Money Merge Account - Worthwhile?
Published June 1st, 2007 in Mortgage Tags: debt reduction, home buying, Money Merge Account, mortgage.If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
**** An Update ****
Judging by the popularity of this post, it seems there are a lot of people that are interested in this subject. The main reason is the controversy surrounding it. For this reason, I’ve decided to look up a few more resources, so that readers of this blog can be a little better informed before deciding on taking this route to paying off their mortgage. While a money merge account may not be an outright scam, the marketing scheme used for the program is pretty scary. Think Amway and any other Mulit-Level-Marketing scheme and you’ll understand why you will find such ardent defenders of the program. At any rate, please read through the following resources, as well as all the comments posted here, and make an informed decision.
United First Financial - Looking for the truth
Have you heard of United 1st Financial?
There are many schemes out there today for speeding up the rate in which you pay your mortgage off. These range from simply adding extra money to your payment to apply towards the principal every month to formalized programs offered by your mortgage lender. Money Merge Accounts are simply another form of this type of expedited mortgage payoff plan.
A money merge account is simply a bank account that is set up to pay all of your discretionary income toward your mortgage principal. You set up the account so that you retain a certain amount of your income to pay for the necessities and other mandatory expenses each month. Everything else goes to the mortgage. Typically, this will result in your paying off the mortgage in less than half of the original mortgage term.
The drawback to this setup is that there is literally no flexibility built in. If you should have some type of emergency arise while this program is ongoing, you will need to already have funds set aside to address the emergency. For this reason, it is absolutely necessary for you to consider ALL of the implications and plan for them before deciding to go with a money merge account.
Another drawback to this type of account is the fees involved in setting one up. Typically, the lender will charge an additional $3000 in setup fees to get a money merge account going. This is added to the principal of your mortgage right at the start, which represents, at the least, an additional payment you will have to make in the long run.
A money merge account may be the right choice for those people who cannot trust themselves to maintain the fiscal discipline to make regular additional payments on their mortgage. For the most part, though, a better plan would be to independently make additional principal payments independently and avoid the additional costs and inflexibility of a money merge account. Keep in mind that no matter which course you decide to take, paying down principal ahead of time will save you thousands of dollars in interest charges over a 30 year term. Not paying down your principal as quickly as possible would be tantamount to flushing money down the toilet.
========================================================
The home business is a vast term where your home business urges you to start working and earning at home. You can get instant home insurance quotes free by getting contact to a website through Internet. Many websites propose debt help customers to keep money to manage and pay the debts. A creditcard is a simple method to make purchases with no paper money carrying in your pocket all the time. To get instant loans visit a website of a particular organization or you can mortgage your property as well for this purpose. It is not simple to get loans instantly. You have to go by certain stages earlier than getting loans or mortgage. An investment is carried out to make profit in future. It increases the stage of profitability of a running business. You can invest your money after mortgaging your property. The insurance quotes can easily be achieved by consulting a good website.
========================================================
“A money merge account may be the right choice for those people who cannot trust themselves to maintain the fiscal discipline to make regular additional payments on their mortgage. ”
I think you are to generous. The only thing a MMA can do is shame someone into making extra payments because they were dumb enough to spend their origional $3500 on the program
The $3500 they spend would put them approximately 10 months behind the same individual who takes that $3500 and pays it towards their mortgage.
People do crazier things though.
Attornies General are investigating these scams as we speak. Florida alone has over 900 complaints since March 2007. They use high pressure sales tactics and confuse people with fuzzy math. Then they sell them their great $4000 program that will payoff their loans in 5 years. Several class actions suits are in progress and most of these scams will cease operation, leaving the users with no software to use, since it’s all web based.
Do a search on MMA and you will be bombarded with offers to save you money.
Save the $4000 and send some extra principle each month.
I am a customer of the MMA. What proof do you have of these “so-called” class action lawsuits? Are you saying that are towards the MMA or programs out there that are like it? Please explain yourself…tnx
I have searched high and low and cannot find a lawsuit (of any kind) against United First Financial. Maybe you could direct me to the correct site or link. Thank-you.
RIGHT ON CHRIS. NO REPLY FROM MR. 900 COMPLAINTS. I CHECH THE UTAH BBB. U1ST IS CLEAN AS CAN BE!
I have done a few analyses and my conclusion is that the MMA is a wonderful tool for 2 kinds of people: Those who are financially irresponsible, and those who have lots of debt. Otherwise, you can do the same thing yourself and not have to pay the $3500 fee for the software. But, if you fall into one of the 2 categories, then the MMA can save you an awful lot of money.
One crucial point in participating in the program is your ability to properly manage a HELOC (Home Equity Line of Credit). The faster you pay down your HELOC, the better the MMA will work for you. There are several creative and extremely effective ways to decrease the payment on your HELOC. These apply not just to MMA participants, but to anyone with a HELOC. You can literally decrease your payment by $100-$200 each month. More info here.
I’m not so sure that Aaron actually gets how the MMA works. By depositing all of your monthly income into the HELOC, you are “paying it down”, thereby dramatically decreasing the balance upon which the finance charges are calculated. That’s an interesting product being touted on Aaron’s link. I’d hesitate to purchase anything from a site like that. No business name, or individual name is listed, no background on the “author”’s qualifications, just a “pay me now” button. And folks think Ufirst’s MMA is a scam?
Here’s a thought on the “Scam” line of thinking for MMA: MMA is a service product. It is designed to help guide you to early mortgage payoff and massive interest savings. Could you do that on your own? Sure, with some time and effort. It’s not quite just simply putting an extra fixed amount towards your mortgage principal each month. MMA is more flexible than than and attempts to adjust it’s recommendations based on changes in your financial situation, such as more or less income, extra expenses, extra disposable income due to paying off other debts, etc. You absolutely could put the time and effort and diligence into your finances and accomplish much the same thing. But that doesn’t make a product a scam. Are all auto service companies scammers simply because you can change your own oil for less than they charge? Are GPS manufacturers scamming you because you can navigate on your own with a paper map, and some trial and error? The answer is no. MMA is a product that provides a service that may not be the best option for everyone, but that certainly doesn’t indicate the it “doesn’t work” or is a scam.
This kind of misinformation could dissuade someone who would benefit remarkably from an MMA, and you should do a little research and write a disclaimer.
Your basic premise that all of an account holder’s discretionary income is deposited and lost forever is flawed. Nor is an MMA inflexible.
Any balance in an MMA remains as an account balance, and the account holder can use the funds on deposit in any way they choose.
MMAs are set up using an open-ended HELOC, and the average balance in the account offsets the principal balance in the mortgage account. That results in a reduction of the principal on which the interest portion of each monthly payment is calculated by the amount of the average balance, allowing a larger portion of the regular monthly payment to apply directly toward reducing the principal.
No additional payment is needed to accomplish the rapid reduction of the principal, and any discretionary income or other deposit adds continually to the average balance–but remains available to the account holder.
Nor does withdrawing funds in the balance of the account cause any reversal of the benefits. Once the principal is paid down with each regular monthly payment, the principal remains paid down.
The effect of withdrawing funds from the balance in the account will however affect the average monthly balance, and nominally slow down the process.
For the facts about the reality of how an MMA works, you should refer to http://uffmoneymergeaccount.com/ and review the spreadsheet demo available on the “Do the Math” page.
Any updates on all of those lawsuits? Also, for anybody who cares, the Money Merge Account is NOTHING like what is described in the article above. First off, it is not a bank account. The system never touches your money, only you control your money. All of your “left over money” does not go to pay down your mortgage. The fee for the program is not attached to your mortgage in any way. Clients actually using the Money Merge Account claim that they have more flexibility than they’ve ever had prior.
Basically, nearly every point made is incorrect. So yourself a favor. Find a site with factual information. There are plenty of them out there. Here’s one for your consideration.
www.DebtFreeProject.com/money_merge_account_intro.html
(shameless plug)
:)
@Jim and Travis - It might be a bit more believable if you guys weren’t trying to plug your own sites by leaving a comment on here. Nonetheless, I will leave the comments, so that folks can make their own decision on whether an MMA is right for them or not. Personally, I don’t think it’s a good idea to pay extra for the “privelege” of paying down your mortgage early. Bottom line is, you don’t need a HELOC or an MMA to do this. So, while the details may have changed on MMA’s, the principles of the matter have not. They are simply a way for banks and other lenders to make money, while convincing the consumer that they are helping to pay down the mortgage.
-Allen
It is free to find out if it will work for you. Everyone does not qualify. Maybe $3500 is too much to Spend to save as much as $50,000 or more. No obligation, no high pressure. You have to see the whole program maybe twice to understand how it works instead of how you think it may work. Have a great day!
(Yes this a plug for my site, but it could help you)
Danny.
u1stfinancial.net/budget
I love all of the people who bash this program. None of them have a clue, and most are totally mis-informed. I’ve yet to actually hear from a person who is on this program and has complained about it or claimed that it doesn’t do what it says it will do. Nor I have I been able to find 1 complaint from the BBB nationwide. Most of the clowns that bash this program simply don’t understand the program, or they just don’t understand the mindset of the average american home owner. This country now has a negative savings rate. That means most people don’t know how to manage their money. If the majority of people could do this on their own, then why aren’t they? The answer is because 97% of americans don’t have the discipline to do this on their own. Thats not a knock on people, its just how it is. My suggestion is that if you’re interested in saving thousands of dollars in interest on your mortgage and would like to pay it off at an accelorated pace without changing your lifestyle,your monthly budget or your mortgage payments, than do your homework on this program. Get your free analysis done and talk to real people who have been on it and see what they have to say. Get real life testimonials from actual clients. I’ve been on it for 6 months and its done wonders for me and my family, but don’t take my word for it, because I’m now a agent selling it for the company. If you do all that and still don’t think its for you, than don’t buy it, nobody in the company will be upset or try to pressure you into it. Its not for everyone. If you have questions on this product, feel free to email me at dkm7498@comcast.net or log onto my website at www.u1stfinancial.net/jasoncolbert
It seems awfully funny, though, that the only people that have spoken up here in support of the program are people who are trying to push the product. The largest objection to the program, I think, is the marketing technique being employed. It just sounds spammy…
Also, just to let everyone know, I did an informal survey of some mortgage brokers in my area, and not a single one of them would recommend this program. Just some more food for thought.
If it’s so easy to payoff your mortgage early, and everyone knows how to do it, then why isn’t everyone doing it?
Yes, contributing more money towards your principal will payoff your home sooner and save interest. Everyone knows that. How much extra will you put towards your principle every month? Will you do it every month? Can you afford to do it every month? Will you know exactly when your home will be paid off? Can you calculate your interest savings? Will you maximize the power of your money?
If you’re have a lot of cash laying around doing nothing, and can afford to put it all towards your mortgage (which is paying into a closed-end loan, meaning: gone for good), then do it.
If you’re the average person with maybe a couple hundred dollars left over after your bills, and would like more flexibility with your accelerated equity program, then the MMA would probably work great for you.
Guess what else? You don’t have to follow the MMA prompts to pay off your home. Why not expand your portfolio? Take a 4 month hit, to invest in something else.
It works! It’s not a scam. Aaron, whatever mortgage brokers you were talking to obviously had not thoroughly examined the MMA and how it could benefit their clients. I’ve talked to brokers who have been in the business for years, and think this is a great product.
BTW, check out the upcoming issue of True Wealth Magazine. There will be a huge article on Ufirst and the MMA.
If there are any doubters, please, keep the questions coming.
If the program works SO well, why will NOT ONE SINGLE UFF REP take the challenge of simulating a sample problem using the software?
Why? BECAUSE IT DOESN’T WORK AS WELL AS SIMPLY PREPAYING YOUR MORTGAGE ON YOUR OWN.
At the ufirst agent blog, one agent from Jubilee said he would take our challenge, but he changed the numbers to manipulate the results (lowered income, increased expenses dramatically, added additional purchases, pretty much changed everything), then we were banned from posting when we showed that his recomendations actually bakrupted the family, and MMA would cost them over $25,000 more in interest. The idiots refinanced $44k in 0% car debt to 7.5% heloc debt. These have to either be the dumbest or slimiest (or both) agents out there.
We all know how this works. Pay off your mortgage with another loan, and then prepay every penny you have to that loan, taking advantage of the “average daily balance” to bring interest costs down, while giving up the ability to earn interest on your money before it is needed to pay bills. With even below average checking account interests, you can beat this program if it were free. With a 0% checking account, you can EASILY beat this program when considering the $3500 cost.
Anyone that qualifies for MMA can access their money just as easily as someone actually using MMA because all they need is a HELOC. UFF agents LIE LIE LIE when they tell you your money is gone when you prepay without MMA. A HELOC is not only for those using MMA (far more people have a HELOC that don’t use MMA than do).
Again, if the program worked so well, agents would be busting down my door to take my challenge and show the ACTUAL MONTH TO MONTH MONEY MOVEMENTS. But no, they just use talking points BECAUSE THE MATH IS NOT IN THEIR CORNER. Jubilee project, put up or shut up, you crooks!
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!!
The UFF is for people who can’t do 6th grade math. That’s why they can only point to articales where they are paid advertisers instead of actual proof that their scamware actually does anything worthwhile.
Calvin, my suggestion to you would be to contact a local UFF agent and have he/she run your analysis. All the numbers would be right in front of you. You can then question and argue as much as you like, for free.
If the program is so bad, why are people all over the world using it? Did the Australians get it wrong? Has everyone on this program been had? All of those clients must be complete suckers, right?
I hope you weren’t calling me a liar when I said putting all of your money into a closed-end loan means that it is gone for good, in equity. That is true. That’s why these programs use an open-end line of credit.
Like I said, have someone run your analysis. Once that is done, find a mortgage calculator online. See how much extra you would need to pay per month to reach the same results. Then you can see for yourself if the MMA is worth it.
I hope to see your results.
Calvin, I think any agent would be more than happy to run your numbers. In fact, I could run your numbers.
If you’re game, here’s what we’ll do:
I’ll give you my email address. You email me, then I’ll send you a worksheet to fill out. You get that back to me, and I’ll run your analysis. I’ll also run your numbers through a mortgage calculator to determine what you would need to do to achieve the same results without the MMA.
You can look at them side by side and determine which would be better for your lifestyle.
How about it?
Dan,
I know this software better than you. I’m sorry if that sounds cocky or whatever, but, well, it’s true. I’ve run the number a zillion times for myself, other people asking about this software, agents, etc. The math is simple (this is where agents respond with MIT experts, NASA, Harvard business school profs, $2.5 million in devleopment stuff, etc. Note: interesting that YOU GUYS never can back up those claims).
Yes, the “interest cancellation” can lower the effective interest rate of a HELOC. Yes, it can save some money on your mortgage using the methodology IF THE SOFTWARE WERE FREE. The savings at todays rates is about $1 per month. All the other savings comes from extra payments. And, if you can get a checking account of ~2.5% (easily done, mine got 6%, down to 5% now), you can outperform a free MMA. The $3500 cost will basically NEVER get overcome with interest savings versus simple prepayment plans. In some extreme cases, you can come out ahead, but that would require incomes in the several hundred thousands per year and million dollar loans.
The marketing of this product borders on illegal, IMO. Agents claim those prepaying their mortgage have no access to the equity when they have just as much access by getting a HELOC just like mma people use. And since they can build equity faster without mma, they have more equity to tap. They claim savings of the “algorithm” are huge, when they are actually negative when the $3500 is taken into account versus a prepayment plan. ALL (read average 99.5%) of savings comes from prepayment.
The funny thing is the software doesn’t even do the mma optimally. If you want to do a month to month comparison, I can not only show you an MMA underperforming a simple prepayment approach, I can demonstrate the UFF MMA isn’t even optimal for an MMA. It’s a joke how worthless this software is.
If you care to try to prove me wrong, I would LOVE for you to be the first agent EVER to agree to a month to month comparison out in the open of the UFF software’s performance versus a simple prepayment plan on a simple sample problem.
Care to take my challenge? Or do you already know your scam software can’t measure up to 100 year old methods?
Again, put up or shut up, crooks.
HAHAHHAHAHAHAHAHAHAHHAHAHA!!!!
Calvin
Dan,
I thought I would reply to a few other of your comments:
“If the program is so bad, why are people all over the world using it? Did the Australians get it wrong?”
Actually, the Austrailian government believed their citizens were being scammed and took action:
http://www.butterhomes.com/blog/index.php/mortgage-accelerator-under-fire-australian-securities-and-investments-commission-taking-action-against-mortgage-brokers
“I hope you weren’t calling me a liar when I said putting all of your money into a closed-end loan means that it is gone for good, in equity. That is true. That’s why these programs use an open-end line of credit.”
Too funny. Liar? Maybe. If you actually believe what you wrote, then, no, I’m not calling you a liar, I’m just calling you, for lack of a polite word, ignorant. If you know the truth, but say those words, then, yes, I am absolutely calling you a liar.
You say once that money is spent on a closed-end loan, it’s gone. If that were true, the MMA wouldn’t exist and you would be out of business. Isn’t one of the requirements of the program that you have some equity in your home? Of course it is. Where do most customers get the $3500? The HELOC. Yes, a HELOC is an open ended line of credit, but it is drawing against equity built from the closed ended loan. If you don’t understand that that is, in fact, where the $$$ is coming from, you understand your own product even less than I give most agents credit for (which is very little). Again, one does not have to use the MMA software, or even the MMA approach to get a HELOC and access that equity in the form of cash that you say is gone forever.
Again, let’s just put this to the test. A simple sample problem:
$5000/month income, after taxes, paid on the half on the 15th, half on the last day of each month.
$2500/month expenses, all rolled up into one bill, due on the 27th of each month.
$200k mortgage, 30 year, 6% fixed, minimum payment due on the 1st of each month. 50k equity.
HELOC rate 7%, interest calculated on average daily balance, zero balance to start ($3500 for MMA though).
Checking account pays 3%, based on average daily balance.
$5000 (one month’s income) to start with in the checking account.
You use your precious scamware, I just prepay with an average checking account. ALL money movements must be shown. My money movements will be simple as they will all be the same, except for the first and last ones.
Care to wager on who gets out of debt first?
UFirst MMA is fine and dandy. It just has that slimy negative multi-level marketing stigma. You know, wink wink, meet at this hotel at noon but I can give you the details. Just show up and don’t forget to put on your name tag. If you become angent, you can start hassling your friends and family first to buy, so the person in your upline will benefit after you drop out of the program. Hell, if you can can’t sell your family, you can sell it to yourself.
Calvin - I wonder about the $2.5M investment myself. And I came to the same conclusion you did, that 99% give or take, comes from the actual prepayments.
What I fail to see mentioned in most of these threads is this; If you can pay your mortgage off this fast, you should refinance and get a lower rate in the first place. A 15 yr mortgage is usually 1/2% less than the 30 year. 1/2% on a $250K mortgage is $100/mo interest ‘canceled’ by virtue of the refi. That observation alone must be worth $1000 to those who will follow it. (They save just over $12,000 total over the 15 years).
My two cents.
JOE
Calvin puts up numbers and all the mma agents scatter.
JoeT,
Yes, refinancing can save some money. But be careful when talking about money spent now versus money saved in the future, especially over long periods of time. Spending $3,000 now to save $12,000 over the course of the next 15 years is NOT a savings of $9,000. If you have $3,000 now, you can sock that in a bank account. If it earns 3%, in 15 years, it will be worth roughly $4675. It’s certainly not $12,000, but it’s also not $3,000.
The two concepts involved are “the future value of money” and “opportunity cost”, both of which never seem to be a part of the average UFF agent’s thought process. They love to use nominal dollars instead of adjusting for future value of money, because it makes their numbers look better. As for opportunity cost, they HAVE to ignore that one, because when it is considered, their product is shown always to be a MONEY LOSER, even if free, compared to prepaying AND adjusting for lost opportunity cost of having to deposit their money against a debt versus earning interest on it for a short period of time.
Usually, when I speak of using a good bank account, UFF agents mistakenly (pr purposefully mislead/lie) say that a 3% bank account will never outperform the MMA. They always separate prepaying and earning interest, but they do not have to be separante. If I have $1,000 extra a month, they say I can send it to my mortgage as soon as I get it, or I can sock it in a bank and earn a measly 3%. Well, acutally, I can do both. I can earn the money, put it in the bank and earn interest until the last possible day each month the bank allows me to pay against my mortgage. The interest is small, ($1.25 for $1,000 @ 3% for 15 days ). But that $1.25 is typically more than what the MMA saves each month (mortgage interest saved minus heloc interest paid). That’s the sad thing about this product. Even if the product was free, I could still pay off a loan faster by using 100 year old methods. If I was using a 0% checking account, I could save some money using an MMA, but that’s where the $3500 kills it’s clients in that they could outperform the MMA even with a 0% account.
As for Don, yes, whenever we issue the open challenge to UFF agents to demonstrate their software’s performance, the agents scatter. We don’t call ‘em cockroaches for nothing.
Have a great week,
Calvin
Wow, you guys really do hate this product and anyone associated with it. Your rants sound very professional (childish).
Here’s what I find interesting: There are ways for homeowners to pay off their mortgage sooner. Why aren’t all homeowners implementing their own strategy to do this?
BTW, I ran an analysis on your numbers:
I’ve got the home being paid off in 5.4 years. It usually outperforms the projection, so it would probably be closer to 5 years. $195,632.33 in interest savings ($36,044.71 interest paid). That’s a 5,589% return on investment in interest savings, opposed to making the standard payments for 30 years. Investing the $3699.10 per month @ 3% for 24.6 years will give you a total of $1,611,000.88.
Is it worth $3500 for this individual to use the MMA? Maybe. Maybe not. It’s clearly working pretty well for this made up person, but maybe he/she would like to implement another strategy.
5.4 years, eh? 5.4 years is 64.8 months. Let’s round that to 65 months.
@$5,000 per month income, that’s $325,000 income over that time period.
@$2,500 per month expenses, that’s $162,500 owed over that same time period.
The mortgage balance from day 1 is $200,000 owed.
So, with $325,000, you claim that using the mma software, the user will have covered a total of $362,000 in bills and mortgage principal.
And you guys wonder why we call you liars. So the bank not only charged you no interest, but actually forgave about $37,000 in mortgage debt as well?
(hint: you might want to double check your numbers)
and when you are done correcting your numbers, compare the payoff period and interest saved to a standard prepayment plan. Then tell me the return on investment (hint, if it’s not negative, go back and check your numbers).
Wonder if poor math skills is a prerequisite for agents? Or maybe just poor eithcs? My experience would say both.
I am being told to enroll and pay $3500 and I will save
thousands of dollars. I am not a mathmatical person and
how do I know what the heck to do. I am 60 with a 1st
mtg. of $98,000….30 years
Calvin, my friend, the $2500 includes the mortgage payment.
So you are telling me what MY example is? Nice. Intelligence should come before arrogance.
So a mortgage payment that is STATED due on the first is assumed to be rolled into expenses STATED to be due on the 27th? Do you tell all your clients that their numbers are wrong even though you don’t know them?
And you still wonder why people think UFF agents are stupid? So not only can you not do the 6th grade math that shows MMA is slower than simple prepayments and an average interest bearing account, reading comprehension, well…… not so much either.
Nice.
I’ll buy the software from you if you can do the following:
CORRECTLY run an analysis of the stated example.
Show a mathematically CORRECT and COMPLETE set of money movements that generate a payoff date faster than just prepaying discretionary income each month and keeping said funds and the bill money in the bank account before spent each month.
That’s a 4 figure incentive for you to show that your software actually works.
But we all know it won’t happen because those numbers don’t exist, some I’m pretty safe. Heck, I’ll buy two MMA accounts from you if you can show it.
Calvin, a mortgage is a monthly expense, is it not? I’m surprised that you, being the expert you are on this, did not pick up on that when running your numbers. Quite the expert, indeed.
Okay, so the $2500 monthly expense excludes the biggest monthly expense. Gotcha. His real monthly expenses are $3699.10.
Here are the numbers:
The home will be paid off in 8.8 years. The scheduled interest will be decreased by $171,476.03 ($60,201.01 paid). Investing that $3699.10 per month @ 3% for 21.2 years will bring you a total of $885,527.40.
That’s still pretty good, don’t you think? Worth the $3500?
BTW, there is a way to beat the MMA doing it on your own. Again, I’m surprised that Calvin, the expert, hasn’t mentioned this. I guess he didn’t know.
ANYBODY could do this own their own. No one is saying you can’t. Whether or you’re in a financial position to do so is the question. For those that can’t afford to change their lifestyle (or just don’t want to change it), then this is probably a good program.
I know you want a huge chart and all, but I’m a busy man.
Also, you might want to check out True Wealth Magazine. UFirst is featured in a 30 page article. I guess they got over on those guys too.
I gotta run and get back to my lyin’, cheatin’, and stealin’. Have a good one, Calvy.
So, I was wrong about setting up my own example? This isn’t something I’m reading and passing on, this is an example I’m making up for you to run. Don’t tell me it’s wrong just because you can’t read.
Ok, so now you’ve rerun the numbers and come up with 8.8 years, which is what I was expecting. 106 months.
So, now let’s make the comparison I actually asked for (there’s that reading problem of yours again). Compare it to prepayments:
At the 30th of each month, if you take your checking account balance, subtract $1000 from that amount, and send that value to your mortgage each month, and pay your bills on the 27th, you will pay off your mortgage in 101 months.
After 106 months (no mortgage payments after month 101), one would have $16,000 in the bank versus less than $5,000 for the MMA approach.
So, using MMA COST you over $11,000!!!!!!
So, spend $3,500 to lose $11,000. Hmmm, are you sure that’s a no brainer?
So, speaking of lies, you said: “For those that can’t afford to change their lifestyle (or just don’t want to change it), then this is probably a good program.”
What change in lifestyle are you talking about? There isn’t one versus prepaying! The only difference between the monthly actions are whether you write a check to your HELOC or whether you write it to your mortgage. No complex algorithm is needed. Checking balance minus $1000 is the only math. (one could change $1000 to whatever they want, including $0 to make it the fastest, which is no math at all).
Typical UFF lies. There is no change in lifestyle versus prepayments. UFF agents say you can’t touch that money, but that’s a lie since they touch it every month in their own approach via the HELOC. Anyone who can do MMA (ie, qualify for a HELOC) can tap their equity without MMA through a HELOC.
Dan, do you also believe the UFF hype that there is no change in cash flow? An accountant that claimed that would lose their license as it would be a lie. Cash flow, under MMA is zero, by defninition. A HELOC is a debt instrument. Any money applied to it is a payment, ie, cash out. By depositing your whole paycheck to it, cash in and cash out are equal, thus cash flow (in minus out) is zero. Cash flow is also zero under the approach I’ve shown above, but I’ve never claimed it doesn’t change versus making minimum payments. The UFF has! Thus, they lied. Pure and simple.
Again, why on earth would someone pay $3500 to pay off their loan 4 months later and lose over $11,000? Obvious, because they were scammed!
Calvin,
I was so looking forward to a brief, concise, to-the-point post. You have yet to deliver. If you spent more time on actual content than on insults and hot air (which discredits your professionalism), you might find that more people would be willing to talk. I will admit, I skimmed your posts more than read because of the unnecessary adjectives. BTW, your insults reveal much more about yourself than they do the persons you are attempting to bash.
I will give you credit, you make some good points. When I have a moment, I will look at these numbers. Again, thanks for some actual content.
Keep in mind, what works well for Joe may not work well for Jim. Your system is another option and it’s always good to have options. Every individual should look at the options available and determine which is best, be it yours, the MMA, or another accelerated equity program.
It’s been fun.
So basically, the numbers are not in your favor, EVER, so you’ll attack the messenger and then cut and run. Tail between your legs. The numbers don’t lie. The UFF does.
I will certainly agree that different things work for different people. The problem is that LYING is what seems to work for UFF agents. You’ve lied about people’s access to their equity without MMA and you’ve lied about the relative performance of MMA to prepayments.
Your reference to the “True Wealth Magazine” is a prime example of why people should avoid this crap. The magazine is about how to make money in home businesses, etc. It’s not about products that do great things, it’s about products that make money for it’s reps. I agree that there’s money to be made selling this crap. No doubt there. Enron made money too for lots of people. Certainly not a great product. 4 figure price, 4 figure commission for something with basically ZERO development cost and minimal maintenance cost. I mean the amount of code it takes to put together the UFF web interface is minimal. Get a server, and connection, and you are in business. Then deploy a MLM sales force. And the $2.5 million agents speak of to develop the “algorithm” (which isn’t even optimal in it’s performance)? It was probably coded over lunch for a buck fifty. Take a second loan, pay it back with everything you have. The concept isn’t revolutionary or groundbreaking. Since it’s slower, it’s not even evolutionary.
UFF agents always seem to run at the first sign of math….
Everyone can see, with a little research, that the software doesn’t do anything special other than tell you to prepay your debt if you want it paid faster.
Write “Send more to your mortgage” on a piece of paper and look at it once a month. That will save you $3500 and be just as effective.
Calvin, I have just see a presentation today, obviously by a UFF agent, for the MMA product. Needless to say, my wife and I left thoroughly confused as to the method and sense of the product. We do have some nominal information based on “conservative” numbers such as gross bi-weekly pay, montly expenses and mortgage balance. Can you recommend a good mortgage pre-payment calculator to compare, side by side, with the MMA system?
I must admist I was rather shocked by the $3500 tag for a product that will not be owned by me outright, but is rather a web-based system. What happens if UFF suddenly disappears along with their server? in a few years? But that is just going off on a tangent. Again, I’m looking for a simple and understandable mathematical analysis to make a rational decision and not one based on a sales pitch.
Thank you for your comments.
I use a spreadsheet myself. the math behind all this is not hard at all, but different people have different levels of math skills (and spreadsheet skills). I am more than happy to send you a simple spreadsheet with an amortization schedule set up, you just put in your numbers. (diver_calvin2@yahoo.com). I will not attempt to sell you anything (i am not even in the home/mortgage/lending industry, i’m just an engineer for a large company).
i think bankrate.com’s calculator is a pretty good start.
http://www.bankrate.com/brm/mortgage-calculator.asp
a few things to keep in mind. UFF agents will tell you their estimate is “conservative” and that users get 15-20% ahead of that. I actually wouldn’t be surprised at all if that were true. But, the more complete truth is that prepayments on your own work faster, and ANYTHING that accellerates the MMA apporach (increased income, decreased expenses, etc) will accellerate prepaying on your own as well just as much. The MMA does nothing special and you are right to question the $3500 price tag.
I would recommend this approach:
1. Set up a budget. Stick to it as much as possible. Eliminate wasteful spending.
2. Shop banks. If your savings/checking acount pays 0%, you can do better. Mine pays 5%, but I use a credit union in another state from me, most wouldn’t do that (and I don’t blame them). This step isn’t crucial, avoiding the UFF is crucial. But every penny helps.
3. Talk with your lender and find out if you can make extra payments anytime or only with your normal payment.
4. Figure out a comfortable minimum amount of money you want to keep for emergencies each month.
5. When it comes time to make the extra payment (the time of the month established by step 3), subtract your minimum in step 4 from your bank balance along with any bills you owe that month, and send the rest to your mortgage. If you know you have big expenses coming up in the following months (annual home owners insurance, car insurance, etc), make sure you will have enough.
For example, if you have $5000 in the bank, and you owe $1200 in bills that month, and want to keep a minimum of $2000 cash on hand, send $5000 - $1200 - $2000 = $1800.
6. Watch your mortgage balance go down without spending $3500.
also, if you are looking at aggressively prepaying your mortgage, you should look into getting a no cost HELOC. You will likely be “house rich, cash poor”, so get a HELOC that you can tap your growing home equity if an emergency arrises (medical, death, loss on income, etc). Do this soon, as credit is hard to get if you lose your job, whereas now, it’s not. Otherwise, don’t ever use it (like when those plamsa TV’s are on sale, resist, resist!!).
If the UFF dissappears, who knows what happens to the server/software. I’ve heard one agent say that the UFF put some money with some 3rd party that would pay for maintaining it, but i’ve also heard agents claim MIT students developed the algorithm, while others said it was GE propulsion labs, other said it was NASA. the only thing I know is I don’t beleive anything they say.
I cannot stress enough how easy it is to do this stuff on your own. Every accellerator out there revolves around sending in prepayments, which everyone can do on their own already. They just want your money.
I’m happy to answer any other questions you have.
Calvin, I see you’re taking the high road again. No surprise there.
Maybe this is something else to consider:
Let’s say that there are 1,000 people whose numbers exactly fit your scenario. If you were to tell them about a perfect prepayment plan, how many do you think would do it? I’m sure most, if not all would try. In the end, I’m guessing that you would have 1,000 different payoff dates.
I’m not suggesting the MMA is perfect plan or solution, nor is it the most convenient system. If there were a system (let’s say a loan), that performed this function conveniently, do you not think people would purchase this system?
This is the 21st century. As sad as it may be, convenience, more often than not, beats effort. Give them an option, and they will choose the path of least resistance. If it costs a little extra for the convenience, I’m sure there are plenty of those who would gladly pay.
I will give you this, $3500 is probably a rip off for those who are capable and have the will power to do this on their own. There are other accelerated equity programs out there that are more affordable and convenient.
Another thing: Exchanging anonymous insults is a game for the weak and cowardice. If you wish to continue, you’ll be playing with yourself.
Best
I like how he says I’m taking the high road, but also accuses me of taking the low road in terms of insults. These guys can never get their story straight, not even within the same post.
I will agree with Dan in that take 1,000 people with the exact same income and mortgage, and you will get 1,000 different payoff results. Of course, you will get 1,000 different payoff results with MMA as well as it’s the spending and changes in income that effects it. you will just get 1,000 results that are $3,500 plus interest behind the 1,000 prepaying without it.
I also like how he says give them an option and they will take the path of least resistance. I would call $3500 a lot of resistance.
It’s not like a 100 year old prepayment method is hard, or there’s a fee involved. Write a check each month equal to your extra income. Yeah, you are right, that’s tough. (note sarcasm). Or you could write a check for what the MMA tells you to write it for, because you’ve been told it’s optimal, even though it’s not optimal versus prepayments, and believe it or not, it doesn’t even do the MMA optimally. The optimal MMA approach will have your HELOC reach exactly zero each and every month, which means you will never draw more than your income. The very first month usually sees ~2.5 times your income in withdrawl (on top of the $3500 fee).
Notice how Dan stopped arguing dollars and cents. He knows the numbers are not on his side. If this program can’t even payoff a simple mortgage faster than a fixed prepayment schedule, do you really think it is worth $3500?
The article is a moderate at best description of this system unfortunately the author did not understand the very product they were writing about. This is not uncommon. Heck, the ‘mortgage professor’ above is in the stone age and does not understand it either.
In the ensuing comments, Calvin makes some good points but is apparently not very much in touch with the reality of most Americans (i do not mean this as an insult again he knows math very well it is simply an observation).
I have been in the financial services industry over a decade and deal with people every day who truly need this type of system. Calvin’s 100 year old method works everyone but unfortunately the majority of people do not - i repeat DO NOT - stick to it. I doubt Calvin understands this or even believes it a possibility. However, Calvin is an engineer and having many coworkers & friends who are engineers I have learned many are not wired like everyone else in many cases (this is a compliment). In particular, the better the engineer the more stringent to their ideologies (case in point with Calvin) I would not doubt he is a fine engineer.
However, Calvin is way off base.
I am not plugging anything I am speaking my experience. I am one of the people who agreed with Calvin and advised everyone to “do it on their own.” This was a mistake and I WAS WRONG. People try for a month or 2 then back to the same old habits.
Calvin is an engineer and astute with math and is one of the few with the discipline to adhere to his method. Another point to be made is many people do not want/need to payoff their mortgage. However, this again is not the majority and possibly a separate topic altogether.
Do I think Calvin should buy it? No, of course not he is doing a great job himself. On that note, of course you can do this on your own. There is no patent on math.
I agree with Calvin many agents are way off base I don’t know any industry that does not have people off base.
However, anyone reading please know this is not a ’scam’ or ‘crapware’ or any of the other ludicrous statements made. Nor is this the ‘only & best way’ or ‘miraculous’ in any manner. It is a system that works for a great many people and the ones using it are enjoying it a great deal.
This system is working for a great many people & putting them in a much better financial situation than they otherwise would have been. Again, I am not plugging or telling anyone anything besides the following:
‘This system works for a great many people. It is very little understood by even most financial planners, mortgage brokers, accountants, bankers, etc. at the moment as it is new to most Americans. If you are interested find out the good, the bad, understand what you are doing & be honest with yourself. Take everything with a grain of salt, anyone trashing the system is missing something and anyone saying it is doing anything ‘miraculous’ is out of their mind. The truth usually lies in the middle somewhere.
good luck
Rich, I applaud you for stating that this is a behavioral tool and nothing more. While I agree with you that every profession has it’s idiots, most professions seem to have them in the minority, granted, with a few exceptions. My problem is that the liars and the idiots in for this company seem to not only be the norm, but the vast, vast majority. I’ve conversed with maybe 3 people who are agents that are honest and straightforward, and educated about the product. I’ve come across literally hundreds of agents that have no clue as to the math behind the product, it’s risks, or basic financial principals (opportunity cost, present vs future value of money, etc). And that doesn’t even touch the outright lies by agents. The same ones that are present in the boilerplate presentation downloaded directly from the UFF web site (ie, this isn’t just a few rogue agents). Then there are the NASA claims, the MIT claims, the Harvard Business School claims, people making claims their spouse is a VP at a major bank and use it, etc. We all know it’s BS. If the product is so great, why can’t they sell it without all the BS? Why do 99.9999% of the claims have to be false?
I will still wholeheartedly disagree that people need a tool like this. The truth would work if they did. I know about this software because one of my friends outside of work, a low paid state employee, approached me about the product. She attended one of the seminars (free luckily), and was going to buy it. She has no real math background, and wanted my opinion since she know’s I’m honest, have a math background, and I’m also familiar with some of her financial troubles she’s had in the past. Once I stepped her through what it was doing, and how it was just a big fee to spend her own money, something she can already do, she was outraged. We set her up with her budget, when to send in extra payments if she wanted to, and she has been happily recovering from her debts ever since (it’s about a year now). She is doing just fine on her own, no more help from anyone. Why? Because she was actually sat down and learned something about her finances rather than being handed an expensive black box that doesn’t do anything but take $3500 plus interest. It’s funny to hear her giggle with pleasure when she is talking about some savings she made so she can add more to her prepayments, or put more into her kids’ college funds.
and how many people have got into this program only to run up their HELOC like they ran up credit card debts? If some of the sob stories I’ve been reading are true, the number is not zero. While it takes some amount of discipline to do this on your own, it might take even more discipline to do this through the UFF, sadly.
But, again, rich, kudos for at least telling the truth about the fundamentals of the program. It is, indeed, nothing special.
I have been researching MMA and I think I understand the concept. My question is, if it’s so great, why can’t I find a single person who is using it? I would like to hear from someone who has bought into it and is using it to testify to that it delivers what it says. The only people who are talking about it are sales people, who are not the best sources for information.
carlea, i am probably one of the biggest opponents of this system you will find out there. that said, it will do what it says it does. if you follow its directions and send all of your income to the HELOC, which in turn sends all of the extra money to the mortgage, you will pay off your mortgage in about the amount of time their analysis will tell you.
of course, if you just figure out how much money you don’t spend each month versus what you earn, and send that in with your mortgage check each month, you will get better results, because it’s basically the same thing and the $3500 upfront acquired debt isn’t there. UFF agents will just tell you that you don’t have the discipline to do that because no one does, despite the fact that many people do.
if you have $100 extra income each month, you will spend the first 35 months repaying the $3500 debt just to get back to square 1. the effect of running your money through the HELOC versus just sending the extra income to your mortgage is minimal at best, more costly at worse.
avoid this product like the plague and just do it yourself. it’s cheaper and faster.
as for finding an acutal user, on the net, they seem to be everywhere, though they seem to be salesmen as well, or salesmen posing as users. finding one in real life, not as easy.
My father-in-law is trying to sell the MMA product. My husband asked me to research it and make sure his father is not buying into a scam. I have THOROUGHLY enjoyed researching it! I’ve enjoyed reading this thread! WOW have I learned a lot!
I too have found there are MANY accelerated mortgage programs out there. While reading some thoughts entered my (far from mathmaticly inclined) mind.
I, and most of my friends, live paycheck to paycheck. We don’t have the extra $1000 a month. I’m VERY lucky if I have $100 left over after expenses. I have two small children, rising rent, gas, daycare, blah blah blah payments.
My question. If I was paying for a home and could only afford MAYBE $100 every few months to put toward the primary, am I right to assume that the MMA would be a major waste of my money?
Another observation. If I have a hard time sticking to a new years resolution, as does most of the human race, how can I expect myself to stick with a program that tells me to pay so much money when I KNOW I don’t have that money?
I’m biding my time to purchase my first home. With the real estate market today, if I don’t own in the next 12 months I’d be crazy. I’ll admit, I’m ignorant to much of what has been discussed on the thread, HELOC’s and the rates, etc. etc. I am intelligent enough to know that I can’t afford $3500 for a “plan”. In all my research I too couldn’t find a person like me using the product and NOT, I repeat NOT trying to sell it! What’s up with that?
It was funny to read Calvin catching Dan in changing numbers, etc.
Dan, explain to me how someone who will be purchasing a home, with NO money down, NO savings, first time home buyer, can benefit from this program.
THANKS!!!
Tracy in Florida
“Dan, explain to me how someone who will be purchasing a home, with NO money down, NO savings, first time home buyer, can benefit from this program.”
That’s easy, the benefit would be Dan earning a $1000 commission and the UFF $2500 profit. Oh wait, I thought you asked how THEY would benefit.
You would benefit by….. well…….um…… ok, you won’t benefit. But isn’t them getting all that profit not reason enough? I mean sure you will be $3500 deeper in debt, and anytime you have extra money to send to the mortgage you’ll have to live with it not being quite as effective had you not bought the program and just paid it yourself right to the mortgage, and you’d be placing yourself in more risk by running up HELOC debt you may not be able to pay down. But think of Dan’s children. Think of the UFF company employees that can buy new cars in exchange for providing you with….ok, nothing, but think of Dan’s children.
:)
Just to throw a twist into this have any of you researched the mortgage product backed by GMAC?
http://www.bankrate.com/brm/news/mortgages/20061102_equity_accelerator_mortgage_a1.asp
it’s the same premise as the UFF’s approach, it’s just tied together directly with your lender. it will do what it says it does. No one is saying this approach doesn’t work, the critics are just saying no one should ever PAY for this ability, because they already have it. Since the discretionary income going to the mortgage is what does all the work (read: 99.5% of the savings), just send in your extra income to the mortgage each month and have a HELOC for emergency purposes only.
the savings of the HELOC effect are so small, that anytime you actually pay for this added savings, you have already spent the savings right off the bat.
Calvin, you sound like a guy I work with called Chris. Anyway, you are just more passionate about it. I too work in a big company and make 100k a year. I have a mortgage that plans to be paid off in a little less than 5 years. I only have about $1000 in discretionary income, so you can kind of kick the big yearly money out the window. Yes, I am using the program. Yes, I signed up to sell this program. No, I have not sold the program because I just tell who ever wants to hear about it and I don’t persue it like I should to sell it. I was skeptical as well, and I when I saw the videos and saw how it worked, I had to explain it to my Mortgage broker how it worked, because like you said, they don’t know too much. Unfortunately my buddy Chris, just like you, wanted to prove to me that he could do much better by doing a spreadsheet. He added my discretionary income as principal payment every month towards my mortgage. Unfortunately I ended beating him by 2 years if I remember correctly. It was a while back. My question would be, If I only have $1000 in discretionary, how come the program told me to pay an additional $4612.81 this upcoming month. It does not make sense if all I have to do is send just what I have left over. The other thing I found out was that when I talk to people who make the amount of money that we make and have the discretionay money that we make it is so easy for us to say “I can do this myself.” I didn’t understand this at first till I realized the reason we could do this is because we have all this extra income and honestly if you put more or less than the optimal it doesn’t matter. We could recover if we mess up. But I want you to tell that to a family that together makes in a month what you and I could make in 2 weeks with a little overtime. Things change. The math becomes more difficult. It takes more courage to say they could do it themselves. It becomes more difficult, before you ask, because finances are tight and it is never the same per month. Yes, $3500 seems like alot. What I realized was this. I already had paid for the program. How you ask? Well, I financed $160,000 at 6.5% for 30 years. That is a little over $204k in just interest after it was all over. Well, what I realized was, since I am not paying this $3500 out of pocket (yes it came out of my Line of Credit) it is really interest that I am paying. Well, if it is going to save me over $170k in interest, then whatever it was I end up paying in interest using the program subtract the $3500 from it. So technically, the program was free, because I didn’t write a check out of my checking account, and those $3500, well I just took that from the interest I was going to pay the bank anyway. So, yes if it were free it would be great. Oh wait, it is free. By the way, I got the program 3 months after I financed.
Also the other thing I like about it, it works like a finance planner. Its like having my own financial planner. I could budget future expenses into it, extra savings, or any other thing that I wanted to. It would constantly update itself. The other thing it does it shows me if its better for me to put things into my line of credit or keep them separate. For example, what would happen if I put my credit card balance under the Line of Credit. What happens if I decide to pull extra money for something else. How much time do I have left if I loose my job before I run out of money.
If you are do it your way, I suggest get a HELOC now even if you dont use it. You agree that the money you put extra into your house cannot be touched again unless you take out a HELOC. You just can’t ask your mortgage company to mail you back the extra payments. So, if you were to have lose your job, that would not be the time to ask for a HELOC since they will unlikely give you one. So my advise, get the HELOC before you need it.
john, the amount of income doesn’t change a thing. the amount of expenses doesn’t change a thing.
math is math is math. whether you are talking 5% of 1,000 or 5% of 10,000, it’s still 5%. This isn’t a matter of “I have a ‘gut feel’ of the math.” This is “I’ve done the math.” I’ve done the calculations.
Why did your software tell you to prepay $4k when you have $k in discretionary income? Easy, because it isn’t smart enough to calculate opportunity cost. 2nd, how do you know $4k was the “optimal amount”? Because it told you so. The cheif minister of information also told us Sadam’s armies were destroying America’s up to the day of his capture. Just because software tells you something, doesn’t make it right.
You say the $3500 wasn’t out of pocket. Hehehehe, did you ever buy that line hook line and sinker. You have $1k in discretionary income. Well, the first 3.5 months you spent getting back to square 1 while someone else in your exact situation would have an additional $3500 PLUS INTEREST in debt paid off.
Opportunity cost SHATTERS the UFF. First, obviously the $3500 that goes to the software that could have gone to the mortgage destroys any potential savings. Then there’s the HELOC shuffle effect. Sure it can save a few bucks. Like about $1 or $2 a month versus prepayment. But to keep the HELOC interest, at it’s higher rate, from becoming a bigger number than the mortgage savings, you have to use your income to offset the balance. Well, that’s income you could have stored in the bank for a few weeks instead of your HELOC. You lost the opportunity to earn interest to save those few bucks. That lost interest is generally greater than the HELOC shuffle savings.
You can say my math is wrong. Fine. PROVE IT. Take our challenge and simulate a sample problem, start to finish, you with your $3500 software, me with a simple checking account. YOU’LL NEVER WIN! Not only will the MMA software fail by thousands of dollars, it won’t even run the MMA approach itself optimally. $3500 for a sub-optimal approach to a sub-optimal technique. Yeah, money well spent. NOT!
$3500 not out of pocket. That’s hysterical! You really bought that line? Really? Is it the fact that your bank paid them and then you paid the bank that makes you think it isn’t out of pocket or is it the fact that you paid it off over time?
Free software, congrats on a new near-low in MMA/UFF logic. I’m sure you would have no problem with them charging $35000 since it is still really free.
Again, put your money where your mouth is and take our challenge. No one ever takes it because they know they will lose.
PS. Yes, I got a no-cost HELOC the day I bought my house and never touched it. I understand the risks as well as I understand the math.
Calvin,
I have a very green question… why would you want to take out a HELOC when you first purchase a home? Man, I need to do my homework!! I feel like McCain must feel… I’ve heard ’bout all them thar big fancy financial words. Gotta do the homework.
I took out a no-cost HELOC with the intention of never using it. I knew I would be paying ahead on my mortgage to the detriment of my savings/investing. If I put $1,000 into my savings account, I can withdraw it to spend it on whatever. I always have access to that money (barring extreme circumstances). If, instead, I put that $1000 towards my house because my mortgage rate is higher than my savings rate, I can’t just turn around and tell the bank I want that money back. With a HELOC, I can, though at a cost (HELOC interest). Not having a lot of savings while having a lot of equity is dangerous. It’s often referred to as “house rich, cash poor.”
I had 6 months expense in the bank while I had years worth of expenses in equity. If I lost my job, had major medical expenses, etc, what would I do for money? I could liquidate my other investments, or I could tap my equity through my HELOC.
Anyone throwing the bulk of their savings should have a HELOC to access that equity. And they should have it now, not later. If you have a job, a house with equity and good credit, you can get a HELOC. Take that job away and your chances drop significantly.
Hope that helps.
Calvin Rocks!! Enjoyed your posts.
I just started reading about this and while I’m not a finance professional, I’m pretty good at math and at spotting a scam when I see one.
Want a free alternative folks? Here goes:
1) Go to bankrate.com or similar mortgage calculator. Plug in amount owed on mortgage and desired time to pay it off (15 years, 10 years, 8.2 years, whatever).
2) Using the difference between your current monthly principal payment and the one displayed to pay off your home in your selected shorter time period, set up a separate savings account (preferably an online one at ING, E*trade, etc. that earns a decent 3-4% rate) and then have your employer set up a monthly debit from your paycheck into that savings account for this amount (almost all employers should be willing and able to do this for free — contact your payroll department and they’ll help you — it’s very straightforward).
3) Now, in 15 years, 10 years, 8.2 years or whatever you will have saved the amount needed to pay off your remaining principal plus have the accrued interest to spend as you please. This will also give you access to your money during this time should an emergency arise.
This will take you all of 15-20 minutes of work to do and then you simply have to not touch that account until you have the money to pay off your principal. There’s no extra monthly amount to pay (since this is really just loaning the bank your money for their use) and nothing to remember to do other than to write that final check to your mortgage company once the cash is in the bank.
No math degree or convoluted HELOC scheme needed. Have a happy weekend!
Richard
What Calvin says makes sense but if your only intent is to pay off your mortgage quicker and you want to get out of debt at the same speed,,, you might want to look into something called a SMART Loan from CitiCorp Trust Bank. It is a complete refinance package with built in acceleration of principal payoff that is tailored to the home owner’s income stream. The trick is using simple daily interest with the amortization recalculated AT THE TIME OF PAYMENT as opposed to the typical scheduled interest which only allows application of principal payment on ONE FIXED DATE each month no matter how often you pay.
As an example a simple daily interest mortgage on $100k at 7% for 30 years would reduce to a 22yr 8mo mortgage saving $45.5K by simply going to bi weekly payments instead of monthly. If you throw in an extra $100 per month toward the principal it pays off in 17yr 1mo saving $70.6K.
The really good part for me was getting rid of all of my other monthly payments and saving over $700 actual cash each month which i can invest.
There is no scam or slam or jam, just a simple mortgage transaction (YES with closing costs) that saves tons of time and interest and monthly cash. I don’t think your MMA can get any better than that.
I am a very happy $MART Loan customer of CitiCorp/Primerica.
Calvin should get $3,500 from all of us…GENIUS! BRAVO! The sad thing is that G. Edward Griffin who debunked the dark truth about the Federal Reserve and the I.R.S., supports U.F.F. I have to send him an email next with a link to this thread so he can see the truth.
I am an ex-loan officer, because our banking system is made to cheat the consumer. I am an ethical person and quit the business after being in it for 6 years. Great job to Calvin. Never buy any product or service from a company that claims to be a MLM-Multi Level Marketing company. Basically they are what is called Pyramid scams that started back in the 1920’s and were taken to new heights in the late 70’s and 80’s.
Calvin: what is the name of the Credit Union you bank with?
my credit union is just a small local one, nothing fancy. always preferred them to the big banks because they pay better interest, charge less interest, and always provide great service.
WW - the product you are talking about IS basically the same thing as the MMA, it’s just more “hands off” in that you don’t have to do big money transfers yourself versus the UFF approach. Again, you are PAYING closing costs to get the Citi product that does what you already can do without spending one single dollar. At least the Citi product is more hands off, but if you are spending more than $100 for it, you are leaving money on the table.
As for statements made about UFF’s MLM aspect. I am a opponent of MLM type products, but I will say that the MLM aspect of this product is pretty small. Generally, the FTC goes after MLM type companies when the bulk of their revenue comes from “sign up” fees rather than selling actual product. UFF’s agent fees are much smaller than their product fees, and I don’t believe the fee’s are split up among some sort of upstream, they just go to UFF.
My beef with their sign up process is they require no training/knowledge/etc of their agents, nor provide any of it. My dog could become an agent if her check clears, and quite frankly, my dog has equal qualifications to understand and sell this product honestly as most of the agents out there (ie, none). “Ruff, Ruff” at least provides no knowledge, versus providing intentionally misleading knowledge that further confuses and misinforms.
Calvin,
There are no extra charges for the Citi product. The closing costs are the same as for any new mortgage, which this is. I beg to differ that you can do the same thing for yourself for freewith your current mortgage. If you have a conventional fixed rate, SCHEDULED interest mortgage, you cannot pay it off as quickly as you can one with simple daily interest. It is the science called mathematics,,, just ain’t gonna happen. You certainly can’t lump in your revolving debt on your current mortgage without getting a new first or a second. Actually the $MART loan is VERY different from MMA. The agents are licensed also (differs from state to state). I don’t know much about MMA but I have first hand knowledge on $MART and would recommend it to my own Grandmother. I know some of the flakes that are pushing MMA’s and that alone is enough to turn me off of them.
Like Stephen Covey says in his books, if it is not WIN - WIN for both the buyer and the seller it is NOT a good deal. Thanks for the facts that you presented. I think we can all see who wins (and who does not) with an MMA.
WW, in your first sentence, your argument falls apart. “Closing costs” = costs. You aren’t going to argue that one. If the rate on your Citi loan is not better than your existing loan, you are going to lose. Big time actually (meaning by thousands of dollars).
Sure, you can save a few dollars with this approach over prepayments alone, but the savings will never touch standard closing costs (thousands).
if someone is going to refinance anyways, AND the rate is at least the same as the loan they would get if not better, AND the closing costs are not more, than sure, go for it. But that’s a lot of ducks to get in a row.
You can say the difference in interest calcs makes a lot of difference, but it doesn’t. Very little in fact. It’s all about getting your discretionary income going towards your mortgage.
And yes, one can easily do this on their own without the product. I did it, 30 year loan in roughly 6 years. It’s ALL about discretionary income. Less than 1% of the savings comes from daily versus monthly income calcs. The math says that. I am more than happy to step through an entire mortgage example using the two methods.
And for the record, yes the MMA is the same as the Citi product in practice, it’s just combined the loans, which really has no effect, it just simplifies the process. Here’s a hint for you:
$200k mortgage @ 6% and $5k HELOC @ 6%= $205k debt. if you deposit $5k income into the HELOC halfway through the month, you pay 6% on $2500 for the HELOC = $12.50 for the month, plus 6% on $200k = $1000, or a total of $1012.50 interest for the month. Not look at 1 loan like Citi’s, $205k @6%, deposit $5k halfway through the month, average balance of 202,500 @ 6% = $1012.50. Interest paid is the same, whether part of it is fixed monthly or one big daily balance loan.
now, the rates are usually not the same. if the Citi loan carries a slightly higher rate than the best mortgage rate you could otherwise get, you will get screwed hard as in the beginning, your large mortgage balance sees a higher rate, which equals a HUGE cost increase.
again, the Citi product really isn’t anything different or revolutionary. Just another way to prepay your mortgage, the thing everyone can already do themselves FOR FREE.
again, if you want to compare the two approaches, you with extra closing costs veruses a mortgage with the same rate and prepayments, I am more than happy to show you it doesn’t work as well as you think (ie, you will never recoup the closing costs unless the rate is lower).
For Carlea,
We learned about the HELOC shuffle from Freedom Financial Group. We are not
selling anything and we have been doing it now for a year.
Yes we paid too much for it, but I view the cost as payment for education.
The primary advantage to using the HELOC shuffle over just dumping money into
your mortgage is access to funds. I always felt the need to keep about 10,000 dollars
socked away for broken arm insurance. With the HELOC we dumped that money
into the HELOC secure in the knowledge that we had access to funds in
an emergency. That psychological prop is huge for us.
We retired our second mortgage rolling it into a 50,000 dollar HELOC in March of
2007. Our initial refinance left us with a balance of thirty thousand dollars. Then
we dumped ALL of our savings and paychecks into the HELOC. By doing so resulted
in an immediate savings of sixty dollars a month from retiring the original second
mortgage. By May we had paid the HELOC down to zero. That First cycle instead of
paying on the primary mortgage we replaced our well pump costing us six grand.
The HELOC shuffle consists of two parts. Placing your paycheck into the HELOC to
keep the average daily balance is part one. Using your credit card grace period for
an interest free loan is part two. We purchased the well pump on the credit card and
by sheer luck were able to break the total six grand cost into two billing cycles or
a total interest free float of forty six days. We purchase EVERYTHING on the credit
cards interest free keeping a close eye on that grace period.
Our particular HELOC cycle is four months from maximum balance down to zero.
Freedom financial International teaches to respect a HELOC balance two and one half
times your net monthly take home pay. This number is your never exceed number
(except in dire emergency, for us that means injury or a funeral) Harj Gill recommends a HELOC no greater than one months salary so there is no way you
can bury yourself.
So, by August of last year we were ready for our first mortgage lump sum. We dumped a very conservative eight thousand that first time, still gaining confidence
in the system. Everything worked as advertised so in December we dumped ten grand
and come the end of April 2008 we have increased it to the level of our comfort zone
which is 15,000 dollars. At that rate we have a eight lump payments remaining over
a total of thirty three months. Our primary mortgage balance is 145300.00. But
wait, 15000 x 8 is only 120,000 dollars. The rest will be paid by interest compounding
in our favor which is roughly fifty bucks for each ten grand of discretionary income
applied to the primary mortgage.
Our original HELOC was taken out at 8.25% By keeping the balance low we saved half
what we were paying toward our second mortgage from the very start. But with interest
rates dropping as they have our HELOC is now 0.4% LOWER than our primary mortgage. We have used this to our advantage by increasing our never exceed number on the HELOC from 15,000 up to 20,000 without increasing the monthly interest payment which cycles between twenty five and seventy five dollars a month.
We only apply 15,000 to the mortgage. The remaining 5,000 is reserved for other
family projects.
The primary advantage to this system is a change in the way you look at your money. Rather than seeing your money month to month I now look with a big picture
view. If you ask me how much money I have I will tell you I am flat broke. This
is true because regardless we have in our pocket or in a savings account we still are
145300 dollars in debt. We have no money we are in debt. This view discounts what
the house might be worth if we sold it because that is potential rather than in your hand.
I believe in this system and would like to see the IDEA taught to every high school
student in the country. Then they can use it or not as they choose. Had I known of this technique twenty years ago I would be retired today owning 4-5 decent properties
paid for free and clear.
I paid five grand for the education. You have it for nothing so you are that much further ahead of me. For the naysayers, I will be free and clear in thirty three months.
Will you?
Calvin,
- WW
Thanks for the “know it all” attitude you have adopted. Obviously you could not be convinced by facts if they bit you in the butt. All I know is what the SMART Loan did for me and that it is NOTHING like the MMA. You retain your opinions and I will retain mine but I don’t think it behooves either of us to bad mouth someone elses product that we know virtually nothing about. Until you are well versed and up to speed on the product from CITI, you might want to be a little careful what you say about it. The largest corporation in the US just might not take kindly to your remarks.
BTW
The RATE does not matter as much as the TIME you are exposed to the rate. Total Interest = Rate x Time. And yes 5% for 6 years is a lot less than 5% for 30 years or 7% for 15 years. The BIG question is,,, Who has enough discretionary income and DISCIPLINE to accelerate a 30 year to a 6 year???? Not many I would imagine.
WW, you don’t by any chance imagine that it is you that don’t understand the product?
Time exposed to the rate…. that’s what I was showing you with the math. This isn’t a “know it all” attitude, it’s just a simple mathematical explanation.
i was trying to show you that the minimum balance for your SMART loan is exactly the same as a fixed rate loan. If your balance fluctuates between $150000 and $155000 over the course of the month, $150000 is charged the full rate for the month while the other $5000 will depend on how much time it spends at various balance levels.
As for who has the discipline to do a 30 year loan in 6 years? Anyone that wants to. I did it, and I know plenty of others who are doing the same thing. But many don’t because they don’t want to prepay the cheapest loan they will ever get. And a person can spend as frugally or as aggressively with the SMART loan the same as credit cards or anything else.
You think Citi is going to come after me for explaining the math behind their product? And who’s bad mouthing it? Not me, I’m just explaining how it works, which is basically the same as the MMA product, just a combined mortgage/heloc versus separate. I don’t think it’s worth it, just like I don’t think MMA is worth it. But Citi isn’t out there saying yourcashflow doesn’t change, no extra payments made, etc. UFF is, so I bad mouth their product lightly, their price heavily, and their agents infinitely.
You say “All I know is what is did for you, and it’s not the same.” Fine, explain the difference besides the details I pointed out, math included.
I have actually sat here and read this whole blog and I have to say Dan has composed himself with professionalism and integrity.
Maurice,
Pyramid scams?
Exxon CEO, their employees, the supplier, the tanker driver, the store owner, the store clerk , the consumer. Is that a pyramid?
Real estate- National company, Regional brokers, the broker, the agents the buyer. Is that a pyramid?
Insurance- National company, regional broker, agents, secretary, consumer.
When you think about the structure of a typicle corporate American business, it is shaped like a pyramid, someone always at the top and many of us at the bottom. So, I guess all businesses are a multi-level marketing scam. Why? Because you buy things you want (not need) based on multi-level “MARKETING SCAMS AND SCEMES” put in front of you everyday through advertising and marketing most generally you are unaware of. Get a grip lady!
Calvin,
You are a math geek that has no common sense. You are absolutely pathetic. The MMA is simple math and beyond your understanding. You are what we use to call people in the Military- Nukes. Something so simple you have to nuke it to the point of not understanding the basic concept.
The person who wrote the MMA is a real math engineer that wrote a 27 page algorithm to create an optimal system that would help determine the precise time to make an interest cancellation payment. Simple banking principles that the banks use and recognize. I have seen the MMA, I am using it, and in 6 months, I have cancelled the $3500.00 fee by paying over $15,000 to my principal and cancelling over $30,000 in interest. The average monthly interest paid on the HELOC was 46.00-60.00. So Mr. math man, you can say what you will, I am living proof that yes my 225,000 house is on schedule to be paid off 100% and the HELOC 100% and my and my car 100%, in 12.9 years. Saving me almost 170,000 in interest paid to the bank. I know quite of few people who are using it now and they are greatful that it has been put to use in their life. It is not for everyone and yes you simply can make payments to your mortgage every month and pay your house off earlier. Not like this! Most of us are not disciplined to make extra payments let alone manage our finances efficiently. Even if I stoppped using it now, my $3500.00 investment, which didn’t come out of my pocket, it came from the HELOC, has gave me a heck of a return on my investment. Do the math and tell me where you can get a return on an investment like that. By the way, my HELOC operates as a checking account, I use e-pay and had no closing costs.
For all of you out there that believe in the thirty year, forty and now fifty year mortgage……….stop and think about it. You were so eager to buy a house knowing that you were going to pay back twice as much. This concept was created in the 1920’s by a two men, one a mathmatician, with the concept that homeowners are just a commodity and the rules would be set by the lenders and the consumers would be kept in the dark. The so called credit lenders would leave you with no choice but to play by their rules.
Unfortunately for them, the rules have changed over time and new opportunities have come about. Still, we as consumers have been trained to think it is ok to give our paychecks to the banks every month. No matter what way you look at it a 30 year mortgage is a lose /win situation. The bank wins and you lose. Why? If you paid your mortgage off in the 30 year term, let’s use a 200,000 mortgage at 6% interest at roughly 1200.00 a month, you would pay back 432,000 in total debt to the bank. Get your mortgage note out and it will tell you what you will pay at the end of the term. Why? It is compound interest, that’s why.
Regular Payment Schedule MMA Payment Schedule
$200,000.00 $20