial product is right for every customer and no customer is right for every financial product. However, there are certain products that are right for certain people. It is clear that you don’t like the MMA. If the product was free, do you then think it would be a good product for consumers.
I believe, based on your posts, that you don’t like the MMA because of its cost. I also believe that this discussion has moved from a objective discussion about whether or not the product is a good way to pay off a mortgage to a discussion about the “value” of the product.
Regarding the value of the product, who are we to decide what value any product is to another person. If Tim’s #1 goal in life is to pay off his mortgage and get out of debt, the Money Merge Account software will give him a mathematical road map to do so. Tim has to decide if that road map and the world class customer support that UFirst provides its clients is worth the cost of the product. That is not a decision for you or me. But regarding the product itself, when used correctly, it works and it works very well.
Travis Mitchell
Debt Free Project
Travis
I originally joined the discussions here to find out how MMA could accelerate a mortgage payoff “without refinancing or increasing my monthly Payment”. With the help of this board and a spreadsheet, I discovered that if one does not increase his payment, he will not pay his loan faster. I am a big fan of paying debt off faster. Paying your discretionary income to your mortgage can be smart, and will accomplish debt reduction. However, paying your discretionary income to your loan principal is, in fact, an increase in your monthly payment, contrary to the language in the MMA Advertisements.
For a person in Tim’s situation, the last thing he needs is to pay 3,500. for a software program to tell him what an honest CFP would tell him for $150.
Tim, please consult with a reliable financial counselor and get your financial situation straightened out.
Also, Tim, I agree with Travis regarding credit counselors who suggest that you allow them to work out arrangements with your creditors. That is considered by some lenders to be the same as bankruptcy. Remember, you cannot usually borrow yourself out of debt. I cannot over emphisize the need for you to speak to a Qualified financial counselor.
Bill V
The MMA provides an instantaneous financial readjustment based on entries of income and outflow. Tim would be in far greater debt consulting a qualified financial counselor everytime he spent or brought deposited money. Real time adjustments are not within the purview of qualified financial consultants. Moreover, a large number of qualified financial consultants recommend the MMA–even those who do not sell it. To disqualify it out of hand would be puerile. I agree with Travis.
Regards,
Steve
Ok, Travis, point well taken.
One platitude thrown our there is “don’t invest in anything you can’t explain to a good (intelligent) friend over lunch.” How about “don’t invest in a product that cannot be explained in a few hundred posts.”
You see, none of the promoters of this system can explain how it will help someone who doesn’t have extra money to throw at their mortgage. If one has no extra funds, the savings to be captured are the difference between the rate on one’s average (checking) balance and their mortgage rate. No more than that, no cutting the loan to half its term.
Bill and others seem to understand that.
JOE
#146 — Joe, you are so right. The mortgage is reduced exponentially, but still in relation to the degree one lives below (within) his or her means.
People already caught up in overspending may need a different solution. Even Consumer Credit Counselors (CCC) charges a fee.
I’m not sure $3500 for MMA is the place to start, especially since, with the info we’ve been given, we aren’t sure out-of-control spending has been corralled.
Name 10 times when spending more saves one money…
Lin
Steve
MMAs offer people with discretionary income a better way to reduce debt (for a mere $3500) then saving it at 1% or otherwise blowing it. If a person has virtually NO discretionary income, MMA will do nothing for them at any cost. For those of you who sell MMA, please reread Tim’s note and suggest ways for him to get back on his feet before trying to take $3,500. dollars more from him than he has.
Bill V.
If you spend more time Googling this company and product… you find that not one person that has spent the $3500 says they regret their decision. Could a math whiz do this program and maybe get close to what the software does? Maybe. On the other hand, a 5% margin of error could end up costing $20K, $30K, $50K, in interest that COULD have been saved… but was not.
On top of that… one would have to really enjoy math, playing around with the numbers, and not mind the time it takes to do it.
Personally I bought a MAC simply because I was tired of the 30 minutes a day I spent rebooting my PC. Was saving 30 minutes a day worth the extra $2000 I spent on the MAC? In my opinion… yes.
After showing this opportunity to several friends who are veterans of the mortgage industry, as well as one who is a software engineer for a major defense contractor, and getting their opinions… I am now a UFF agent myself.
THANKS to everyone here, as well, for helping me make this decision… your input has been invaluable!
PS: You will not find this on P2P because the software is online… clients get a login, password, tech support… and (by the way) a money back guarantee.
One thing I find REALLY ironic… is the folks here who are using a tool (their computer) to write on this forum. If you really do not believe in software, or in the value of using a tool to do something more efficiently… why did you buy a computer? Could you not use a Smith Corona and some carbon paper to communicate? When you balance your checkbook… do you use a calculator… or a abacus?
Also… a couple of people here said they could do just as good a job as this software. But I notice that they did not say they HAD (and how could you know if you did as good a job if you do not own the software so you could compare/match performance to performance?).
And… If you can, but you won’t (or have not)… can’t you just conceed the the whole thing would be a pain the butt… and that many people would rather invest a measly $3500 on the right tool for the job… so they can then go lay on the beach somewhere?
Is $3500 really such a huge amount of money? Seriously? When it allows you to save over 100K, cuts years of your mortgage so you can invest that $ in something else… and do it all in a way that is simple, easy, and saves you time?
Again… thanks for helping me make my decision.
@Bill, post 144.
The advertising claim of “without refinancing their existing mortgage or increasing minimum required monthly payments” is an absolutely accurate statement. None of our clients increase their monthly payments. Every client, however, will make additional principle payments, in specific amounts and at strategic times, based on the mathematical formula that exists in the software. The frequency of those extra principle payments and the amounts vary based on each customers specific income, expenses and discretionary monies. Those three components are always being leveraged to their maximum potential.
RE: a CFP, it’s been my experience that a CFP is not going to calculate those numbers for you on a daily basis, a weekly basis, a monthly basis, or on any basis. In my area, I can’t walk into a CFP’s office and even get his attention for less than $150.00. In fact, our clients have found that if they don’t have a big chunk of money to invest, they can’t get a CFP’s attention for much much more than that.
Travis Mitchell
Debt Free Project
@ Joe, Post 146 - I don’t believe that anybody from UFirst has ever said this program will work if you don’t have discretionary income. In fact, if you look at UFirst’s FAQ regarding the Money Merge Account program, it specifically states that you need to spend less than you make for the program to work. Here’s the link: http://u1stfinancial.com/Default.aspx?tabid=118
One of the benefits from to the discretionary income (which is often misunderstood) is that the program specifically leverages that money for your benefit. For those w/o discretionary (which we have had many clients in that category), there is generally a way to create some discretionary by restructuring the debt into the LOC (which is generally a lower interest rate than the debt was previous) and then putting the software to work on what’s left over.
Regarding the software not being explained in many posts, I disagree. I think it has been explained over and over. In fact, I know for a fact we explain it every week in our FREE 40 minute web events. Do we go through the entire mathematical formula? No… We can’t, because frankly speaking, we don’t know it. We’ve tried it, tested it, and use it daily. We know the fundamentals behind it, but we don’t know exactly what the formula is. I kind of relate it to that new $3500.00 HD DLP ABCDEFG TV that electronics stores everywhere are selling. I don’t know how it works. I do know that it could show me the Super Bowl in much more detail than my old TV (come to think of it, I don’t really know how the old one worked either though). Of course, when you really analyze it, there are thousands of examples like that of products that we use in our everyday lives that few of us really knows the inner workings of. Having personally pondered it at length, I sincerely believe that most of those products are designed to make our lives easier, more productive and more flexible, while providing the stated benefits. Not much different than the Money Merge Account system, in my opinion.
Travis Mitchell
Debt Free Project
I am back. Thanks to those of you who sent me spread sheets to show that I can do this myself by paying extra principle. However, the best I can do is pay a 30 yr off in 15. The MMA folks that they can get it done in 10 yrs and use the extra to make me a bundle. How can they do it in 10 and I can only do it in 15????
Also, let me be 100% clear…this isn’t just some sales rep trying to sell me this. It is my best friend of 32 years. Hard not to trust him.
To all. I had a couple of other thoughts, so I’m going to apologize in advance for a rather lengthy post.
First, I had an additional thought regarding the “software” portion of the product. If anyone thinks that UFirst are going to make their exact patent-pending formula available for public review, I believe you are sadly mistaken. In my opinion, the reason they don’t sell the software on a disk is because they are afraid that somebody will reverse engineer it and make all of their investment for not. I’m sure that they will go to great lengths to protect the exact algorithms which consist of certain mathematical formulas combined with other certain financial principles.
Second, since much of the dialogue in the preceding posts has to do with price and not whether or not the software functions as a good way to pay off a mortgage, I thought it might be enlightening to review the process a customer goes through to become a client, along with what it takes for most full-time agents to market the product. I’ll use our average scenario at the DFP as an example since this is a core product for us and since many of us represent the DFP and its products on a full-time basis.
To begin with, we market the product via web content, newsletters, local advertising, warm market, and to referrals via word of mouth. As interest in the product is expressed, we conduct live presentations (in person and via web events) to clients who have an interest in paying off their mortgages and other debt as quickly as possible. Once the presentation is complete (generally 40 minutes to several hours depending on questions and presentation format), we spend somewhere between 1-6 hours per client: dispelling all the myths about the product that the client gathered from ill-informed or misinformed naysayers who have little or no real idea of how the software functions (no flaming intended toward those posting in this forum); working with the client to create and review their budget (to gain an idea of discretionary income); and creating a free Money Merge Account analysis to assess whether or not the program will be beneficial for them and whether or not they can qualify for the program.
Once the preliminary work has been done and the client decides they want to proceed, we refer them to a favorable lender to obtain a LOC (to ensure their LOC will be compatible with the program). Once their credit line is secured (often takes several weeks to several months in many cases), we finalize the necessary paperwork and collect the activation fee to submit to UFirst. We must submit to UFirst complete copies of the following paperwork with the application in order for UFirst to process the application: Mortgage Note, Current Mortgage Statement, the most recent LOC statement and the entire LOC agreement. UFirst then processes the paperwork through their quality assurance department to verify the accuracy of the information gathered by the agent. If any documents are missing or the LOC is not compatible, or the program does not adequately benefit the client, the application is rejected or put into holding until the appropriate materials are received.
After everything has been submitted by the agent and approved by UFirst, the company then creates a customized web site for the client, the data of which is based on the exact loan structures as outlined in the Mortgage Note, Current Mortgage Statement, the most recent LOC statement and the entire LOC agreement. Once the customer’s individual site is complete, the client’s customized Money Merge Account program is ready. The client is then sent an email and physical activation documents notifying them that they are now ready to begin their Money Merge Account program.
At this time, the client is directed to contact the company to schedule their initial coaching session, which can either be a private one-on-one coaching, a recorded webinar, or a live webinar depending on the customer’s preference and product aptitude. In the initial training, the client verifies the latest financial data to confirm the accuracy of the numbers which have been prefilled into the software. They are then trained for 60-90 minutes over several coaching sessions on the software’s functionality and how to correctly use the existing banking tools to maximize the benefit of the program. At this point, the client is generally comfortable with the processes and understands that if there are any questions they always can access their Money Merge Account coaches.
The entire process takes anywhere from 10 days or so, to several months. Our shortest has been 14 days and our longest hast taken over 4 months. That’s weeks and weeks of work by many highly skilled and qualified professionals to create a happy and satisfied customer. What’s more important, in my opinion, is that this new customer is a consumer who is now focused on their financial future and eliminating their debt. This may be why you can never find a negative post from an existing client.
By the way, after the client is trained and activated, the sales agent is then notified that the client is up and running with their software and has completed training. At the DFP we contact them at this point to make sure that they are satisfied and to determine if they have any more questions. It is generally at this time that the client offers names of several friends, neighbors, relatives, etc. (referrals) with whom they would like for us to share the program. (We currently averaging 3.2 referrals per client.)
The point to that long post is that the customer gets all of that for $3500.00. And that doesn’t take into consideration that they get the piece of mind knowing that if they update their numbers and do what the software says they’ll own their home and have paid all of their other listed debts, achieving a result which was fully disclosed and guaranteed prior to them making a decision to move forward. (I think I forgot to mention the FREE lifetime upgrades to the software along with the ability to move the program from one property to another).
Frankly speaking, I think it’s a heck of a value for the client and we are proud to represent such a world-class company. I was personally in the wholesale consumer electronics field for many years, 7 of which were spent working for the world’s largest company in our vertical. Our dealers never offered this type of value to the consumer and our company, although it was a best-in-class company, would have a hard time competing against the level of service that UFirst provides it’s clients. In my book, if all parties involved are happy with the outcome, that’s a value that I think all companies could strive for.
Ok… sorry about that. My rant is complete.
Travis Mitchell
Debt Free Project
http://www.debtfreeproject.com
Saint - you asked for a specific spreadsheet, how to pay a 30 year mortgage off in 15 using one particular method. I sent that to you. It can be adjusted to 10, 9, or whatever you wish.
In the end, you must make your own decision. You can use that $3500 to knock off the final 7 payments on your mortgage as I show your numbers. Or you can give it to your buddy, and report back how happpy you are to have software tell you that if you apply 100% of your discretionary income to your mortgage, it will be paid off in 5 years. Either way, your decision, of course,
JOE
#149–Mark:
I’m glad you’re happy with your decision to be a UFirst agent. Our next-door neighbors just bought a brand new Jeep Rubicon they’re very happy with, but we’ll buy a certified pre-owned one and save $10,000 or $20,000. Do you see what I mean? It’s preferences on how to spend money. New car smell isn’t worth 10 grand to me, especially here in Arizona where everything growing alongside dirt roads has thorns on it!
It seems you overlooked my posts–I know, easy to do with over 100 here. You said “a couple of people here said they could do just as good a job as this software. But I notice that they did not say they HAD.” Yes, I *have* been paying off my mortgage quickly, saving $100,000 or more in interest, using a HELOC. You can read my whole story in “Let your Mortgage Make You Rich” (website by the same name).
While it truly is MATH that drives the savings–laws and principals of finance–it is NOT NECESSARY to know math or do math beyond the level of balancing a checkbook and a credit card statement to accomplish saving around half of the interest a regular loan would cost (quickness of payoff depends upon how well one lives within one’s means). You can see an example in the mortgage calculator at http://www.letriches.com/calculator.php. It actually comes out pretty close to the UFF savings projections, though the two are related only by principles, not because we each knew what the other was developing.
In fact, I used a software program subscription, before inventing the system I write about. I entered all my expenses, income, etc. Frankly, I found that tedious and unnecessary.
I think the grand misconception about the Money Merge Account is that it will take control of the finances of people who are out of control and slap some order into their otherwise disorderly financial lives. While preparing their numbers to begin the UFirst program is no doubt extremely helpful for people who don’t have a clear picture of what’s happening with their money, they are probably not aware they will have to make decisions all along the way to agree or disagree with the suggestions of the MMA software. The software does not manage their money for them. It’s more like a giant multi-armed bank statement–a snapshot.
People who *do* know where their money is and how they spend it are prime candidates for similar savings by buying “Let Your Mortgage Make You Rich!” for $97–or one of the other books written on the subject in the last 20 years.
MMA is a good system. But it does NOT TAKE A ROCKET SCIENTIST . I think some of the MMA agents prey upon what they suppose to be stupidity in the American public. I prefer to empower people by teaching them how to use principles they can then use for the rest of their lives.
#152 - Sear Saint…Has UFirst done a complete analysis of your finances, or is 10 years the ballpark promotional language of your best friend?
Some people CAN pay off their home in 10 years. Others can’t. It depends on what some are calling “discretionary income,” for lack of a better term. How well do you live within your means? What is your average daily checking account balance? These are the factors that determine your speed and savings.
To get a worst case scenario, go to http://www.letriches.com/calculator.php, fill in the numbers and click “a little.”
To whom it may concern:
Here is the classic MMA example of paying off a 30 year Mtg in 10.4 years.
Loan $200,000.00
Rate 6.00%
Payment $1,199.10*
cost of software $3500.00
Discretionary Income $1,000.00
Using MMA, loan will pay off in 10.4 Years!
=========================================
—————–Compare—————–
=========================================
Loan $200,000.00
apply cost of software to balance (200,000. - 3,500.)
Balance $196,500.
Payment $2,199.10 (1,199.10 1,000.00)
Using any free mortgage payment calculator on
the WEB, your remaining term is 9.917 years!
Travis, you said “..If anyone thinks that UFirst are going to make their exact patent-pending formula available for public review, I believe you are sadly mistaken.” After reviewing the comparison above, why would anyone want such a patent-pending formula. All a person needs to do is pay their discretionary income down on their mortgage, the same as they do with MMA.
Bill V
Thank you all very much for the replies. I know much more than I came in with. I do not currently have a “budget”. We have looked at our bills and income to determine that we are indeed making more than we are spending. However, that “discretionary” income is slipping away somewhere.
Thanks to the posters here, I know much more about the way a MMA works and in what way it could be benificial. If I am in a situation where it will save me thousands, I will gladly spend a few thousand(of course this would be impossible for me if they did not take it as your first balance).
My agent(also a relative that paid some of the labor costs of our new house) is currently speaking with his manager to see if this program could work for me and if I am even going to be eligible. Do to his relation, I want to give this a fair shot. I am hoping that it will help us free up more “discretionary” income to help pay credit off quicker while providing a safety buffer(something we currently don’t have).
While I am leaning toward the options an MMA gives me, I do plan to speak with financial advisors if possible to make sure this is the best route for me. I appreciate this forum and the people diligent to read it to the end. You have helped me see everything I need to confirm before I take the next step.
I will keep you all posted whatever I choose.
Bill - don’t confuse these guys with the facts. They offer stories, analogies, and examples of computing power greater than any work of science fiction.
The line “The entire process takes anywhere from 10 days or so, to several months. Our shortest has been 14 days and our longest hast taken over 4 months” implies something that makes no sense. 4 months to calculate what? One can run these number in excel and not even use FV,PMT,or PV calculations. This is simple arithmetic.
They will offer the doubletalk as a way to obfuscate any attempt at discussing the numbers. If someone really doesn’t understand how a mortgage works, they should go buy a book with a clear explanation, and use the extra $3400 to save a couple year’s interest.
JOE
Bill, no doubt that in internet utopia, your customer can pay all of their discretionary toward their mortgage and live happily ever after. There are a couple of problems with your scenario though. #1… customer didn’t actually have $3500 in cash to apply toward the mortgage for the initial buy down, so you don’t get the benefit of that (the 10.4 years in the UFirst example includes financing that $3500.00 and includes the interest cost of paying that amount off) If our client applies that same payment we also come out at under 10 years guaranteed
#2… we know, based on audits, that the live software performs @15%-25% faster than the static analysis software which is what is used to produce the 10.4 year example. #3… run this through your free web calculator and tell me when your client will pay off - client decides they want a new $25,000 car, so they go and purchase it. They get a 4% rate for 5 years @ $460.41/mo, so now their discretionary income is only at $539.69. Oh, and by the way, in month #7 they had to buy a new fridge at the cost of $1437.26 and in month number 11 they took a family vacation that cost them $3716.24 which they financed on a credit card @ 11.7%. They still want to be debt free as fast as possible, but as we can see, they still want to live their life as normal. Can you tell us when they will have their mortgage and all of their other debts paid for….
Travis Mitchell
Debt Free Project
http://www.DebtFreeProject.com
@Joe - “implies something that makes no sense. 4 months to calculate what? One can run these number in excel and not even use FV,PMT,or PV calculations. This is simple arithmetic.”
Come on Joe, …. now you’re sounding ludicrous. Nobody said it takes 4 months to calculate anything. It has taken us that long to educate the customer about their finances, work out a budget, get their funding in place to use the Money Merge Account system and get them up and running with the program.
Travis Mitchell
Debt Free Project
http://www.debtfreeproject.com
@Tim-
Tim, I also suggest that you discuss with your relative the possibility of a referral program. I know many agents will give a referral fee, which you could then apply toward your debt to help you accelerate the process even faster. When it comes to debt reduction, most people think in terms of negatives (cut back). We like to think that you can think in terms of positives (make more) and have a similar if not better outcome. Good luck to you.
Ok all, it’s been fun, but now it’s time to get back to work so I won’t be back on posting for a while. Bill V., I’ll look at your numbers when I get back.
Travis Mitchell
Debt Free Project
http://www.debtfreeproject.com
@Travis-160
The only possible way for the software to work better than a projection is if a client is motivated to decrease spending, thereby increasing discretionary income.
If someone needs the kind of hand-holding that MMA provides to keep them on track, then I suppose they will find value in spending $3500. Otherwise, as long as they continue with their payoff schedule, regardless what life throws at them, they will achieve their goal.
@Tim-158
I strongly urge you to record and categorize your spending over the last couple of months so you can see where your money is going. There is a new site, http://www.mint.com, that will automagically suck down your online bank and credit card information and prepare a sample budget and spending plan. It is very hard to reach a goal without a written plan - it is just a dream.
@ Jimmy
Sorry Jimmy, that is not accurate. The projection is static and doesn’t figure the interest cancellation effect. The software is dynamic, and does take that into account. No doubt there is some behavioral stuff happening as well, but the end result is that customers are experiencing a result faster than what was projected and what they were guaranteed.
Ok… really now, I’m gone until next week. Best to all.
Travis Mitchell
Debt Free Project
Joe - My MMA example above is MMAs own numbers, using their “..exact algorithms which consist of certain mathematical formulas combined with other certain financial principles posted on many MMA web page solicitations.” (to quote Travis). Although they won’t share their formulas, they do publish their results. See my comparison #157. The math speaks for itself.
Bill V
@Saint-152
Get back to your friend and ask him to run four projections with you making the same amount of money, but change whether you are paid weekly, bi-weekly, semi-monthly, and monthly. I am curious to see if the projections change. There is no way that using a HELOC can create a 5 year payoff difference, especially if you have to pay $3500 upfront.
If you want to make a bundle, it makes more sense, in the long run, to invest your money, instead of paying your mortgage off. But that is another discussion.
Bill, I understood perfectly. I’m with you 100% on this. I don’t understand what it is that the buyers think they are getting for their money. You, and my mortgage calculator (I love my TI BA-30) both confirm the numbers don’t lie.
JOE
@Travis-165
If “interest cancellation” is supposed to produce any significant savings, why won’t it work if I have no discretionary income? Because you need discretionary income to pay the interest on the HELOC.
People keep posting that MMA uses proprietary, patent-pending, rocket-scientist-written algorithms to produce fantastic results, and that people like me, who have no idea how MMA does it, must be wrong. No one says that MMA software does not produce the results people think they do. The fact, that MMA people have never countered with a worked-out example, in any forum, is that people can do the same on their own without spending $3500 or using a spreadsheet. If they want to spend that money for the training and coaching you describe in #153, that’s their business
#16 Travis. Your question is valid. Please answer it with MMA and I will answer with my free calculator and compare. You’ve got a deal! I promise to show you a direct comparison and I won’t charge you a thing.
Bill V.
ps On your MMA example, your customer didn’t have the $3,500 either but was required to borrow it on the HELOC. (I thought we were trying to get out of debt.)
I didn’t think I would have to show this, but here it is:
MMAs Example
Loan $200,000.00
Rate 6.00%
Payment $1,199.10*
cost of software $3500.00
Discretionary Income $1,000.00
Using MMA, loan will pay off in 10.4 Years!
=========================================
—————–Compare—————–
=========================================
Loan $200,000.00
Rate 6.00%
Payment $2,199.10 (1,199.10 1,000.00)
Using any free mortgage payment calculator on
the WEB, your remaining term is 10.167 years!
Bill V.
Wouldn’t someone able to make payments nearly twice their current obligation be able to commit to a 15 year mortgage and enjoy the lower interest rate, usually 1/2% lower. This alone will save the hypothetical borrrower of post 170 save $1000 in interest the first year, and nearly $6000 over the life (10 yrs) of the loan.
JOE
@Bill,
Last post before I head out for the week. Figure out your payoff from my post #160 and post your results. I’ll post the MMA result next week when I get back.
Regarding your example in #170, you can see that our results are virtually the same, if you were to add in the cost of the financed $3500 to your result. Now, here’s the difference. Your person spent every penny of discretionary to achieve the result, meaning that they had to change their lifestyle to accomplish the goal. The MMA client, didn’t change anything. They just used the software and the strategies developed by UFirst to create a leveraged position of their discretionary income. If an emergency comes up, life goes on and the software adjusts. You could argue, as people already have, that you could use the HELOC to adjust for those emergencies. Correct, but you still lack the power of leverage.
So, why would anybody pay $3500 for the algorithms as you indicated in post #157? Well, using your best case scenario against the UFirst worst case guaranteed scenario, at worst the client is going to come out close to even, and to achieve your results, they had to totally modify their lifestyle. However, when you compare the UFirst best case example to your best case example, they will beat the “add the full discretionary” scenario by a minimum of 15% to 25%. A 10% improvement more than pays for the cost of the software in this example.
Nobody has ever said that the MMA way is the only way to accomplish the task of early mortgage payoff. This forum is titled “Is a Money Merge Account a Good Way to Pay Off Your Mortgage”. Based on these examples, I continue to validate what we found in the 300 hours of research we did on this product before we sold our first program….The Money Merge Account is a Good Way to Pay Off Your Mortgage, if that’s what your goal is.
Travis Mitchell
Debt Free Project
http://www.DebtFreeProject.com
My comment #137 says there is 2 ways to reduce debt: lower your rate or pay more money. All the other stuff is for those who are, in the words of ‘The Rolling Stones’, practiced in the art of deception.
Bill V
Travis,
I showed my cash flow. I spent all of the borrowers discretionary income. Where the heck is your cash flow. Isn’t it time that you were honest with the readers of this board and every one else you sell the program to?
Bill V
Bill,
You’ll have to join the webinar. We cover the first 12 months of the cash flow there. You can also view a new corporate video which shows the cash flow. It’s available at http://www.u1stfinancial.net/dfp. The video is located at the bottom of the page and is called “Money Merge Account Overview”. My agent agreement prohibits posting the numbers on public forums, but it’s clearly available for viewing from a variety of sources.
Why is it that every time a position is clearly defended on these boards, the naysayers always switch to “be honest” or “quit lying”. I’ve tried to articulate my company’s position with integrity and believe that I have done a pretty good job of showing that the Money Merge Account program from UFirst is a reasonable way to be successful in paying off a mortgage. Don’t diminish yourself by playing the “be honest” card. The numbers are out there for the world to see. People are going to see them for what they are and make a decision that fits their interests.
Ok, until next week….
Travis Mitchell
Debt Free Project
http://www.debtfreeproject.com
Always, only half of the numbers are out there. Where are the corresponding heloc numbers. Sorry you think that honesty diminishes anyone. Once again, show us the numbers.
Bill V
Travis - you don’t like the request for honesty? Bill posts good numbers, you then suggest that all of one’s discretionary income isn’t going to pay the principal, that it’s somehow borrowed and paid on the HELOC. But you know that can’t be right. Then you write “The MMA client, didn’t change anything. They just used the software and the strategies developed by UFirst to create a leveraged position of their discretionary income. If an emergency comes up, life goes on and the software adjusts.” And when that emergency comes up, where does the money come from? The huge principal paydowns of course, and then the accelerations slows to a crawl. There’s no such thing as “interest cancellation” these are just words meant to sound like something is going on. One owes interest on the money they owe to the bank, period. You pay back some principal, you owe less interest. Such a simple mathematical concept cannot be made simpler, only more confusing by “advanced algorithms”.
@Joe-177
“Interest cancellation” refers to the idea of borrowing a lump sum from the HELOC to pay down the mortgage now and using your monthly salary to temporarily reduce the HELOC balance. This reduction is temporary because you use the HELOC, instead of your checking account, to pay your bills, increasing the HELOC balance again. The trick is to keep the HELOC average daily balance low enough during the month so that the effective HELOC interest rate is subsequently reduced, bringing it below the mortgage rate.
You have 2 choices regarding paying off this lump sum. 1) Do it gradually, using all your discretionary income. Once it is paid off, you go through the borrow and pay off cycle again. 2) Maintain the balance, just paying interest, and using the rest of your discretionary income to pay off the mortgage directly. The HELOC balance is paid off after the mortgage is paid off.
I modeled both scenarios and found the most efficient way to do this “HELOC shuffle” is to borrow an initial amount equal to your monthly take-home pay. This amount is maintained as an interest-only loan and paid off at the end.
#178 — Hey, Jimmy, did you rip me off? [kidding] No. 1 above, in your explanation is what I put in Let Your Mortgage Make You Rich!–which I wrote two years ago. The only reason was that’s what I did in my own case and it worked so beautifully, I recommended it to others. It’s a formula that works at all levels of positive income (will not work on negative cash flow).
Did you figure that out yourself or had you read or heard about it?
Lin
“I modeled both scenarios and found the most efficient way to do this “HELOC shuffle” is to borrow an initial amount equal to your monthly take-home pay. This amount is maintained as an interest-only loan and paid off at the end.”
And I bet you have an observation that (a) the greater the delta between the LOC and the Mortgage, the less there is to gain by this method,(b) the lower one’s average balance in checking, the less there is to gain, and lastly, (c) the higher the interest on that checking balance, the less there is to gain.
Me, I just ran into the oddest of situations. When depositing a check at my bank, the teller asked if I was interested in a new promo. Bottom line - they just lowered the rate on my HELOC to Prime-1.26 (4.74% as of today) as compared to my fixed rate mortgage of 5.24%. So how does that run through your analysis? I’m thinking the decision is based solely on how low one expects rates to move, as long as it’s under the 5.24%, and I can pay it off before it goes much higher. I’m also thinking we still have a way to go on the downside. I figure I’ll be at 4% pretty soon.
Pretty crazy, I think.
JOE
@Joe-180
Yes, I posted about a) b) & c) elsewhere.
I’ve been thinking about your HELOC question. The ideal way to take advantage of a below-market HELOC interest rate is if you have a first mortgage with an interest-only option. You borrow so many months of principal from the HELOC and make a lump-sum payment on your mortgage. You then make interest-only payments on your first mortgage and make amortized payments on your HELOC.
If you can’t make interest-only primary mortgage payments, maximize the HELOC shuffle. Borrow a larger lump-sum that reflects the lower interest, make interest-only HELOC payments, and reduce the lump-sum when the interest rates rise again. For the HELOC shuffle to work, the monthly interest paid on the HELOC lump-sum has to be equal or less than the equivalent amount of principal paid off in the primary mortgage.
@Lin-179
I’ve been researching mortgage payoffs for over 4 months. I’ve read about every program, posted on many boards, and created a bunch of spreadsheets. I never saw your site before you posted here.
Bottom line:
1) The HELOC shuffle works BUT as Joe posted above, its effectiveness depends on interest rate spread, monthly salary, and cancellation rate. The lower the HELOC interest rate, the higher the monthly salary, and the greater the cancellation rate means you pay less HELOC interest.
2) Paying off with discretionary income always works better than a HELOC shuffle.
3) Investing for the long term is the best way to go since you can accumulate much more money, giving you more options in the future. People like to talk about being debt-free, but if you lose your income before you lose your mortgage, you won’t have that cash available.
Jimmy, my first is a “home equity loan”. It’s fixed, and credits my payments the day I make them, but will advance the next payment due date if I make an extra payment. I know this is NOT how most mortgages actually work, but I verified the numbers with mine. So I can pay a year ahead from LOC and make the payments only to LOC for a year and come out ahead. It really comes down to a bet on rates, as I don’t want to get caught with the LOC rising above the 1st mortgage with too much time needed to pay it off. I wonder how the MMA software would advise, since it should target an LOC balance of only a month’s income flow. 2 year’s of the Mort payment are about 3-4 months income, that’s probably what I’ll start with, and track rate movements.
JOE
Joe,
If I,m reading #183 correctly, your activity will cost you money, not save.
If you pay your 1st mortgage in advance by 12 months using your LOC, meaninging that you don’t have to make any payments until the 13th month, that would allow you to make those same payments to your LOC at a lower rate. At the end of 12 months, your balance on the 1st mortgage is the same as if you would have made the scheduled payments (since that is what you did in advance) plus you would still have a balance due on your LOC.
You Have to pay down principal on your 1st mortgage, not make advance payments.
It absolutely makes sense to pay a higher rate loan with a lower rate loan, but make principal payments, not advance payments.
A simple spreadsheet will so demonstrate.
Bill V.
Bill, please reread my 183. The mortgage I have is not a standard one. It was made as a “fixed home equity loan” and calculates interest as I described. When I first got it, I made three payments. The day the third one was actually due, the balance was less than the amortization table suggested, matching my other calculations based on early payment. Even making the regular payments a few days early lowered the balance, granted by only a few dollars. If I pay 1 year ahead and do nothing but pay the LOC back, I will gain 1/2% * the one year’s worth of payments * 1/2 (as the average extra payment is 1/2, not the full year). My intent is to pay the LOC down in less than 6 months, make a judgement on rates, and extend the LOC again. At this moment, I have 10 years left, and would look to bring it down to 7. To do that at 5.24%, means about 33% higher payment per month. Mixing in the LOC should help by a couple months.
JOE
Hi Joe
As you can tell, I had to make some assumptions about your loan terms for my response. Normally a heloc does not provide for amortization, but only requires I.O. payments and has a balloon payment date. Your loan is apparently amortized. Please tell us following:
What are the required payments on the 1st.
Were you planning to make 12 payments on the 1st up front from your 2nd loc?
how much and at what times were you planning to make payments on the 2nd loc?
I believe that your 1st rate is 5.24% and your 2nd rate is 4.74% currently.
No problem if that is more info than you wish to provide.
Thanks,
Bill V
I’ve been doing some research on MMA for the past few days and now believe it to be a SCAM. It’s basically a $3500 budget/discipline tool. You can beat MMA results by doing it yourself.
In their example on the United First website video, they say:
A $200,000 loan @ 6% for 360 months
can be paid off in 10.417 years using this system. This assumes $5000 in income, $4000 expenses, leaving $1000 for discretionary (which basically all gets put toward principal with this system).
If you use any prepayment calculator on the internet and do the following plan without MMA:
* Lump sum payment towards principal of $3500 in month one that you saved by not buying crappy MMA software
* Pay extra $1000 of your discretionary income each month for the life of the loan. This is basically what MMA is doing with smoke and mirrors.
It gets paid off in 9.9 years!!! Try it and see for yourself. Here’s the calculator I used:
http://www.decisionaide.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp
Mark,
Your point is well taken. See my comments #157 & #170. Here is a quote directly from an MMA add on a web page called http://www.payitfaster.com
“With the Money Merge Account system you could have your home paid off in as little as 1/2 to 1/3 the time, with NO increase in your current monthly mortgage payment and with NO refinancing of your existing mortgage”
Can you tell from that language that a person is required to pay all of his discretionary income each month toward his mortgage, in addition to his current monthly payment? Read it again. It says “NO increase in your current monthly mortgage payment”.
I have no problem with paying additional money toward your mortgage, but I do object to the outright deception MMA uses to convince people to purchase software to do what they can do for Free. And that is:
Enter net monthly income Here __________
subtract all monthly expenses __________
==========================================
Pay the difference to your Mortgage _________
Bill V
Bill -
186 - I appreciate the offer, but I did the math myself, I can save the sum of: A) The interest difference (1/2% right now) times the average HELOC balance sent over. If I send $50,000, it’s $250 times about 50% as I pay it back, so maybe $125 in savings. B) The extra interest by letting my monthly average checking balance get closer to 0 vs the $10K or so I run. That’s about $500/yr. As you observed, the real benefit would be some extra money going to the loans. The kicker from using the MMA approach is minimal.
188 - Exactly what I posted on another site, almost word for word. If they would be more honest, and not make such claims, they’d not come off as snake oil salesmen. With no change in ‘lifestyle’ I can capture that $500, but not a dime more. And if I weren’t so lax, it would be in a money market account earning 3% even now, and that savings drops to $200. I can save more by grabbing a zero interest credit card offer. Got one today in fact. $30K zero interest for one year. That’ll save me $1500.
JOE
Hi Joe,
I’m sure we’re probably on the same page. I’m in the mortgage business as well as a software developer. In the mortgage world, more often than not, making payments a year in advance allows the bank to use your money free of charge and costs you any interest you could have earned by just keeping your money and making payments when due. That is apparently not what you are doing. From your prior posts, I’m sure you can accurately model the different cash flows and determine your savings. Of course, any time one can replace one loan with an equal loan at a lesser rate, one will so benefit.
A waitress I know is excited about selling MMA software and is interested in making money and helping people. She has a very limited knowledge about cash flow, but believes that people cannot accomplish debt reduction without this very sophisticated software which saves hundreds of thousands of dollars for only $3,500.00. I cannot fault that waitress for her efforts, but I don’t particulary care for the “financial planner with years of experience” who knows better.
A prior commenter said one should not diminish himself by playing the “be honest” card. Could it also be said that one should not diminish himself by being dishonest? I believe that the math is clear should one choose to show it.
Bill V.
Ok, so I’m back from my trip and thought I would catch up on some blog/forum reading. I was hoping to see Bill V’s answer to my post # 160 question #3 in regards to his comment he made in #158 of
“After reviewing the comparison above, why would anyone want such a patent-pending formula. All a person needs to do is pay their discretionary income down on their mortgage, the same as they do with MMA.”
in which he used incorrect numbers to create a flawed example. I can see that we still don’t have the answer. As soon as Bill posts when the client will be debt free after they bought the car, refrigerator and went on their vacation, I’ll put my results up, which were easily generated by entering the information into the software with the algorithm that Bill claims doesn’t work or isn’t worth the money.
Travis Mitchell
Debt Free Project
JimmyDaGeek,
I’m interested in asking you something about the HELOC shuffle since I like your breakdown of it (and I completely understand what you are saying). I’m still a little intrigued by it though.
Let’s assume my monthly income and expenses are both $5000. Of my $5000 of expenses, $3500 are pretty much fixed (bills) and I can control when I can pay them throughout the month. The other $1500 is money that I spend on food etc. and is deducted as the month goes on.
Now let’s say I now take a 1-time withdrawal from my HELOC for $5000 and pay down my mortgage. If I paid my fixed bills at the end of their due dates to create a float, couldn’t I reasonably keep my average monthly HELOC balance at $2000 month after month?
Now, let’s say that I will not pay off the HELOC until my mortgage is paid off, but I will organize my finances so my monthly HELOC balance remains at $2000 each month. Nor will I prepay anything else to my mortgage.
If my Mortgage is $200,000 at 5.25% I will save approx. $19,000 interest over the life of the loan by making 1 prepayment of $5000 towrds the first payment. Now, if a run an interest only loan for 30 years for $2000 (the monthly balance of my HELOC) at 7% it will cost me approx. $3,000 in interest over the life of the loan.
So, can’t this work as a 1-time shot to save about $15,000? With no prepayments after the first one, doesn’t it just come down to how much interest I save on my mortgage over 30 years by making a 1-time payment vs. how much interest I pay on my HELOC balance over 30 years due to that 1-time payment? Wouldn’t this be equal to making a 1-time $3000 prepayment w/o having to have the actual cash?
Thanks. I could be missing something here - just curious. Personally I’m in no rush to prepay my mortgage. I’m in the camp of maxing out tax-deferred investments first.
Ken
Hi Travis
Per your Request.
My calculation says the mortgage will now take 12.28 years using the facts you gave me and the following assumptions so one can follow the math:
Client Has HELOC at 6.5% with 0 balance.
Refrig purchased begining of month 7 for $1,437.26.
Heloc used for purchase
Heloc paid in full in under 3 months with discretionary income diverted from 1st mtg to the HELOC.
Bought vacation on credit card month 11 for $3,716.24.
Paid off credit card with HELOC month 12 (no interest if paid in full in month).
Paid off HELOC with diverted discretionary income in just over 7 months.
Paid $539.59 Discretionary income toward the 1st Mortgage thru the 60th mortgage payment at which time the car was paid in full.
Discretionary income is now back to $1,000.00 applied to mortgage monthly and all debt is paid in 12.28 years.
Travis, The calculations are on a simple spreadsheet which I will gladly send to you on request as well as anyone else who wishes to see it.
Please put up your results as promised.
Thanks,
Bill V.
Ken,
It would be instructive if we could put an income - expense cash flow together for just a 2 month period. We could then easily do the math with and without the Heloc and compare to the penny. For Example:
March 1st get mortgage loan $200,000.
Heloc advance March 1 of $5,000.00 toward 1st mtg.
1st payment due Apr. 1 = $1,104.41
Assume no discretionary income.
List Bill amounts and dates paid during March and April
List Income amounts and when received during March and april.
List which accounts you are paying during those 2 months.
Lets look at the mortgage and heloc balance at the end of 2 months and see the difference.
Bill V.
#192 — Hi Ken,
Just read your proposal. Without checking your figures, your proposal seems exactly right to me. I’m sort of an ad hoc queen of money-rotating to your advantage. In our first two years (the only time for which I have “tight” figures), we cut nearly $70,000 pour interest off our loan by cycling $5000 in four chunks. (I may have previously stated “of which $50,000 was interest,” but I recently rechecked my printouts and the interest alone saved was well over $69K.)
I have compiled a stack of reviews of the MMA into a single 25-page report which you can get free here:
http://www.letyourmortgagemakeyourich.com/02/15/is-a-money-merge-account-a-good-way-to-pay-off-your-mortgage/
“pour” = “pure” as in : interest.
- Lin,
Thanks for the response. I’m afraid when it comes to cycling four “chunks” of $5000 through the HELOC, then I side with these other guys who say it’s just a different form of prepaying. Assuming no disposable income, how can you cycle your 2nd chunk w/o paying back your 1st chunk (which equals prepaying since the 1st chunk was a prepayment). Are you claiming there is a way to replicate what I described in post 192 as more than a 1-time deal?
- Bill,
Let’s assume the following:
March 1: $5,000 paid from Heloc to mortgage.
March 1: $5,000 income deposited against HELOC.
March 15: $1,200 mortgage payment from Heloc
March 31: $1,500 of monthly food/gas etc. expenses paid from Heloc to AMEX (assuming a cc will be used for these expenses)
March 31: $2,300 of utility and other bills paid from Heloc to vendors.
April 1: $5000 to Heloc again.
Repeat April like March.
So my HELOC balance would be at $0.00 for 15 days, $1,200 for 15 days, and $5,000 for 1 day. April 1 it goes back to $0.00.
I’m calculating an average monthly balance of only $741.93 ($1,200 X 15days + $5000 X 1day divided by 31 days).
I’d be getting $5,000 prepayment on the mortgage for a monthly HELOC of $741.93.
I could be way off base since I’m no expert about how loans work. This just seems to make sense. I’m just trying to figure out if it works theoretically.
Ken
Hi Ken,
Remember, we said no discretionary income, yet you apparently have $5000 on March 1st, after paying all bills in February to apply toward the Heloc. That is the logic error exposed when we look at cash flow.
Bill V
Bill,
The $5000 is a paycheck. Not discretionary.
Ken
Ken,
I guessed that, however, you are useing it to pay bills in the future, not the past, as it should be.
Think of this scenario. On march 1st, all of your bills are paid. You used your march 1st pay check to pay those bills. That check was for work done in February, right? No discretionary income remains. (you said so)
You get a mortgage loan on march 1st for 200,000. with your 1st payment due April 1st. (Interest on mortgages is payable in arrears, meaning that your April 1st payment covers interest for march.) If on March 1st you pay 5000 down on your 1st mortgage from the Heloc, you have no money (no discretionary income to pay the HELOC until April 1st. That’s why you used the HELOC to pay the 1st mortgage balance down by 5000 on march 1st. Remember, your 5000 income received on March 1st is compensation for February and goes to pay Februarys payments.
It is critical that cash flow is properly allocated to expect accurate results.
Bill
Ken,
Definition of Discretionary Income.
The amount of an individual’s income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of.
If on March 1st, all of your essentials as described above have already paid in full without having to use your March 1 paycheck, then the whole paycheck would be discretionay income by definition.
Bill V.
re #197
Hi Ken,
In our case, our monthly bills were less than our income. So after a few months of cycling everything through the HELOC, the H. was gradually repaid. Rinse and repeat.
The cycling kept the average daily balance low, so that over the two year period we paid only $208 interest on the H.
So, no, in your case where income and outgo are equal and you specify not repaying the H. till the mortgage is retired, you will save on your mortgage, but can’t do the lump sum transfer four times without raising your H. balance owed, the ADB and the interest due on the H. Also, often a HELOC has to be completely repaid withing 15 years–or five years after the draw period expires.
You can call it a prepayment if you like.
Yes, you’re absolutely right that it’s a way to save significantly without having the CASH on hand, because you’re transferring part of the paid for portion of your house to the unpaid for portion. That’s what all the folks who say “just pay extra” miss. In this method, you don’t have to HAVE extra. But if you do have a little extra you can do the technique several times as your extra repays the HELOC.
Did I cover all the points you asked about?
The entire process is explained in Let Your Mortgage Make You Rich–available from a website by the same name. The 11 qualifications of the right kind of HELOC, and exactly where to put how much money when.
Lin
Bill,
OK. Let’s make it more realistic. let’s say I get paid on March 15 and 31 and use this income to pay March bills.
March 15: $1200 mortgage payment from HELOC
March 15: $2500 from HELOC to mortgage.
March 15: $2500 paycheck to HELOC
March 31: $1,500 of monthly food/gas etc. expenses paid from Heloc to AMEX (assuming a cc will be used for these expenses)
March 31: $2,300 of utility and other bills for March paid from Heloc to vendors.
March 31: $2500 paycheck to Heloc.
March 31: $2500 from HELOC to mortgage.
Result is still a $5000 mortgage prepayment for March and an average Heloc balance of only $700 ($1200 X 16days + 2500 X 1day divided by 31).
Ken
Lin,
I’m on board with you that it is possible to keep the Heloc average balance ridiculously low for a one-time deal.
Once you start prepaying the 5K back then I feel you might as well just prepay directly to the mortgage. I guess maybe you get a little benefit from paying the $5000 all at once instead of $500/month for 10 months (or whatever it is) but I can’t imagine that saves too much. Is that where you claim to get the savings?
My monthly income is quite a bit more than my expense as well. I was just trying to throw out a hypothetical to see if someone with equal income/expenses could see a 1-time benefit.
Ken
Hi Ken,
$5000 added the first month, versus $500 added months 1-10 shows very little difference — $426 to be exact. This is the calculator I used: http://www.mtgprofessor.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp
You’ll note it’s on the Mortgage Professor’s site. He and I actually did some calculations and hypotheticals together. Without calculating every bill for every possible family situation, we used an average daily balance (ADB) in the HELOC of 50% of the amount of the draw.. Of course, that could be high or low in someone’s particular case, depending upon when they pay their bills.
Here are the advantages to using as HELOC, as I see them:
1) It exploits what would otherwise be seen as an ADB in your checking account, which for most people yields no income. For example, in the case of $5000/mo income, it’s likely your bank statement shows an ADB of $1800 or more–even though you claim to spend all but about $500 every month.
2) It’s liquid. If you pay $5000 income directly onto your mortgage principal, you can’t easily get it back. We move a couple thousand dollars back and forth whenever it’s advantageous to do so–even for only 3-4 days!
3) Because the HELOC is liquid, one can apply all savings accounts to the mortgage and other investments, without retaining access to several thousand dollars cash sitting at less than 5%. Car repair? Dental work? Draw on the HELOC, then pay it back. $2000 for 30 days at 7% costs $11-12, if not offset for a few days by inserting income.
In my manual, Let Your Mortgage Make You Rich, I show a scenario of a person making a one-time $4000 draw for her mortgage, and because her income was not great, it took her awhile to replenish the HELOC. It wouldn’t be as financially prudent for a person living on a tighter budget to embed every penny in early mortgage payoff. People in a situation like yours or mine can do this 2-3 times a year (ideal).
It comes down to what you believe about OPM–using Other People’s Money. Banks use ours all the time. What shouldn’t we smarten up and use theirs?
Exchanging expensive debt, a mortgage, for cheap debt, a HELOC just makes too much sense not to do it. Thousands of people are doing it. Presumably at least the 16,000 reps for the Money Merge Account! And the thousand or so who’ve bought my manual…and others following TJ Maars or the many others selling this technique for far more than the $97 I spell it out for.
Last month I blogged about the cost of your last house payment. You can read it here:
http://www.thegreatmortgagerevolt.com/01/11/why-you-should-pay-off-your-home-years-sooner/
In a conventional 30 year mortgage, you pay interest on that last house payment 360 times. Ends up being a lot of dough! That’s reason enough to pay it off early.
Lin
Lin,
Seems like a $5000 mortgage prepayment becomes illiquid no matter where it comes from? If I pay from a Heloc and need the cash back, I just borrow from the Heloc (as you pointed out). However, if a pay directly to the mortgage and want the cash back, I could still just borrow from my Heloc. The Heloc just becomes an emergency account.
My ADB in my checking and savings accounts usually seems to be between 3-7K. Yes, I like the idea of making that money work for me more often. However, I’m not sure I love the idea of borrowing from the Heloc everytime we travel or need to make a substantial purchase. The way I manage my finances, I’m pretty confident I could do this but it seems pretty dangerous for most people.
FYI - As of a few weeks ago I noticed my Heloc rate (5.15%) is now lower than my mortgage rate(5.25%).
Ken
Please note that your March 31st heloc disbursement was 3800, not 2500.
Also, for apples to apples comparison, since you use average heloc balance for March, you should use average prepay for march. Remember, no prepay for 15 days, then 2500 for 16days and 2500 for 1 day in March.
You should also note that your 1st mortgage balance as of April 1st is 5000 less but your Heloc balance is 5000 more. The Heloc has a higher rate which you will be required to pay and you have no discretionary income to pay it down. What now? You’ll have to borrow more from the Heloc to pay the extra interest. Carry out the scenario another month.
Your example is a very good one.
Bill V.
@Ken-192
Using the example you gave: $200,000 @ 5.25% for 30 years (360 months). Monthly take-home: $5000 and HELOC rate is 7%. Let’s assume that your average daily balance is $2000.
You will borrow $5000, not 2000, because your take-home is 5000 per month. The monthly interest will be about $2000*(.07/12)=11.67. If you just did the HELOC shuffle, you will pay about $4000 in HELOC interest and save about $18,000 in mortgage interest for a net savings of about $14,000. Your mortgage would be paid off in month 340 and the HELOC would be paid off about 4 months later.
There can be one hitch as most HELOCs seem to be designed to allow you to pull money at will for the first 10 years only. Your balance is then fixed and amortized.
Ken,
It does not make sense to use a HELOC for emergency money if you are not prepaying your mortgage. That is because you do not have the cash flow to repay the HELOC, unless, of course, you would otherwise borrow using a credit card and maintain a balance.
My response #193 shows how effective a heloc can be when used as an emergency money supply. It enabled the client to get free use of a credit card for a month and substitute a 6.5% loan for a 11.7% loan. The client paid off the the heloc in less than 8 mo. with his discretionary income. If you understand this concept, you have just saved $3,500. A qualified client can obtain a HELOC for nothing.
My response #207, if followed thru, will show that a heloc shuffle with a Higher rate than the 1st mortgage and no discretionary income, will not save you money, it will cost you money.
The math is simple. If you substitute higher isterest rate debt with lower rate debt, or accelerate principal payments, you can pay your debt off faster.
@Bill # 174, #176,& #190 and @Joe #177
Bill said:
“Isn’t it time that you were honest with the readers of this board and every one else you sell the program to?”
I replied:
“Why is it that every time a position is clearly defended on these boards, the naysayers always switch to “be honest” or “quit lying”. I’ve tried to articulate my company’s position with integrity and believe that I have done a pretty good job of showing that the Money Merge Account program from UFirst is a reasonable way to be successful in paying off a mortgage. Don’t diminish yourself by playing the “be honest” card.”
I didn’t mean that as a personal attack and I apologize if it came across that way. What I probably should have said is “Don’t diminish your argument by playing the “be honest” card. This goes back to my old high school debate days where a person or team was docked points by using a weak argument such as “be honest” without showing factual data as to how the person was not being honest.
Anyway, please accept my apology. My focus was at your argument and not at you.
Travis Mitchell
Debt Free Project
@Bill #176
“Always, only half of the numbers are out there. Where are the corresponding heloc numbers. Sorry you think that honesty diminishes anyone. Once again, show us the numbers.”
Bill, you were kidding right? You did watch the video didn’t you? Here’s the link again in case you didn’t. http://www.u1stfinancial.net/dfp
At the bottom of the page it says “Money Merge Account Overview”.
It shows an entire year of ALOC activity, mortgage activity and interest. Here it is in black and white.
# Beginning Balance on 1st Position Mortgage was $200,000.00
# Ending Balance on 1st Position Mortgage is $176,319.65 at the end of the first year.
# Ending Balance on LOC is $9,167.30 at the end of the first year.
# Total Interest Paid on LOC for the first year was $865.10.
# Total Future Interest that can never be charged on the 1st position mortgage is $77,524.00
# Months remaining on 1st Position Mortgage at the end of the first year is 267 (total # of payments are 279)
=========================================
—————–Compare—————–
=========================================
If we were to compare that with a client who was just sending their $1000.00 of discretionary income toward the 1st position, we would find the following:
* Beginning Balance on 1st Position Mortgage was $200,000
* Total of additional principle payments made to the 1st position mortgage was $12,000.00
* Ending Balance on 1st Position Mortgage is $185,208.41 at the end of the first year.
* Total Future Interest that can never be charged on the 1st position mortgage is $49,552.64
* Months remaining on 1st Position Mortgage at the end of the first year is 297 (total # of payments is 309).
As you can see, the Money Merge Account client is 30 months ahead and has already canceled $27,106.26 more in future interest as a result of being on the Money Merge Account Program.
$77,524.00 - $865.10 - $49,552.64=$27,106.26
Travis Mitchell
Debt Free Project
@Bill, #193
I promised I would post the MMA numbers. Based on the demo software that UFirst let’s us use for client presentation purposes, here’s how the MMA performed. Drum roll please…………………………………………………………………………………………………………………………………………………………………………………….
Crash (sound effect for illustration purposes only)
The Money Merge Account system pays off in 12.083 years and beats the “add all discretionary method” by a worst case scenario of 2.36 months. The 2.36 months translates into $8698.00 because the scenario I ran also included the client’s purchase of the Money Merge Account program of $3500 which Bill’s did not (2.36 months *$2199.10 in mortgage payments = $5189.88 3500.00 software cost= $8698.00). Because of my agent agreement, I cannot post the math here, but I have posted it on the official UFirst Forum with Bill’s #193 post so that the thread can continue. This way it can go through the appropriate approval channels and I won’t jeopardize my status within the company. You can view the math (the 3 months that my demo software will let me show) at http://ufirstforum.com/thewholetruth/?p=6 post #93 and #94.
The only things that I did different were:
1. Followed the software prompts which Bill of course didn’t have.
2. Used the ALOC as my primary checking/savings account which Bill did not.
3. Purchased the car through my ALOC at 6.5% interest instead of buying it through the auto dealership @ 4% for 5 years @ 461.60/mo. (I made that decision by modeling the two scenarios in the software and the ALOC purchase saved more than the lower rate dealer finance option).
4. I used my Credit Card for the Fridge instead of taking that money directly from the ALOC which gave me a month use of the money for free (which Bill could have also done but didn’t for some reason).
Other than that, everything else was the same.
So, there are the results directly from the software (although I had to manually calculate HELOC interest rate because I didn’t have a monthly statement to balance against.)
Bill, I would be happy to take you through the process real time so that you can verify everything if you like. Just shoot me an email and let me know. We can do a web meeting if you like.
travis.mitchell@debtfreeproject.com
Travis Mitchell
Debt Free Project
Thanks & Kudos JimB
Here’s a short excerpt:
“There are no secrets about how loan amortization works…although there is much misunderstanding.
…
IMO the biggest piece of misinformation in both schemes is that that you can pay off your home faster without changing your spending habits. Actually, if you don’t have any discretionary income left at the end of the month to apply to pay down the first mortgage, you won’t save any time or interest. In fact, you’ll be in the hole because you increased your debt load and paid a higher rate of interest on the average balance in the HELOC.
In order to pay off any mortgage in less time, you must pay all of the principal plus all of the interest that accrues on the unpaid balance every month of that time. Even if the UFF money merge account HELOC were 0% interest, in order to pay off your mortgage early you’d still have to pay all of the principal plus all the monthly interest on the unpaid balance within the new time period.
If you do have the hundreds extra in your budget to pay on the mortgage every month, that will be a change in your spending habits. And if you do have a lot of spare money to put on the mortgage, you will still save a lot more money and time by keeping your existing lower fixed rate mortgage and paying all the money as principal prepayments on it yourself.
…
The bottom line is that in every case, if you truly have spare money to pay on the principal, you will save more by paying all your money on your own mortgage…and avoiding their schemes altogether. “
#214 — Hi Ron…
I’m not sure you’re right about that.
Leaving alone the implausibility that a person with not a single dollar of discretionary income would DESIRE to pay off their house early, here’s what the numbers show. I drew today’s rates as posted on Bankrate.com –assuming they show best rates for good credit people, or at least that the rates they show are equivalent to one another.
Today’s 30 yr fixed is 6.01%. I chose a $100,000 loan. Today’s SMALL HELOC rate (rates are lower on a higher amount, I chose the lowest they offered, $30,000) is 5.77%.
Assuming $1000 from the HELOC applied in month 6, one time only, and assuming a 30 year payoff by gifts of the virgin Mary (A. lenders don’t allow 30 year payoffs on HELOCs in the US, and B. how could the homebuyers ever pay it back if their situation doesn’t improve?), for a 29.5 year HELOC, if interest-only–which makes the numbers I’m about to show you the highest possible because principal never goes down…
…(drum roll) they will pay $4.48 per dollar in interest. A total of $4484.99 over the 30 years.
However, their savings during the same time frame, from a mere $1000 HELOC cash infusion to the mortgage in month six, is $4737.09 - $252.10 lower.
Now, realistically, if they’re using the money-cycling technique I teach in Let your Mortgage Make You Rich, we could assume an average daily HELOC balance of 50%, which would add $2242.50 to the family’s savings.
The MMA is no more of a “scheme” than is the ‘schematic’ of the wiring in your car. My beef with it is it’s expensive, and they enshroud it with such mystery that people feel like they couldn’t do this by themselves.
I’ve taught about 800 people to do it by themselves. I know that isn’t a lot compared to their 16,000 sales reps earning $1000 a pop! But it’s a lot for one person to do.
Fortunately, fewer than 10% call me for help, because the manual (eBook or spiral bound; there’s a choice) is so easy to follow. There are pictures, comparisons, payment paths.
If I’d known about UFF prior to writing this, I might have become a rep for them. But on the other hand, I really enjoy helping people without sticking them for salary for a rocket scientist!
I sell more books when I participate in forums where the folks aren’t as smart as you are. You all actually know how to do math–even when I occasionally disagree with your assumptions.
Travis
I’ve enjoyed being able to participate in the discussions with you and the rest of the participants here. What I really would have enjoyed seeing is an actual, complete cash flow from the beginning for any period of time. I now realize that you are not permitted to show that because of an agency relationship.
In any event, I believe that people who read this series of posts will leave with a better understanding of how to accelerate the payment of debt and hopefully will improve their financial condition as a result.
Bill V.
Bill,
The feeling is mutual. I love a great debate and hope that when people leave this forum they have a better understanding of their options.
I believe we are all on the same page in that we need to increase financial understanding in this country. At my company we work with the plague of debt every day. It’s destruction is wide and runs deep into the fabric of our society.
At the DFP, our motto is “Our interest is your interest”. If we can show people how to pay less in interest, budget, and control their finances, then I believe we will be a successful long term venture. By the way, we are always looking for intelligent people to contribute to our newsletter, web properties, etc. If you are interested, drop me a note. I’m happy to promote people with integrity, especially if it increases the quality of our offerings.
Travis Mitchell
Debt Free Project
@Travis-212
@Bill
I am very glad that U1st posted that 12 month example. It shows how misleading numbers can be, no matter how correct they are.
First, this example does not even use “interest cancellation.”
Second, while you only pay $865.10 in interest to the HELOC for the first year, you also pay $11,045.75 in mortgage interest, for a total of $11,910.85 in interest. Compare this to the $11,597.63 you pay if you just send the same $1000 to the bank each month. Kind of funny how the overview misses that. Plus, the overview says you would pay a total interest of $71,005. If you did it yourself, you would pay $67,408.
Why? Because you can’t use a HELOC and ignore “interest cancellation” when the HELOC interest rate is above the mortgage rate.
@Jimmy,
Can you expand on how the example doesn’t use “interest cancellation”?
Also, I agree that you are paying more interest in year #1 to achieve the results. I believe that’s where a lot of confusion about this strategy comes in to play. Even though we paid more interest in year one, we are much further along on the amortization schedule and have in essence “leveraged” that additional interest paid.
Would it be fair to say that we traded the extra $313.12 in interest on the front end for the interest cancellation effect of over $27,000 on the back end in year 1?
Also, can you please email me your extrapolation of the calculations that show the additional $3500 in interest because of the HELOC over the life of the loan? I would be interested in seeing how you calculated that.
Travis
@Jimmy-208
Thanks for answering my question about the effect of a one-time Heloc Shuffle. Here’s what I’m thinking now.
I just purchased a new car for $15,000. I took out a car loan at 6% for 5 years. I also have 15K cash that I would like to put towards either the Car or my mortgage. If I pay off the car, I’d save about $2400 interest over 5 years.
However, if I pay 15K towards my new mortgage which is $200,000 @ 5.25%, I will save almost 50K in interest over the life of the mortgage. Doesn’t it make sense to pay the mortgage even though it’s a lower rate and let the car loan run it’s course since the loan amount is so low?
If so, isn’t there also some logic to the Heloc shuffle if I would take 15K from my Heloc to pay the mortgage (saving 50K) and then do a 5 year amortization on that loan? Even with a 10% HELOC rate my monthly interest payment would be $125 (assuming I paid nothing towards principal) equaling only $7500 total after 5 years.
Ken
P.S. I’m not on anyone’s side here - just trying to work this through in my mind. I actually already paid cash for the car but in hindsight thinking I could have saved more $ by prepaying my mortgage.
I am curious, how many people have used this system, decided to sell it and then sold it to someone else thus profiting in this way off the idea? I am not against this I am just curious if the ability to sell the solution to others was one of your deciding factors.
Travis,
Interest cancellation only works if you are paying less interest on the HELOC balance than if you left that money in the mortgage. Using the MMA example of $5000 take-home salary and 6% mortgage interest. The maximum HELOC monthly interest paid should be $5000*.06/12=$25 because that is the most money you can cancel in any month. Given the 8.6% HELOC interest rate, the maximum HELOC average daily balance is $3488.
And, NO, you can’t say that you spent XYZ extra interest now to avoid paying it later, because if you stop using MMA at any time, you still have that outstanding HELOC balance that must be paid off. Add in the extra interest you pay to the HELOC until payoff. Now tell me what your total interest paid is and compare it to doing it yourself. YOU LOSE.
PS. I sent my spreadsheet to you.
Addendum to 220: I think I figured it out myself b/c I need to compare the savings I’ll achieve using a HELOC to the savings that the principal payments to the HELOC would have had if paid directly to my mortgage. Comes out pretty even (even if I wait until year 5 to pay the full 15k principal).
So even though I still kind of wish that I paid 15k towards my mortgage instead of paying off my car it really doesn’t matter. I can just make the auto loan pricipal payments directly to my mortgage for the next 5 year and achieve similar results.
Just thinking out loud. Thanks for listening.
Ken,
You can easily answer your own car-vs-mortgage payoff question by running the numbers on any loan amortization calculator and comparing the difference. The other question that must be answered is whether you would take the money you would spend on paying off the car and spend it on the mortgage for the same 5 years. If you don’t do that, you are not making the same comparison.
As for amortizing the HELOC loan, see #222. If you amortize the 15K HELOC loan, you also have to calculate what would your savings be if you apply the same payment to your mortgage. As long as your monthly HELOC interest is greater than the interest you would have paid on your mortgage, you are losing in the end when you add up all the interest paid.
220 - Ken - The car loan is not deductible. It costs you 6%. The mortgage likely costs you less than 4%. The length doesn’t realy come in to play, the last dollar you pay on the mortgage will cost you 30 year’s interest. That’s about $4.64 you can save for every dollar you pre-pay. Don’t let that kepp you from paying back 20% credit cards because the cards are on a shorter payback, and ‘only’ cost $2 per borrowed dollar (over 4 years or so).
To compare apples to apples you need to compare the after tax rate you pay.
JOE
Almost bought the $3500 program…then there are the $500 info sites…
As soon as I saw that the United Financial was MLM, All MLM’s are jokes except for a top few people….stay away.
I just don’t see how a (for example)$150,000 loan could be payed off in 5 to 7 years..You would have to pay approx $1758.00 per month at 0% interest.
Get real.
#83 Jimmy. Please send me the speadsheet as an attachment to iloveamour@yahoo.com. Thanks for all your hard work and good intention to help out. Also thanks to all the comments and exchanges (the good, bad & ugly) I am doing my research and learning a whole lot. After I see the spreadsheet. I will see if spending $3500 is worth it. I calculated it to be an expense of $9.72 per day, easily a doable expense. I am open to what would work and support me to have ease in managing multiple properties. I own 3 houses, 2 of which are rental properties. Just like one guy said, sure he can change his oil, but he goes and have someone do it for him. BY the way, can I set up automatic deductions of bill payments from that HELOC account?
@don-226
You are right to be skeptical. For a $150,000 30-year loan @ 6% to be paid off in 7 years (84 months), you would have to add an additional principal payment of at least $1300 per month to the required $900 per month payment.
@Iloveamour-227
Look for your spreadsheet. Re: mortgage payoff, if you have investment properties, why would you want to pay them off? Let your cashflow do that work for you. As long as you are able to raise your rent, you have the chance to earn an income, while your properties appreciate and your spare cash can be used for other investments.
Look, it’s easy to answer this debate that’s been going on on countless sites.
SIMULATE A SAMPLE PROBLEM.
I got kicked off the UFirst site because I showed, using an example problem, how little the agents know, how much they lie, and how bad the software really is. Heck, they wanted to refinance $44k in 0% debt to a 7% HELOC. It’s laughable.
If the software works so well, why will NOT ONE SINGLE AGENT show a complete, month by month payoff schedule of a sample problem using MMA versus just prepaying and using an average checking account?
Of course, the answer is that the software offers no monetary advantage whatsoever. And even without the $3500, an average bank account combined with monthly prepayment checks will outperform the UFF software.
It is just that simple. Agents, if I’m wrong, take my challenge. But I know you won’t.
The MMA in out of pocket expense using the HELOC is not $3500, but closer to $25. Quantum amounts of interest are saved on a fully amotized closed end loan, and principal is paid down faster using the banks money not yours. I am an Agent, and I am not lying. Sure you can pay down a mortgage yourself by making extra payments each month, but each one of those payments come out of your pocket.
Calvin is correct… it is irrefutable that these merge accounts are at best a complete waste of money! They are worthless crap!
Without the lies and deception… no one in their right mind who was told the honest truth in advance and understood even a little would ever pay a single penny for them!
It’s just another get rich quick type scheme to separate you from your money… Hide your wallet from the thieves and fools selling this crap!
It’s all smoke and mirrors… read the article!
http://www.theage.com.au/news/property/smoke-and-mirrors/2004/09/28/1096137225560.html
Lee,
Um, well, you may not be technically lying, but in real world terms, you are. ALL payments to your mortgage using MMA come directly from your pocket. Sure they *technically* come from the HELOC, but where do the HELOC payments come from? DIRECTLY FROM YOUR POCKET. It’s faster to prepay yourself with and avoid the $3500 fee. Throw in a decent savings account, and you can outperform MMA even without the $3500 fee.
Typical UFF lies and deception.
Again, if you care to compare a real world example in a public forum and try to prove me wrong, I’m game. But I know you won’t, just like all the other agents won’t, because you will lose, and you know it.
UFF = scam.
Just a little note…It is easy to condenm people when they are make great choices. If this is a “scam” or not accurate then I challenge you to:
1. Talk directley to the company
2. Actually look at your own person finances…Are you where you’d really like to be?
3. How much debt do you actually have?
4. What is your history for paying? Do you normally have debt or is it just your mortgage?
5. Why do the rich keep getting rich and you stay poor? (They get how to leverage their money)
6. Do you always listen to total strangers opinion or do you actually check into the actual source?
7. I am going to guess you also like to gossip???
Get the facts from the actual source (company) before you judge people who are actually making this work! Most people who don’t want to believe in this are probably don’t have good credit (much easier to bring people to their level), don’t have a mortgage, or just don’t have a brain!
We are laughing at you who don’t do this because I am going to have a HUGE retirement when you are still working!! Thank you so I can enjoy more time with my family and still laugh at you!!!
Fletch, YOU need to read your own quoted article a little more closely rather than offering the audience the very ’smoke and mirrors’ you claim to expose.
The Australian loans are variable rate loans in the FIRST position–not HELOCs in the 2nd position as with the MMA.
Most of my clients have a regular 1st mortgage: 40/30/20/15 yr fixed, int.only, NegAm, etc. I have never refi’d any of them–the MMA is so good it has worked well with all of them. (That is not to say a bunch of ’smoke and mirror’ folks haven’t sold a lot of lousy loans–know any of them, Fletch?). But I’m sure the time is coming when a client will need to refi to optimize the MMA.
There is a large difference between the MMA w/HELOC and the Aussie loans: the MMA uses the HELOC to pay off incremental chunks of the 1st mortgage in a controlled and secure environment and in low dollar amounts. The Aussies place their entire mortgage in what is essentially a massive HELOC—unlike UFF’s MMA.
Based on the nature of your discussion, you clearly have not looked into the MMA, have you? I sense that you parrot what you hear. Fletch, you need to get your facts straight before going off the way you did—and you might want to quite whining, get educated and staunch that bleeding credibility.
Now Lee, let’s deal with your equally poor description of the MMA, peppered as it was with epitaphs aimed at everything but hitting nothing.
Question: how much of your savings account would you throw at your 1st to pay it down in the same manner as the MMA? That’s right, you have no clue: spend it all and you have no safety net; or, using a HELOC, you go deeper into interest debt, thus offsetting your 1st mortgage pay down gains. Go too slow and you sub-optimize the pay off of your 1st mortgage. The MMA software optimizes the fastest path to zeroing out your 1st while controlling the amount of HELOC interest generated.
I first looked at UFF and the MMA to disprove it; now you see where I am. I too generated an Excel-based spreadsheet. But there was simply no comparison. I knew when I investigated it that it was created by people a lot smarter than me. Have you considered there are people in the world smarter than yourself?
The Bard clearly had you two in mind when he penned:
Life’s but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
I don’t expect we’ll hear anything about you two in the future—but there are plenty of satisfied clients touting the MMA.
A posting tip: don’t come across so vitriol filled and with such an elevated level of self-righteousness: a toxic mix that neither impresses nor convinces. I hope you both find happiness one day soon. Now stop whining and go and get educated on the MMA.
Steve
United First Financial Independent Agent
It is not proper to refer to MMA software as a Scam. Please note that MMA software is NOT a Scam. It works for those people who have more income than expense and enables them to use all that excess income to pay down their mortgage.
What makes it appear to be a Scam is the method in which it is sold.(read prior posts) Remember, you can accomplish the same effect as MMA software for free. I have no agency restrictions and will give you the method right now.
1) Net Monthly Income
2) Minus monthly Expense
3) Equals Discretionary Income
Apply Discretionary Income to mortgage balance.
Obtain a heloc with a 0 balance and only use it when expenses exceed income. If that happens, use future discretionary to pay toward heloc balance until it is 0. Then continue to use discretionary income to pay down mortgage balance.
If you understand this, you understand MMA and the knowledge is presented to you without cost or complex software.
post script - Please try to be nice to each other!
Bill V.
Great post, Bill. You’re absolutely right we can’t call it a scam. (I had fun writing a blog a few weeks back on all the reasons people ‘think’ it’s a scam! Fun!
Your scenario is good, too, of course. But you miss the point of exchanging high-interest debt for lower-interest debt. I’m not referring to the interest rates of 1st & 2nd mortgages, but also to how they’re computed–in arrears on a large outstanding balance, versus daily on a constantly adjusting much-smaller balance if one cycles income and expense through the account.
You also presume people have extra cash they can always (or almost always) expend permanently on their mortgages. Using a HELOC, as I’ve described in “Let Your Mortgage Make You Rich,” converts your equity into the bank’s cash into your cash and thereby your increased equity! (It’s almost a magic trick, yet easily explained.) The HELOC is liquid as long as it’s active, and therefore precludes the need for savings accounts, etc.
Does this make sense?
Lin Ennis
When I meet ONE SINGLE AGENT that represents this product for what it is, a glorified prepayment plan hidden in a HELOC game, then I will think not calling it a scam. I’ve conversed with over a hundred agents, not ONE has been honest or completely informed as to the absolute MINIMAL (read: zero) savings generated by the HELOC game versus prepayment coupled with an average savings account.
When the UFF takes down their boiler plate presentation off their website that is full of math errors, misleading statements, and outright lies, I will think about not calling this a scam.
I’m pretty confident I will be calling this product a scam for a long time.
“Using a HELOC, as I’ve described in “Let Your Mortgage Make You Rich,” converts your equity into the bank’s cash into your cash and thereby your increased equity! (It’s almost a magic trick, yet easily explained.) ”
You just made every accountant out there throw up.
Yes, a HELOC can generate cash for you, but at the expense of your equity. If you with draw $100 out of your HELOC and turn it into cash, you haven’t increased your equity, you’ve decresed it by exactly $100 since the HELOC is drawing upon your equity. The $100 cash isn’t equity, it’s cash. If you then use it to pay your mortgage, you increase the equity by $100 (the same equity you lowered by $100). The net change in equity is zero.
If you have a house worth $150k, and you have a $100k mortgage and A HELOC with a zero balance, you have $50k equity. If you withdraw $50k from the HELOC and turn it into cash, you now have zero equity in your house. Use that $50k cash to pay your mortgage, you again have $50k equity.
As for how the interest is computed between the two, yes there is a difference. The HELOC is a higher interest debt (99.999% of the time at least), but the time which you hold the debt lowers the interest paid (not the interest rate). The problem MMA proponents have is that when you can use income to “offset” the balance (ie, lower the average daily balance), that means you can INSTEAD put that money in a savings account and earn interest and come out ahead (way ahead when you factor the $3500 fee). One does not need a savings rate above the mortgage rate to outperform the MMA since the MMA saves so little (versus prepayment). The HELOC shuffle generates about $1 of savings a month. A savings account will generate about $1.25 of interest a month. (for typical family incomes/rates).
The math behind this is pretty simple, that’s why it’s so easy to show the MMA coming out behind. Agents don’t like this fact, but math is math, it’s not like math is going to change.
There are 2 ways to pay your loan faster:
1.) Increase payments
2.) Lower your rate.
reread #235
Please keep the following in mind. The concept of Paying your loans faster is simple. (see the 2 ways above). If someone explains it in a way that makes your head spin and wants to charge you for the information, seek advice elsewhere. Does it make sense to buy something without a clear understanding of how it works? Please speak to someone in your sphere of influence with some financial expertise before spending $3,500.00 for something you can do absolutely free.
Bill V
Bill,
You say “Does it make sense to buy something without a clear understanding of how it works?” I think in this case, a more appropriate question would be “Does it make sense to *SELL* something without a clear understanding of how it works?” I think for a good chunk of the agents out there, that’s a relevant question.
Calvn,
A waitress I know is excited about selling MMA software and is interested in making money and helping people. She has a very limited knowledge about cash flow, but believes that people cannot accomplish debt reduction without this very sophisticated software which saves hundreds of thousands of dollars for only $3,500.00. I cannot fault that waitress for her efforts, but I don’t particulary care for the “financial planner with years of experience” who uses his financial knowledge to improperly weigh the “Heloc shuffle advantage” over the paying of extra money from the clients sources.
Bill
Bill,
I think the majority of the blame lies squarely on the UFF. Anyone willing to pay the agent fee can peddle this crap. I’m not a huge fan of overbearing regulation, but we require licenses for all sorts of stuff (such as selling mortgages), but not this crap. A waitress with no financial education should never be able to sell this, and, frankly, a financial planner recommending this should be losing his planners license/accredidations/etc.
of course, none of this would be necessary if agents actually told the truth about the product, but then again, that would mean far fewer sales. if it didn’t mean less sales, why continually lie? the sole reason I know about this product is a close friend almost got conned into buying it. I explained to her the truth and the mechanics, and she was pissed, for good reason. the agents lied to her, and she would have bought it without knowing the truth. she sent them packing after a pretty quick talk with her explaining where the savings was really coming from.
AAAAaaaarggghh!! They found us. Leverage…. Other peoples Money… HELOC….
Please stop drinking your own kool-aid. There is only one way to figure your EQUITY.
HOUSE_VALUE-HOUSE_DEBT = EQUITY. It makes no difference whether your debt is in a first mortgage or second mortgage or HELOC. You can’t borrow money from your HELOC to pay down your mortgage and magically increase your equity. You simply moved your debt from one loan to another.
The moment you got a mortgage on your home, you were using Other People’s Money to leverage your down payment (or lack of it) to own that property. Using a HELOC does not leverage anything, it merely increases your house debt, dollar for dollar. Most HELOC’s are only liquid for the first 10 years, and then are amortized for a fixed period. The only “leverage” you get is paying $1 now to reduce your mortgage principal so you don’t pay $10 in interest later. Your discretionary income drives everything, NOT THE HELOC. Putting the money through the HELOC is a shell game that pays very little.
It’s unfortunate that all these satisfied MMA customers weren’t told they were allowed to pay off the mortgage on their own, without paying a $3500 fee.
I am still waiting for an MMA advocate to show me how U1st’s own overview shows that MMA is better than doing it yourself, especially since the overview doesn’t use interest cancellation and does not include the $3500 fee. My spreadsheet offer is always open.
#236 Lin Ennis,
With every financially modeled spreadsheet describing inane concepts articulately, it should be obvious to all MMA customers, in any regard, that, by paying an insignificantly small fee for software which provides for and, in fact, creates income, the client should be able to reduce his debt in 1/2 to 1/3 the time. (It’s almost a magic trick, but easily understood.)
Does that make sense?
If not, try paying more of your discretionary income toward your debt and/or lowering the interest rate on your existing debt. (put the insignificantly small fee you would have paid for the software in your own pocket.)
Thanks,
Bill V.
When I was researching United First and the Money Merge Account over a year ago, there was a lot of (and continues to be) negative and positive comments about the system all over the internet.
What I found very interesting is that several of the proponents, many of whom were financial professionals, were actual clients of the Money Merge Account. NONE of the critics had actually used the system.
My ultimate decision was to move forward as a client. At the time, I had 26 1/2 years to pay on my first mortgage and had a sizeable HELOC. According to my Money Merge Account analysis, I would have my mortgage and HELOC paid off in 12.4, or I would get my $3500 back.
Having been a client for just over one year, I have paid down my HELOC over $14,000 and am currently on track to being mortgage free in 11.5 years.
Does it work. Yes. Could I do it on my own and accomplish the same results? No. The best case scenario I could accomplish on my own was within about 2 years. Two years of mortgage and HELOC payments amounted to over $60,000.
If you are truly looking for accurate information on this, or any other financial tool or vehicle, get your information from people who are actual users of the program, product or service. They can provide actual, credible information. Anyone who hasn’t used or participated in the program should hold no credibility.
If I’m deciding whether or not to purchase a Chevy Impala, I’m going to get comments from other Impala owners.
Getting opinions from people who never owned an Impala wouldn’t do me much good.
Further, here is the most recent information direct from the Better Business Bureau website regarding United First Financial:
The BBB processed a total of 2 complaints about this company in the last 36 months, our standard reporting period.Of the total of 2 complaints closed in 36 months, 2 were closed in the last year.
Sales Practice Issues BBB Definition:
Sales Practice Issues - Claims of alleged sales presentations made in person or by telephone that contain misrepresentations of the product or service, high pressure sales practices, failure to disclose key conditions of the offer, and verbal representations not consistent with written contractual terms or agreements.
Resolved BBB Definition:
Resolved - The company resolved the complaint issues.
1 - Company resolved BBB Definition:
resolved - The company resolved the complaint issues.
the complaint issues. The consumer acknowledged acceptance to the BBB.
Refund or Exchange Issues BBB Definition:
Refund or Exchange Issues - Claim of alleged failure to honor company policy or verbal commitment to provide refunds, exchanges, or credit for products or services.
Resolved BBB Definition:
Resolved - The company resolved the complaint issues.
1 - Company resolved BBB Definition:
resolved - The company resolved the complaint issues.
the complaint issues. The consumer acknowledged acceptance to the BBB.
For any company with tens of thousands of clients, having only 2 complaints, both of which were acknowledged by the consumers as being resolved by the company, I would consider that pretty strong.
One last item: I have been a financial educator and licensed mortgage lender for over 18 years. Since I became a customer of the Money Merge Account, I also became an agent, integrating the system into my financial business. In less than one year, we have approximately 50 families on the program, with zero complaints (other than, “Why didn’t we know about this sooner!)
Get your information from people who have the fruit on the tree. Remember, no statue or monument has ever been erected to a coward or a critic.
Hi Mike,
A thoughtful and eloquent post.
I differ with you on only one point: ’some’ people can accomplish similar results (within $2000 *either way*) following similar principles on their own.
I do not call the MMA a scam, nor have I been a customer. But I have compared my “shooting from the hip” program with two sales reps who said on their mortgages my formula came out almost identical.
My formula was based on educated guesswork and my own risk-comfort and implemented at least a year before I started hearing about UFF (probably only 6 mos before their MMA product hit the streets).
I wish you and other MMA agents much success, because improving financial literacy is a challenge big enough for lots of teachers.
Besides, some folks would rather buy “Let Your Mortgage Make You Rich!” for $97 than to spend the $3500 for the successes you speak of…those successes being similar.
Oh, one more thing. In less than two years, I have nearly 1000 families on the Let Your Mortgage Make You Rich program. I have had three or four complaints (I supposed a few people have been electrocuted by talking on the phone in the bathtub, too, so it may not be a fault in my educational material).
So while you edify the characteristics of what you sell, please be mindful of the statement on the UFF website: “Q: Can I do this concept on my own? A: Absolutely. The simple answer is that anyone can attempt to do something similar on their own.”
Best regards for a delightful weekend!
Lin
Many of the postings I have read herein include very derisive comments toward people like me… an agent for UFirst and the MMA. I made a comment a few days ago, but it went over like a lead balloon. I do not lie, I have experience, I am reasonably intelligent if I do say so myself, and have experience with the product. Indeed, a waitress could sell this, too. You don’t have to have an MBA from Harvard to help people.
I am a high school teacher, and a financial planner when not in school. I graduated from Pepperdine University with a Business Administration/Marketing degree.
The program is NOT a scam. It works. To pay $3500 is peanuts to what you save, plus you pay much less than $3500 when running it through the HELOC. To understand that you have to immerse yourself to understand the rapid interest paydown which is probably the hardest thing to grasp.
The online Money Merge Account system makes a connection between your bank account, the HELOC, and your primary mortgage. Each time you deposit income into your account, it registers as a decrease to your HELOC balance which allows funds to pay down principal on the mortgage. By decreasing your mortgage balance, you now lower the balance on which interest accrues. By decreasing the balance on which interest accrues, you increase the portion of your monthly payment which is credited toward your principal pay down. The algorithms in the proprietary Money Merge Account system are systematically programmed to create the highest interest savings possible in the least amount of time.
I think the software is ingenious, and is worth the price.
It cannot be the be savior for all people. If your monthly expenses exceed your monthly income, it (or nothing else for that matter) will work.
To try to duplicate a spreadsheet is almost impossible because the numbers can change daily depending on payments, income, and timeliness.
You can’t duplicate this on your own by making extra payments per month out of your own pocket. However, were you to attempt to mimic the sequence using a HELOC and making your own similar payments, you would be able to effect similar results, however, I fear without the clever algorhythms built into the MMA program, you on your own would be only 50 or 60% as effective. It would work, but not as well.
Those out there who choose to be insulting and use objectional language demonstrates some kind of agenda or anger that is not necessary or warranted.
Lee,
You very well may not be lying, but the alternative is that you don’t understand the system AT ALL. Not only can the results be duplicated in a spreadsheet, they can be beat. Not because a spreadsheet is great, but because the system is not. 99.5% of the typical savings of an MMA approach comes from prepayment, NOT, I repeat NOT from the “magic algorithm.” And for the record, the magic algorithm isn’t even optimal.
It’s sad that a high school teach can’t figure this crap out. I know it may sound mean to people to see someone put a teacher down, but it just the truth. If my family members were peddling this crap in the manner this guy is, I would go after them too. The lies/misconceptions are outrageous! 50 to 60% as effective as prepayments? Are you kidding me?
Here’s your test, Mr Teacher.
Let’s run a sample problem. You with your software, me with my spreadsheet. We both show all the money movements and everyone can see the math.
Up for it, or do you really know that you are a liar? I know no other agent will accept our challenge, because they all know their system, with its $3500 price tag can’t even payoff a simple mortgage faster than a guy with a checkbook and a good bank account.
clever algorithm? please…clever lies!
I am still on the fence but leaning towards the naysayers. RE:248, I too have a problem with how UFF will not provide one example of how their software would play out one scenario from start to finish - all of the cash flows including various hypothetical life events which cause unforeseeable fluctuations in those cash flows. I’m suspicious that they won’t do it because they’d be exposed for how simple their calculations are. I am not super-intelligent when it comes to finance (I still can’t figure out how our government can just print new money and put it into circulation with nothing tangible to back it - point me somewhere if you can help me understand that) but it seems to me that there are probably some very simple repetitive calculations that the software does to determine optimal HELOC balance to keep a low enough interest rate to make it all work. Bill V - how can I get a copy of your spreadsheet? - storminfz2@juno.com
Has anyone here spent the $97 that Lin Ennis is charging for her .pdf file? I’m tempted to get some of my friends (or anyone - perhaps YOU) who also can’t figure this MMA thing out and buy it and see if she’s for real or if she’s just a manic greedy marketer. If it’s only worth the paper it’s printed on, then we won’t be out much (split 10 ways hopefully) and we can then let everyone on this forum know so she can pipe down. If it’s truly enlightening, then damn …. Lin for President !!
Do not give Lin a penny. Anyone claiming one can increase their equity by drawing from that equity has no clue what they are talking about (post 236). Accountants would literally lose their licenses making claims such as that.
Send your discretionary income to your mortgage. Get a no cost HELOC for emergencies and never touch it unless you absolutely have to. That’s if you want to pay your mortgage off ASAP.
Jeff,
The reason UFirst doesn’t provide a “full term” math scenario is quite simple: Everyone’s expenses and income is constantly changing (especially if you have kids!). The beauty of UFirst’s software is that every time I update my software with an expense or income, it automatically and immediately updates the entire calculation to show my how it affects the months and years to pay off my mortgage.
A “stagnant” 5-10 year break down of how the software works wouldn’t provide an accurate representation of real life.
When I work with a prospective family, we run a financial analysis to see if and how the program will work for them. We also run an amortization schedule comparing the results of applying their discretionary income direct into their mortgage. I also show them my actual MMA software.
Ultimately, our goal is to help families improve their financial literacy and build equity as quickly as possible. If they can accomplish this (guaranteed!) more efficiently with another method…..DO IT!!! We all only have one chance at life. Stop wasting it paying interest to banks and lenders.
Jeff, your side comment about the FED printing money out of thin air is a poignant and growing concern amongst Americans. The Fed which is not Federal, but a foreign owned private corporation, has absolute control over our money system. What is that? I saw Dr. Paul chew out Chairman Bernicke at a congressionsl hearing, and it was most entertaining.
There is a growing movement in this country to change what has been into a new paradigm, and to get the middle class off the hook with all the userous methodology that has held us under their thumb.
#251 Dear Calvin - This is why it’s cool I’m not an accountant.
You’re right. People should not give me a penny.
But if they want a copy of of Let Your Mortgage Make You Rich! they should be able to obtain it either as a download or in print.
There are some folks who like the basic concept of revolving equity, money cycling, whatever one wants to call it, who would prefer a step-by-step program that doesn’t cost $3500. To each his or her own.
Lin
Mike,
Jeff isn’t asking for a full money movement chart for a real life problem where expenses vary each and every month. He’s asking for one for when the expenses don’t change to make it simple. That’s the whole point, you crooks (ethically/morally, not legally) can’t even show for the simplest of examples that your software is worth a single dime, much less $3500. I think every prospective client has the right to say “put up or shut up.” The math is simple, that’s why you will never put up, because you can’t.
As for Lee, “There are some folks who like the basic concept of revolving equity, money cycling…” Yes, there are some folks like that. Those folks have been tricked into thinking there is really something too it. When compared to just prepaying on your own, there really is nothing to this. Even if you skew all the inputs to the MMA’s favor (pay at the beginning of the month instead of at the end and/or middle, expenses all on the last day of the month, etc), the MMA will still never come out ahead of using a good bank account and prepaying, especially with it’s $3500 price tag. Make the software free, and the typical user would still come out behind what they could easily do on their own with minimal thought.
I challenge each and every agent out there to simulate a sample problem compared to prepayments. Mike, I even have a spreadsheet setup that would generate random expense amounts, random raises/bonuses, etc. The MMA just NEVER, EVER wins. You can spin all you want, but it will never make the MMA more effective than it really is, which is nothing.
I know agents will NEVER take this challenge, because it will show their software to be worthless. The only single thing it does is make the UFF and it’s agents $3500 richer. Keep your hard earned money!
You know, Calvin may be a little rough on the MMA program but he is accrurate. There is absolutely no reason why a sample scenario cannot be set up and results shown using MMA. Mike Smela, you said “..If you are truly looking for accurate information on this, or any other financial tool or vehicle, get your information from people who are actual users of the program, product or service. They can provide actual, credible information.” Well then, as an actual user, please provide us with just one year of either actual or simulated cash flow so we can see your results. If they are better than what we can do with simple math, then MMA will have sold itself.
After 256 posts, not 1 mma seller or user has been willing to show the math. Mike, you can be the 1st.
Thanks,
Bill V.
#249 Jeff.
I sent you a spreadsheet under separate cover. Call with questions or comments or post them here.
Thanks,
Bill V
No agent wants to address the fact that Calvin continues to bring up, that 99.5% (sounds right to me) of the benefit of the program is from increased payments, not from the HELOC cycling.
At best, the HELOC saves you (average monthly checking balance)*(mortgage interest rate) and that’s erring on the high side. It assumes that checking accounts earn no interest.
Why don’t the agent focus on their advertising, that “no change in lifestyle is required”. How does that compare with the reality of sending every extra cent to your mortgage every month?
Calvin - I agree about regulation, but the important thing here is that you are not buying anything but software. So the banking regulators aren’t involved at all.
JOE
By the way - I read excerpts from Lin’s book, (through the magic of Amazon’s preview feature), and have no issue with it. It explains various methods of prepaying and is a decent primer on mortgages. You have to realize, most people are pretty clueless on this topic, so when we say ‘do it yourself’, it’s not like everyone can even understand a spreadsheet. Her book costs less than 30 minutes of a financial planner’s time, and less than 3% the costs of this software.
JOE
Joe, you make a good point. Lin’s Book may be very good, just as the MMA software is. The problem is not the software or the book, but rather, the reason for the benefits of both as told thru either Lin or the MMA sales people. The disproportionate weight given to the heloc debt/income swap versus the payment of discretionary income to debt as the reason for accererated debt reduction is what causes the deception. I have shown in prior posts how simple debt reduction is more effective than the MMA example posted by MMA web pages. I have just requested an actual or sample cash flow for one year from Mike or anyone else so we can put this issue to rest.
Thanks,
Bill V.
@Lee-247
“The program … works. To pay $3500 is peanuts to what you save, plus you pay much less than $3500 when running it through the HELOC. To understand that you have to immerse yourself to the understand rapid interest paydown …”
If you want your statement to make any sense, then compare the money you save by just paying ahead with your discretionary income vs buying MMA software and you realize you lose $3500 using MMA software. How can paying $3500 through a loan with interest cost you less money than your original amount? Apparently you don’t understand rapid interest paydown beyond the pablum that MMA feeds you.
Each dollar you borrow from your HELOC that is not paid off by the end of the month incurs the full interest for that month. MMA software has you borrowing MUCH MORE MONEY than you can pay off in a month, making you pay MORE, not less, INTEREST each month. You are easily fooled into thinking that you are saving so much money on your primary mortgage because of the large sums applied to it by borrowing on the HELOC. Your discretionary income pays down the HELOC, not your parked money.
It’s a cop-out to keep saying that because each month changes, you can’t make comparisons between MMA and do-it-yourself.
Anyone should be able to give us the following info:
Tell us the 1st Mtg Bal. and Heloc Bal. at the begining of the cash flow period below
At the end of each month, regardless of whose system they use, our client can determine:
1.) total amounts of deposits (income)
2.) total checks written (expenses)
3.) Payoff amount for each loan.
With this information, we can show anyone, at the end of each month, which system (mma or anyone elses) is better for the client.
Come on Mike or Travis or anyone selling or using the MMA system, please show us the numbers.
Thanks,
Bill V.
Bill - If you have a moment, I’d like to see your spreadsheet as well. Is it more than just a 180/360 month amortization table? I am tinkering to create a sheet that has an easy way to enter extra (random) payments.
I am at comcast.net
thanks in advance.
JoeTaxpayer
Joe,
How do I attach the spreadsheet?
Thanks,
Bill V
my email address is joetaxpayer at comcast.net
thanks, Bill
Bill V.
As an agent for FEG (www.fegcorp.com) we can write mortgages, but most have converted to MMA as many people are upside down and cannot refi.
The examples used typically are of a family with a $200,000 mortage (very low for here in L.A.) with a 6% loan. They have a monthly payment of $1199. Let us suppose their monthly expenses (mortgage payment, car payment, gas, lights, food, etc) were $4000 per month and their monthly income was $5000 per month. How would you illustrate to a client your spreadsheet using these as guilelines?
I will put together a simple scenario for 6 months if you can first show me what yours would look like that I can compare.
Lee Zebold
Los Angeles
Lee,
I will be happy to. The math is easy based on your assumptions. The formatting is more difficult.
No=Beg Bal===Interest===Prin====Extra Pmt===Ending Bal
1 200,000.00==1,000.00=($199.10)=($1,000.00)=198,800.90
2 198,800.90===994.00=($205.10)==($1,000.00)=197,595.80
3 197,595.80===987.98=($211.12)==($1,000.00)=196,384.68
4 196,384.68===981.92=($217.18)==($1,000.00)=195,167.50
5 195,167.50===975.84=($223.26)==($1,000.00)=193,944.23
6 193,944.23===969.72=($229.38)==($1,000.00)=192,714.85
I will be very interested to see your comparison.
Thanks,
Bill V
Wow, you are quick, Bill. I have a mountain of work to do here, but will take some extra time to construct a scenario. You see, we do not possess a spreadsheet software ability per se to run numbers as the MMA is open ended. You can make payments and deposits anytime of the week, and the algorhythims do their magic little figureing where the client knows daily how long it will take to pay off their mortgage loan completely (usually around 8 to 12 years) (and by the way when they throw in the car payment, credit card payments, etc., they get paid down quicker, too)
Your spreadsheet deals only with the mortgage. But as I read it, in 6 months, in addition to the standard monthly payment in my setting of $1199, you would have them pay $1000 more, or an extra $6000…correct???
I am off to church but will put together my illustration when I return. I caanot duplicate your spreadsheet. It will include other expenses in addition to mortgage, but you will be able to see a simple version of what happens with the MMA.
Lee
But a spreadsheet can do anything the algorithm does. It just needs to be setup correctly. An algorithm is just math and logic put together in a computer program. A spreadsheet is just math and logic thrown together in a computer program, with a particular user interface.
anyone saying an algorithm is across the board better than a spreadsheet can, for the most part, be dismissed as unaware of what’s going on.
the MMA software has a fixed amount of ability set by it’s archeitects while a spreadsheet is pretty much limited by it’s author. There are many out there that can do far more with a single spreadsheet than the MMA users could ever hope to do.
People selling this crap either don’t understand how worthless it is or know it and don’t care. Is that who you want to be giving your hard earned money to?
If the MMA is so powerful, why can’t one single agent use it demonstrate it beating a simple prepayment approach? Simple. Because it can’t.
Lee,
Yes, My spread sheet shows that the client pays $1,000.00 more per month toward the mortgage.
As you can see, my numbers are the ones you proposed. All expenses, including the required mortgage payments are $4,000.00 per month. Correct???
You are the first MMA agent who has expressed a willingness to do an apples to apples comparison of MMA to a simple spread sheet. Congratulations!! If you truly compare numbers using the same income and expenses as you described, and show both the first mortgage balance and your HELOC balance after 6 months, the readers of this group will be forever gratetful.
The summary of both scenarios should show:
1) IN 6 months client spent $30,000. for expenses and debt reduction
2) In 6 months Total expenses before extra debt reduction was $24,000.
3) After 6 months, Total mortgage balance (1st & HELOC)
please remember to include the software costs in your scenario.
Thanks again,
Bill V
If you look at MMA’s own overview, they use the identical first mortgage, income and expense numbers, so there is nothing new about that. They also assume their HELOC interest rate is 8.6%. At the end of six months, they have a mortgage balance of $183,691.68 and a HELOC balance of $9,196.98. However, they don’t include their $3500 fee and they don’t use interest cancellation. lee’s example should be instructive.
Jimmy
Using your numbers, the total debt due after 6 months is $192,888.66. (higher than my balance by $173.81) It makes sense that their balance would be higher because the HELOC interest rate is higher. If that’s the case, If you pay $3,500. for the software, you would be $3,673.81 worse off buying their software than paying down your discretionary income with no software.
Bill V
Lee - I am waiting to see your reply as well. I wonder how your sophisticated algorithms will create any savings beyond Bill’s numbers.
But for me, the larger issue is this - is it realistic to use these numbers as an example? Do people netting $5,000/mo actually have 20% or $1,000 available to pay toward mortgage principal? Of course this amount will knock the mortgage down to just over 10 years, but I’d think just $100 extra (if that much) is where the average person finds himself. But I guess claiming to pull one’s mortgage in from 30 years to only 25 isn’t as dramatic. And I’ll be quick to mention that $3500 thrown right at the mortgage will save nearly 15 months, or almost 1/4 of the time saved.
JOE
Joe
For Lee’s example, whether the numbers are realistic or not is not a factor in the comparison. What is important is that none of the assumptions change.
Bill V
One of the key factors in using the MMA is discipline. You have to periodically enter the numbers. I have little issue with those of you that say a spreadsheet is as effective as MMA, except, knowing human nature, people get lazy or careless over time, and get off the discipline. The MMA program makes you stay abreast of your situation everytime you post up a payment or make a deposit. You are continually reminded of your finances, when to pay, how much to pay to be obtimized, and you become enthusiastic about the process because you can see it happening.
Additionally, the nuances of the software will make a difference in the numbers calculations and the savings, but the more discretionary income you have the faster it will work. We all have been saying that all along.
I just closed a fellow teacher a couple months ago, and she will save over $300,000 on her 28 year loan, pay it down in about 13 years, while pulling out $200,000 from the HELOC to finance an IUL to give her tax free retirement income for the rest of her life. It is a win win situation. If she didn’t have the MMA she would never have been able to do this on her own - notice what I am saying - she wouldn’t. Maybe one of you genius financial people (I am not being sarcastic) would be able to come close, but not jane q. public.
I put up some numbers to roughly simulate a 6 month scenario using MMA although not pretending to be dead on accurate. Rather than put all the info here I made an extra page on my website. Here is the link
http://www.accurate-creditrepair.com/MMA-Sample.htm
IUL, Indexed Universal Life? Congratulations on the commissions you continue to extract from this person, you hit a home run.
JOE
Lee - I do appreciate your honesty.
Your site shows that after 6 months, your client owes $193,500 (compared to Bill’s $192,715) as well as the $3500 cost of program or a total of $197,000. So how do you justify the HELOC if its use seemed to reduce your client’s worth by $785?
You then suggest that “after several months of paying the $4000 month in expenses, they reduced spending habits by $500 per month, and then, some other debt is paid off in the process also, giving them an additional $300 discretionary money.” Well, I’m sure anything is possible, but that seems quite the stretch.
JOE
Joe
If she lives 20 years she will have made over $1.2 million, and her death benefit would be over $1 mil in addition. She is 58. It is a good investment. Why are you so negative?
The numbers I used are estimates - chances are after 6 months the mortgage balance that Bill used, $192,715, would be the more accurate number. And people do discover ways to reduce their spending and things do also get paid off leaving you more discretionaly income. That was an example to give an illustraion of what could happen.
Lee,
Thanks for your efforts in looking at actual numbers. Allow me to make a comment here. You said “If she didn’t have the MMA she would never have been able to do this on her own.”
My hope is that jane q. public can understand and do the following
1) Deposit her net Monthly Income to her checking acct.
2) Pay her monthly Expense from her checking account
3) pay any excess income toward her highest interest debt.
Obtain a heloc with a Zero balance and only use it when expenses exceed income. If that should happen, use future excess income to pay toward heloc balance until it is 0. Then continue to use excess income to pay down high interest debt.
Very honestly Lee, its not necessary to be a financial genius to understand this concept and apply the $3,500. toward debt instead of software, which is what we are really attempting to accomplish.
Thanks Again,
Bill V.
“If she didn’t have the MMA she would never have been able to do this on her own - notice what I am saying - she wouldn’t.”
This is one of the single biggest BS line a UFF sales-scum has ever claimed. The only thing needed to do to replicate and beat an MMA is a single check, once per month. The only math needed is simple subtraction. A teacher should be ashamed at the sheer ignorance, arrogance, or just plain dishonesty. A sixth grader could outperform an MMA.
Now as for you numbers….. your HELOC interest calculations are wrong. Any client you showed this to come come back and charge you with fraud. There is not one HELOC out there in the real world that charges interest on the closing balance. They either charge on the average daily balance (most common), or they compound interest daily. If you can show me one HELOC that works this way, I’ll give you a $1000, cause I will be making some serious cash off it. Here’s how:
I own my house, no mortgage. IF I could get a HELOC that charges interest like you have fraudulently stated, I could take out hundreds of thousands of dollars each 1st of the month, sock it in an interest bearing account, and then withdraw the funds and payoff the HELOC before the end of the month, avoiding all interest charges. This would net THOUSANDS of interest income from the bank. That’s why they don’t calculate interest that way.
Anyone relying on Lee’s numbers is being led far down the wrong path as to how this works in the real world. Income is not earned at the beginning of the month, expenses are distributed (though can be consolidated with CC’s), and interest just isn’t calculated that way.
Lee, you are a crook. I’m callin’ you out, scumbag.
Lee, I am negative because you put on quite the halo implying that you are doing good (for others). Most genius readers on this board will agree that with rare exceptions, life insurance should not be combined or substituted for, investments. I won’t continue in this vein for fear of derailing the levelheaded discourse Bill and you are in the midst of, but any time anyone has given me the full details of any whole life/ universal life/ variable annuity, it’s clear the benefits are to the seller, thus the strong sales of my “friends don’t sell friends variable annuities” bumper stickers and t-shirts. There are those rare times that one buys a VA (say on 8/25/87) and dies in November of that same year, but even that lucky soul would have been better off buying term, and lots of it.
Back to MMA - it does seem that as your numbers appear worse than Bill’s you continue to offer other scenarios, one’s which stray from the apples to apples comparison Bill has a always sought.
Now, Calvin, on the other hand seems to have insulted the intelligence of my third grader, whose math skills can easily pay off a mortgage early, but I like him and will let that slide. I know he was only trying to prove a point.
JOE
Calvin,
It’s not inconceivable that ending balances on Lee’s heloc example approximate the average balances on the Heloc, so the numbers are probably not far off. The numbers do, however, show clearly that, at the end of 6 months, the client was significantly worse off with MMA. His total payoff balances for his 1st and Heloc total 197,000. by his own numbers. That is $4,285 worse than my example.
Remember folks, borrowing money at a higher rate to pay off a lower rate doesn’t work. Paying $3,500. for software to do what common sense tells you to do doesn’t work either. Please don’t think that you have to understand complex formulas on a spread sheet or buy software you cannot understand in order to pay off your debt. Just pay any extra money you have toward your debt and lower your interest rate if you can.
Bill V
Bill, his numbers are the minimum balance. since they balance will not be the same everyday, the minimum balance, by definition, CANNOT be the average balance. Since, as many UFFers are quick to point out, the majority of homeowners are paid either weekly or bi-monthly, the average daily balance and the minimum balance will be significantly different.
it was very nice of you to give him the benefit of the doubt, but unfortunately, he has done nothing to deserve it. He is a liar and a thief, and nothing less.
And my apologies to your third grader. I’m sure s/he does have the math skills to outperform the MMA. And most likely, can outperform Lee’s ethics as well.
Calvin, Just a note to say that Lee was the 1st person on this entire post to attempt to give numbers. It amazes me how often and how many MMA people actually believe they are selling financial information rather than software. Once they really look at the numbers, they usually find something more productive to do. I think Lees numbers go a long way in showing readers here how to save money they were going to spend on software with complex algorithms and Pay down their Debt. (a good thing)
Bill V.
Actually, Bill, I have to disagree with you wholeheartedly. It has never been an issue to get UFF slimeballs to post numbers. It has ALWAYS been an issue to get them to post REAL numbers.
Basically, Lee is saying 1+1=4, and you are saying, “hey, at least he’s helping people understand addition.” Horsepucky. He’s actually doing the same typical lies the UFF has spewed all along. Anyone saying that you can change your interest rate from 30 days at your mortgage rate to 1 day at your HELOC rate is lying and muddying up the waters for those trying to understand what’s really going on. The numbers he’s posted are plastered all over the net. They are right out of the boilerplate presentation at the UFF. The one full of lies and math errors.
Have you ever heard the term “he knows enough to be dangerous”? It basically means someone knows enough about something to make people think he knows something, but not enough to actually do it correctly, so people trust their answer despite the gross inaccuracies. Many UFF zealots are a textbook example of someone who knows enough to be dangerous. Numbers like Lee posted might make someone think there’s significant savings to be had. But because his numbers are off by so much, some people stand to lose significant money.
So, Lee’s numbers do not, in fact, go a long way to helping people understand how to save money with complex algorithms. Quite the opposite in fact since there is no real savings to be had. The complex algorithm is a complex smoke and mirrors game.
Calvin, Even the numbers he posted prove to the readers that MMA cost a person $3,500. to get negative results.
When I said “I think Lees numbers go a long way in showing readers here how to save money they were going to spend on software with complex algorithms and Pay down their Debt. (a good thing)”, I meant that readers, after looking at Lee’s numbers, would save money by NOT purchasing MMA software, but rather, invest that $3,500 toward their own debt. I hope this clears up my comment.
Thanks,
Bill V.
Well, my point is that if the numbers worked the way Lee has put them on his website, I would have used an MMA approach to pay off my mortgage. I wouldn’t have used software, I just would have done it myself, because there would several thousand dollars to be saved, as well as several thousand dollars to be earned each year by withdrawing huge (hundreds of thousdands of dollats) and putting it in deposit accounts to earn interest for ~29 days before returning it to the HELOC. But HELOCs don’t work that way. It’s not like a credit card, there is no grace period. That’s why I just made extra monthly payments coupled with a high interest checking account.
You are basically saying the $3500 kills it, otherwise, one can save a lot. That is not completely true. While the $3500 does kill it, any savings to be had if the software were free are minute to negative, and can be outperformed by a simple interest checking account. And that doesn’t even discuss the added risk a user faces while following an MMA approach.
Calvin - Forget MMA for a second or two.
Do you feel that HELOC use can’t add any value to one’s situation? I’m not saying much, just a bit. As others have stated, 99% of any plan benefit is from the pre-paying, but I can calculate some savings (a few hundred $/yr) in extra money saved by HELOC use.
I continue to run into discussions on finance topics that focus on emotion, feelings and psychology. Toward that end I wonder if one takes a HELOC loan for exactly a month’s pay, if that alone doesn’t help to change how they view money. Instead of thinking they have money to burn during the month, they now have to borrow to get back any spending money. Does that not impact some people’s spending habits? (again, this post has nothing to do with MMA, per se, just the use of HELOC.)
As for me, my HELOC is now 4.74% vs a mortgage of 5.24%, so I’m juggling a bit to extract the most value out of this situation that I can.
JOE
Bill,
Do I think running income through a HELOC can generate some savings? Well, first, as compared to what? A 0% checking account? Yes, it can save typically ~$1 a month. But it depends on so many things. Pay date, bill due dates, HELOC rate, relative size of income/expenses, etc. But compared to a competitive interest bearing checking account, no, it does not save anything, it costs you even without the crazy $3500 fee.
For you, a HELOC charging less than your mortgage, you can save some measureable money. Though your comment about not being able to save money with a higher interest loan is not correct. That is why they can say an MMA can save money, but it’s just so little.
That’s why the risks need to be discussed. In doing an MMA, you are generally transfering from your HELOC to your mortgage once every 3 months. So that means you are committing to prepaying your mortgage 3 months in advance. I like to use the case of the dual income family. If mom/dad each have a $3000 net pay per month job, and $3000 total expenses (including mortgage), they have $3000 discretionary income. MMA might have them transfer chunks upward of $12000. What happens if they do that, then one of them loses their job? They can “cancel” up to $3000 (more likely 1500 or less when averaged over the course of the month), with no ability to pay it down. Their minimum mortgage payment didn’t drop, and now they have an addditional $9000+ loan to service. IE, they watch that interest compound until they find another job.
Now take that same case if they are just prepaying. The month that the one loses their job, they stop prepaying, and all is well. They have no extra income, so things are tight, but no bills are accumulating while the MMAer just watches their HELOC balance grow each month.
Given that a simple interest bearing checking account will outperform the approach with less risk, and less hassle, I say what’s the point?
Calvn,
You’re mixing me up with Joe in your responses, but that’s ok. You said “You are basically saying the $3500 kills it, otherwise, one can save a lot.” If you review my numbers with Lee’s, you will note that Lee’s numbers are $4,285 worse than my example. Thats $3,500. cost for software and $785. cost in performance. That is not “saving a lot” in my book. If you get anything from my posts, get this: Do NOT buy MMA software, pay your debt down yourself for free.
Joe, “Saving a few hundred $/yr” using a heloc? Sorry about being a skeptic, but the only way that can happen is if the HELOC is at a lower rate than other debt you are substituting. If that is not right, show me if you will.
Bill V.
Calvin - thank you for your level headed, well reasoned reply. I agree that the 3 month HELOC borrowing cannot make sense. It implies always carrying a HELOC balance. My trying to understand what the MMA’ers are selling led me to believe that the HELOC can capture some small gain, about $150 on a $5000 monthly net income. Your points regarding job loss are well taken. One certainly raises their risk by having no emergency fund, and only debt.
JOE
Joe/Bill,
Sorry for using the wrong name to reply to some of your posts. So many responses! Joe, I do think one can save around $150 *over the course of the life of the loan* (not per year) using the HELOC approach versus a prepaying 0% checking account absent of the $3500 fee. You are correct that withdraws each month instead of every 3 months are far more efficient. Using that approach would out perform the UFF software at their own game. Yes, that same software that has been claimed to have cost $2.5 million to develop, that was fine tuned by MIT students/NASA rocket scientists/GE propulsion labs, etc. (ie, those claims are false).
I understand the idea that you like people looking at their money as debt rather than money to burn when holding a loarge debt (mortgage). I think it makes sense. But I don’t like the idea of everything being a credit purchase. I don’t like people getting used to every account being a debt account. But moreso, I don’t like the idea of people putting more of their financial decisions in other people’s hands, the idea that one needs a complex algorithm for something so exceedingly simple.
One of the funniest things I’ve read was at the UFirst agent board. One agent bought an investment property (rental) on top of his primary residence. He was asking should he pay the $500 fee to transfer the software to the new property, or just use it on his primary residency. The response was “it’s easy, you pay another $3500 for another account so you can pay down both optimally.” This was one agent to another. The financial ignorance of these guys is utterly astounding. So he’s reccomending paying for the right to prepay a debt twice! People just get into this software and lose all sense of reality. It really is a cult like following.
For the purposes of paying down debt, specifically pre-paying mortgage debt with discretionary income, as is the basis for this entire dialogue….
Having a “Dry” HELOC, as an emergency reserve is fine and can be prudent risk management. However, the trouble arises if you ever start using it! Make no mistake, intentionally using a HELOC by repetitively borrowing money and increasing your debt, will LOOSE you money if your goal is faster mortgage reduction and pre-payment!
Using the HELOC, borrowing more, paying for it, repetitively… costs money… usually at a higher interest rate… it is an additional expense, no different from buying a boat… it reduces the efficiency of any pre-payment curtailment and it increases your personal RISK… and it DOES NOT save any money when all of the real world costs, expenses, and ‘per diem’ interest are properly and honestly calculated. To suggest otherwise is simply ignorance, lies, or both!
Prudent cash management, first building a cash buffer in an FDIC, SIPC, NCUA, etc… insured account (preferably one paying some interest income on your deposits)… is the best, cheapest, fastest, and also the simplest and easiest way to prudently pre-pay debts. EVERYTHING else carries more risk, and likely will LOOSE you money!
The interest rate arbitrage ‘potential’ of the HELCO shuffle is de minimis… and the increased risk is both unknown and unacceptable, especially to the average Joe homeowner in the USA earning less that $200K in yearly income. This is undisputable to any financially ‘literate’ individual who’s done their due diligence, though perhaps not to the many well meaning but unfortunately financially ignorant, incapable, and incompetent ‘software’ salesmen.
The long term ‘holistic’ benefits of mortgage pre-payment (which is also a debatable premise even to begin with) is Not to be confused with this merge account Voodoo HELOC balance transferring shuffle! Over time, you WILL LOOSE doing that HELOC two step!
However, to be clear, there is financial wisdom in having a “DRY” LOC for emergency purposes (secured or unsecured)… and in not using it! Especially if you are unintentionally or intentionally living paycheck to paycheck following a 100% spending problem or as mortgage/debt pre-payment scheme.
If you want to pre-pay your mortgage… you don’t need outrageously expensive budgeting software, cheap software, any spreadsheets, HELOCs or anything else… all you need is a simple 99cent calculator, a pencil and paper to write out a budget, and a little bit of common sense and discipline.
There’s no magic, no miracle, no rocket science, no secret…. Regular average folks already do it every day, and have of decades, even centuries! Simply pay back the debt, with cash that you earn, in a prudent responsible manner that you can afford. There really is noting to it, except doing it!
Don’t fall prey to fools selling a ‘too good to be true’ cure… it’s nothing but snake oil or fraud!
http://www.integramortgages.com/financialvoodoo
Kudos on the good and honest numerical analysis Calvin… keep them honest, and squeeze them on the numbers until they admit their error(s) and capitulate… unfortunately there are simply so many errors and lies that that may take a long while.
It’s sad that soooo many of the salesmen for these schemes drank the cool-aide, are brainwashed, and want to believe on faith… but don’t fully (or even a little bit) understand the crap they are endorsing and selling.
While many of the salesmen for these equity accelerators likely mean well… because of their financial ignorance, lack of financial education, and lack in understanding of financial analysis they very often (even un-intentionally) are misleading homeowners into wasting tremendous amounts of hard earned money and taking on increased risk in order to do something they can already do entirely for FREE!
I know I am going to get a flame from calvin.
The correct way to use the HELOC is to make a one-time interest-only loan equal to your monthly take-home pay and pay it off only after the mortgage is gone. You use your monthly take-home pay for interest cancellation against the HELOC and you use your discretionary income to pay down the mortgage, not the HELOC.
Two conditions that make it less effective are:
1) A larger difference between the mortgage and HELOC interest rate.
2) A greater HELOC average daily balance.
Calvin is right, though, that a decent interest bearing account will beat the HELOC using similar conditions.
When you model a HELOC payment, don’t forget to either subtract out any interest paid from the discretionary income or add the interest to the next month’s balance.
No, Jimmy, no flame. You have it right for the most part. The only thing I would change is where you say “things that can make it less effective”, I would change to “less effective, ineffective, or actually cost more.” Even running a free MMA approach at it’s most efficient point (something the UFF software will never do), for certain fairly common circumstances (income paid at the middle and/or end of the month, some bills due before the last day of the month, and restrictions on how many/timing of mortgage payments each month), it can come out behind even a 0% checking account with prepayments.
i don’t like your use of the term “correct way” just because it implies it’s a good idea to do this, but that’s just my opinion (and probably every financial planner worth anything).
Calvin, using a HELOC for a one-time interest-only loan moves the debt from the primary mortgage to the HELOC where interest-cancellation must be used to reduce the effective interest rate below the primary mortgage rate. Consequently, it can’t cost more.
As we discussed elsewhere, the most efficient HELOC scenario is also the most advantageous savings scenario. So it all boils down to comparative interest rates.
Currently, with a prime rate at 6%, it makes sense in the short run to use the HELOC shuffle. But, is it worth it to add another layer of complexity for the long run vs. just using a good savings/checking account.
I continue to look at the math. If one is paid $5000 net on the first, and every last bill is due on the 31st, the user can capture $5000 times their mortgage rate, no? And this is about $300, assuming 6% rate.
It’s all downhill from there, as most aren’t paid once per month, but twice or even weekly, and the bills are due throughout the month. So that $5000 guy finds his average checking balance to be $2500. So it takes an average HELOC of $2500 to top off this money. The MMA examples cite an 8% rate or $200/yr to borrow that money. $200 interest cost to capture a $300 gain on the other side.
So, math done, I lean toward Calvin with ‘why bother at all’? The HELOC gains are much ado about nothing. And if any MMA’er can show me otherwise, I’ll be happy to read what they have to say. I hope Lee will visit again.
Joe
whoa there, jimmy, you can’t claim accross the board that the most efficient MMA for a person saves them money over a prepayments with a 0% checking account. There are too many variables that aren’t in the users control.
1. Unless they are self employed, payday is set by their employer.
2. Due dates for bills are set by creditors/service providers.
3. Not all mortgages allow prepayments any day of the month (mine only allowed them up to the 15th)
4. Not all mortgages allow multiple payments (prepayments must be lumped in with the standard payment).
If a user has a minimum mortgage payment due on the 1st, can only send in extra payments in before the 15th, and gets paid on the last day of the month (all of those were true for me), a zero percent checking account could outperform it. Throw in some bills in the beginning of the month, and it is likely a 0% checking account can outperform it. (assuming HELOC rate > mortgage rate).
i agree that for the setup that benefits MMA the most will see a small savings, but that can easily degrade to a net loss due to variables outside of their control.
Joe,
You are right. Using your numbers, at the end of a 10-year payoff, you gain $500. Certainly not worth the effort.
In case anyone is wondering why not $1000, if there is a $100 difference per year? That is because you must use part of the discretionary income to pay the interest each month, reducing your potential savings.
Bill V.
Could you please send me your spreadsheet? Thanks!!!
socalsweendog@yahoo.com
You Bet Sweendog!
Bill V.
I confess I didn’t read through each and every post response on this but I do actually have 1st hand experience with an “Accelerator Mortgage” - BUT not the United plan. First, the United deal is a MLM and thats’ essentially why the $3500 cost. Also, the posts I read are right, it’s too labor intensive and not much in the way of savings.
The Accelerator Mortgage I did last year was through a GMAC lender and it basically replicates a very popular and effective mortgage from Australia. In a nutshell, it ties together a checking account and mortgage (HELOC) and administers it just like a commercial sweep account. Every night, money deposited in the checking account sweeps over to the mortgage account reducing the principal balance thereby reducing interest cost. When you pay bills at the end of the month, the money comes back from the mortgage account, raising the principal balance BUT
For some reason, my post above was truncated. Maybe too long winded so to finish the above sentence
…you can’t spend every dime you make or this product doesn’t work, you still have to be somewhat disciplined. If there’s any money left over, it begins the compounding effect every month.
I’ll just finish with this.
#1 option to Accelerator mortgage is you can do it yourself by making extra payments. *True but that’s kind of like dieting, how many people continue to do it forever and when you have an emergency, the mortgage company won’t give back your extra payments.
#2 Don’t understand how it works, must be a scam. *Works just like we’ve always been taught about compounding of savings and starting early - it’s just math.
2 Programs not a scam - Macquarrie Bank and the one I chose for simplicity and costs, GMAC sold through liscensed agent of AmeriFirst Financial, Mark Maire http://www.markmaire.com There’s a calculator on there that will tell you if it works for you.
I get nothing out of this but as someone it is working VERY well for, just wanted to share in the discussion.
To LS Carper and Bill V
During the week I usually do not have time to “play” with these posts.
As an agent for the MMA, my interest is to give the client a good deal that works and to help them save gobs of money. The MMA is not an MLM in the strictest sense, but it does offer commissions to agents as does most any product out there.
Bill V has countered with me that his spreadsheet (I presume used with a HELOC) will work every bit as good, if not better than my MMA. If that is the case, I still have not really seen how his spreadsheet works better, and ask if it is available to anyone? I am curious to know more.
Also, the Accelerator mortgage sounds interesting. Does it cost anything? I would like to know more about that, also.
LS,
“and when you have an emergency, the mortgage company won’t give back your extra payments.”
if only there was a line of credit based on one’s home equity they could use to tap those payments made. Maybe we could invent one, call it a Home Equity Line of Credit, or a HELOC for short.
Can’t you guys at least come up with a new bogus argument supporting your overpriced accellerator programs instead of using the same old bogus arguments?
I know why you don’t use genuine arguments for your products…because…well… THERE AREN’T ANY!
Lee,
Do you get paid for getting someone to sign up as an agent (not just as a client). If so, that’s MLM. In the UFF’s defense (can’t believe I just typed that), from the recruiting fee/commission structure, I don’t believe it meets (or even comes close) to the FTC definition of a pyramid scheme in the MLM sense. But that is independent of the price worthiness of a product. I think there are some dust bunnies behind my monitor that are worth more than this product. At least they don’t add any risk to my finances.
Something I read on another board that is a very interesting point…. Some banks are freezing HELOCs as home values plummet. Since the equity is dissapearing from homes, the lines of credit they back are becoming very risky. When an MMA user gets their HELOC (read: their checking account) frozen, that could cause some pain for them.
Quite Correct Calvin!
To paraphrase from a post elsewhere… Ron @ October 6th, 2007 (comment #790)
“To make sure folks understand the ramifications of the financial decisions they are making, they first need to understand a few VERY important facts about HELOCS that most folks are completely unaware of.
Principally, access to a HELOC (access to the un-used credit line) can be FROZEN or REVOKED at any time by your bank! The Home Equity Credit Line (HELOC) is not your money, it is not cash, it is not an FDIC/ SIPC/ NCUA insured demand / NOW / savings/ deposit account… MOST Importantly it is NOT Your Money!
It is DEBT!
If you ever have a problem, this reality can become particularly important. Such as:
1) In the case of a fire / natural disaster, where you home ‘MAY’ have been damaged or destroyed, you can easily find that you do not have immediate access to your ‘equity’ (what’s left of it) and that the account has been frozen. Note ‘MAY’ because even if it’s ok and undamaged that does not mean you will have immediate access.
2) If the value of your property decreases as a result of a declining real estate market, neglect, or damage, again the bank may freeze all access to the ‘available’ credit line. (this is happening in California, Florida and elsewhere right now through no fault of the homeowners)
3) If you miss a payment or go into default, the lender can freeze or permanently revoke access to the credit line. Unexpectedly loosing a job, losing cash flow, missing a payment, and NOT having access to ‘home equity’ is not an uncommon problem.
4) And in some cases of so called ‘universal default’ falling credit scores or default on any credit (particularly first mortgages) can be cause to freeze or revoke HELOC access.
5) Similarly, if you have any financial or legal troubles, like bankruptcy, litigation which attaches your property, IRS or other federal or governmental liens, etc… The bank can freeze or revoke any access you may have to the line of credit that had been previously extended to you. This could include unfortunately common situations such as divorce!… whenever the initial circumstances change.
6) If the Bank/Lender itself has liquidity issues (as is happening right now), goes bankrupt, or is forced to suspend unused lines to limit outstanding liabilities… e.g Net Bank, perhaps Countrywide, Wamu, Chase Manhattan… access may be frozen or revoked.
Don’t be misled, The equity in your home is not cash, it is not savings, it is not your money, it is not guaranteed or insured, it is highly illiquid and can be entirely illiquid at the most difficult times when you may want or need to access it the most!
It is NOT a wise decision to invest all of your assets in any one thing, particularly a single piece of real estate, even if it is you home.
There are many very prudent reasons for every person and homeowner to have actual liquid cash and cash equivalents as reserves / savings… especially in the case of emergencies!
http://www.creditbloggers.com/2007/09/heloc-warning.html
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But, it’s not doom and gloom; HELOCS can be very useful and beneficial tools for financial management when used wisely! Using a HELOC to consolidate other higher rate unsecured debts ‘debt consolidation’ can be financially advantageous, but also carries greater risks. Having a Dry HELOC for convenience and financial management can also be very wise. However, using a HELOC as an ‘attempted’ replacement for a demand checking or savings account (which it is NOT) is not only very bad financial advice but it is RISKY Business!
Before getting involved with any of these types of costly and risky equity acceleration schemes, make sure you talk to educated professionals, get multiple opinions, do thorough research, and make sure you fully understand ALL of the issues and risk involved.”
http://www.integramortgages.com/financiallvoodoo
calvn,
“if only there was a line of credit based on one’s home equity they could use to tap those payments made. Maybe we could invent one, call it a Home Equity Line of Credit, or a HELOC for short.
Can’t you guys at least come up with a new bogus argument supporting your overpriced accellerator programs instead of using the same old bogus arguments?”
No need to be a smart ***, I’ve got no beef with you and as we say in the south, no dog in this hunt. I am very astute in debt products having owned a successful business for many years and I’m formerly a Big 4 guy - so numbers I know.
You can go get a HELOC anywhere you’d like, not just the Accelerator product but you will pay more for it from what I see. In my case, I am at a variable interest rate based on LIBOR +.75, currently 3.8%. My bank wants 7.5% currently for a HELOC - why would I do that? I hate variable rates but LIBOR hasn’t been over 7.5% in the last 10 years so I feel pretty comfortable with this index. Take it for what it’s worth but me thinks you protest too much.
Lee,
Yes typical closing costs like other mortgages.
I do not care if anyone ever gets another Accelerator mortgage. Again, it was ask for people with real world experience, not theories, to relate their experience and mine has been fantastic.
Ron, while I appreciate people agreeing with me, I disagree with a fundamental point you made. Your home equity, is indeed, your money. It is not debt. Money drawn against your home equity is, indeed, debt, but the equity itself is just that, equity. Now, it is relatively illiquid equity outside of a line of credit against it. If you want the cash without the coresponding debt, you have to sell the house. The equity will vary depending on the market value of your house, but anything beyond what you owe is in fact yours.
and any HELOC cannot be frozen or revalued at any time. it depends on the terms of your particular HELOC. the laundry list of reasons you posted are somewhat typical, but the terms of HELOCs vary, just like the terms of mortgages. Some get revalued (the size of the line) periodically, and the size of those periods vary, etc, etc. All HELOCs are not created equal.
well, LS, it’s the same tired argument the UFF agents have made for some time, so the shoe fit. as for the cost of my HELOC, well, it was free to get (just did it at the time of my original closing), though it’s interest rate is ~7%. Couldn’t care less really since I never touch it, nor do I ever plan to. it’s like my credit card interest rates, i couldn’t tell you what they were, because they don’t matter since i pay my balance off each month.
as for having no dog in this hunt, you have more dog in it than me. I have no mortgage, and am not in a related line of work, so the only dog I have in this hunt is the truth. And anyone that doesn’t have that dog isn’t living an honest life. being an engineer, I’m a numbers guy. we don’t take kindly to people throwing around BS numbers, no matter the subject, especially when it involves scamming people out of their money. they tried to scam a friend of mine, so my “truth dog” is a motivated one.
I must say, it is an education reading all these posts. Would not the recent bailout from the FED feeding over $200 Billion to major banks to avert any emergencies cause an easing of tensions with regard to mortgage loans, and banking and general? It sure helped the stock martket.
To Calvin - “Do you get paid for getting someone to sign up as an agent (not just as a client). If so, that’s MLM.” No we don’t get paid to sign another agent up.
Calvin,
“Your home equity, is indeed, your money. It is not debt. Money drawn against your home equity is, indeed, debt, but the equity itself is just that, equity.”
Calvin - we may be splitting hairs here. My home equity is not money. What if we lived in a world where our word was our bond, and you could borrow with no collateral? It would be an unsecured loan, right? The home equity is mine, but the loan against it is debt. It only makes sense to borrow if the return elsewhere is greater. In my case I am at prime-1.25% (4.75%) so my HELOC is lower than my mortgage. And I carry no other debt. Otherwise, I agree that MMA is like putting lipstick on a pig, whatever that means.
Joe
Calvin,
I respect, like, and appreciate your numerical honesty… I’m a numbers guy too… but, there are also other non-numerical points and concerns that warrant being properly addressed.
Sorry, but “Your home equity, is indeed, your money”, is a wrong and fundamentally incorrect statement … and it’s a crucially important point for folks to understand who are considering investing all of their cash in one single highly illiquid real estate asset (their home) by following these worthless and risky spend 100% of your income heloc balance shuffle merge account arbitrage schemes!
‘Home Equity’ is not money, it is not currency, it is not cash, it is not a demand deposit, it is not a personal savings account or certificates of deposit… we include it in our calculation of ‘net worth’ to make us feel good, but unless it is real estate producing actual cash income today it is otherwise an illiquid asset by definition (appreciating or depreciating) and whatever value it ultimately one day may hold is not guaranteed or insured. Even though real estate ‘equity’ is often used as collateral to borrow cash… it is only a theoretical net quantity until you get the cash in hand from selling the asset. Right now, unfortunately, that has become an extremely important and painful reality in California, Florida, and elsewhere.
It also an important conceptual and financial accounting distinction especially in terms of these “equity accelerator” schemes suggesting using a line of credit (DEBT) as a replacement for a demand/now checking account or savings account (liquid ASSET) is somehow the same thing. It is quite different, there are different terms, different conditions, different personal liabilities, different fees, and it can be risky business.
You are right that every bank, lender, creditor has unique terms and conditions under which a home loan is made and managed… thay are important and folks need to know the facts in advance.
Q: If you misuse the credit line… say as a demand account… would the bank hold you personally liable for a $50K fraudulent check, or debit card fraud? Maybe… Probably not… whichever, it is one example of an unknown risk you are subjecting yourself to, and that is worth considering when analyzing the options.
Moral & Point is:
Your liquid assets (cash) are yours to do with as you please. Make no mistake credit and debt are liabilities to you… they are someone else’s assets to do with as they please!
Folks cannot always count on being able to pay bills by borrowing against their ‘equity’ any day they feel like it, every week for the next 20 years. Hopefully and usually there will not be a problem… but….
At the end of the day everything boils down to CASH. If you have insured deposited CASH Reserves… they will not disappear and it’s very unlikely you will have a major or even minor problem due to illiquidity. But, if someone is choosing not to have liquid cash reserves, invest 100% in a single illiquid real estate asset, an