Is a money merge account a good way to pay off your mortgage?

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  • Some large sum is withdrawn from the HELOC and used to pay down the primary mortgage.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:

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.

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Alias
Alias

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… Read more »

plonkee
plonkee

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.

Ross
Ross

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… Read more »

Hank
Hank

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… Read more »

MillionDollarJourney
MillionDollarJourney

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.

nic
nic

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.

Pippin
Pippin

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.

Compounding
Compounding

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,… Read more »

elisabeth
elisabeth

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… Read more »

FinanceAndFat
FinanceAndFat

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.

Sara
Sara

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?

JACK
JACK

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… Read more »

JenK
JenK

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… Read more »

JenK
JenK

As an aside, HELOC as emergency fund is better than no emergency fund – but an actual emergency fund is better 😉

Jeremy
Jeremy

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.… Read more »

Aimee
Aimee

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.

Mrs. Micah
Mrs. Micah

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. 😉

Kevin
Kevin

“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!

Trent
Trent

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.

Daiko
Daiko

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… Read more »

George
George

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.

NeverStopBuying.com
NeverStopBuying.com

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!

John
John

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… Read more »

bethh
bethh

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.

Nicole
Nicole

Like many other commentors on this article, this seems like a product with no value add. I smell a SCAM.

Sparky
Sparky

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).

Bobo
Bobo

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… Read more »

Moneymonk
Moneymonk

You do not need to buy a product for something you can do yourself

Amber Bishop
Amber Bishop

As of October 15th 2007, the only information available to be put on web sites will have to be identical to what is on our home page violators will be suspended for 30 days with out pay. You may create your own skin, look & feel but the content MUST be identical to our home office retail site.
This site is not in compliance and you must contact me to obtain the most recent copy of the agent guidelines.
866-307-3201
Thank you
Amber Bishop
Compliance Coordinator

JACK
JACK

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… Read more »

kazari
kazari

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… Read more »

Casey
Casey

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

JACK
JACK

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… Read more »

JimmyDaGeek
JimmyDaGeek

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… Read more »

EmperorCoder
EmperorCoder

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 ?

Steve
Steve

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… Read more »

Daniel
Daniel

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. 😉

Jason
Jason

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.

Daniel
Daniel

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.

Jaime Buckley
Jaime Buckley

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… Read more »

Aly
Aly

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… Read more »

Mark
Mark

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… Read more »

Mark
Mark

Check out this Channel 3 in Las Vegas news report. http://www.sydneyfinancialgroup.com/articles/nbc-report.php

Jaime Buckley
Jaime Buckley

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… Read more »

Steve
Steve

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.

Jaime Buckley
Jaime Buckley

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.

Steve
Steve

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… Read more »

Jaime Buckley
Jaime Buckley

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… Read more »

Matt_In_TX
Matt_In_TX

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… Read more »

Mark
Mark

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.

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