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United First Financial Money Merge Accounts: Scam or Legit?
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A reader recently sent an email asking about a program United First Financial runs called a Money Merge Account and whether it was legitimate. United First Financial promises that the program, which costs $3500, would have you pay off the mortgage in one-third to one-half the time it normally would take. Knowing nothing about money merge accounts and knowing a little bit more about simple math, I smelled a fat $3500 scam brewing. The only scenario in which I could see $3500 cutting your mortgage in half is if you had a $7000 mortgage. But, setting my mental scam alerts aside, I did some more research about the plan.
Apparently it’s a fancy name for an accelerated mortgage repayment scheme. The first step in the money merge account is to take out a second mortgage on your home, a home equity line of credit. Then, what you do pay your entire paycheck towards the first mortgage and withdraw money from the HELOC to cover your expenses. You save a little money because the interest on a HELOC is calculated based on average daily balance rather than the final monthly balance. This lets you pay off more of the mortgage at the beginning of the month and then be charged less interest on the HELOC. (this assumes the same interest rate, which is a big flaw)
However, the plan also has a lot of other assumptions and flaws.
- It assumes that your HELOC interest rate will be the same as your first mortgage interest rate – very unlikely. The bigger the HELOC rate, the less you save on that difference.
- It assumes a single monthly paycheck so it’s a plan that loses some of its power if you are paid irregularly or every two weeks.
- One big flaw is that there is never discussion of HELOC fees. I’ve never opened a HELOC but I imagine it’s not free.
- This plan requires that you don’t save at all for anything else. Since your entire paycheck goes towards the mortgage and you withdraw expenses, it penalizes you drawing on the HELOC for non-essentials. Why pay $100 towards a 6-7% mortgage and then borrow $100 from a 10% HELOC?
- Finally, as if all those weren’t enough, you have to pay $3,500 for a program to help you do this!?
In researching this article I researched a lot of sites and they were nearly unanimous in their opinion that these types of programs are not worth the money (not surprisingly). They’re not scams in the sense that you pay your $3500 and they disappear into the night but it’s something you can do yourself.
This begs the question, should you use it to force discipline? I could justify paying $100 to enforce discipline because it can save you quite a bit in the long run, if you can overcome the failings, but $3500 is ridiculous. If you have $3500 and you want to pay off your mortgage sooner, send a $3500 check to your mortgage company. (if you want a legitimate and easy way to pay off a mortgage faster, consider making mortgage payments every two weeks)
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MMA Software User,
To further go into your point of your $500 in discretionary income that you are plugging into the calculator:
perhaps you owe $4000 on a credit card in which you pay $200/mo. Once that card is paid off in a few years, according to UFF you will have $700 in discretionary income. If you have a few other cards like that you could end up with a whole lot more in discretionary income.
UFF automatically takes the $200/mo that you were paying towards the card and puts it towards the mortgage. The same thing happens with other debts as they are paid off.
This is why your simple calculation on the mortgage calculator is not outperforming the UFF software. You must take into account when the debts are paid off, and when those payments that were going towards other debt, are now going towards your mortgage.
Again I will stress that the interest cancellation approach that UFF uses can save you a few dollars each month, but what UFF does not tell you is that it will never be enough to overcome the $3800 cost.
If I were you I would contact UFF and ask for your money back because of false advertising. Also, If they give you a hard time, goto the Better Business Burro and make a complaint.
MMA Software User said:
“However, the main point I was trying to make was before buying the software, this money wasn’t doing anything for me just sitting there all year waiting for me to have to pay a long term bills. Now, with the MMA software, I feel like that money is somehow helping me to pay down my mortgage. Am I wrong?”
I suggest you go back and look at the UFF guys initial prediction. A guy did an analysis for me and secretly checked the “bi weekly” paychecks option and low and behold beat my numbers. I could not believe the results and did a annual cash flow analysis and found the program was applying more money to prepayments than it was supposed to . The “Bi-weekly” payment ends up giving you 1 more month paycheck. Once I pointed out the “error” to him he stopped communicating with me.
I highlighted this “oversight” on one of my webpages. http://www.amquix.info/mma_mlm_1.html
Do you have your original analysis from him? We could look at it and see what went wrong.
Scott
mma user I posted my actual mortgage interest rate that it is 5.75% started on 5 June 2005 and 718.32 discretionary income. It doesn’t matter but in what you quote I was new and making hypothetical of 7.5% with $900 discretionary income. Also instead of 3.9% HELOC for first 6 months I can get 2.9%. You can see here what I already posted and JimmyDaGeek gave me his analysis.
What if your HELOC interest rate starts at 3.9% for 6 months, then is 1% below prime after that and your mortgage interest is 5.75%. My mortgage was $185,000 that took out in June 2005. My monthly mortgage payment is 1079.61. Is the UFF system good for this since the HELOC interest rate is lower than mortgage interest rate. Bills average $3785 per month with house payment. This includes tax and homeowner insurance I don’t pay with mortgage payment. Net income is 4503.32 per month. I have discretionary income of 718.32 per month. This is average and some months are different. Before I have been putting this in savings account for 2.42% interest. What could happen if I use this instead to pay to mortgage or if I buy UFF software and use it to pay into HELOC so I can pay more down on mortgage faster. My balance in savings is 4414.22.
I don’t want to contact a UFF agent because you say it is a painless process but maybe it is not for me if he tries to twist my arm to buy. I’m sorry but that makes me uncomfortable and nervous when people do that. They try to make me look stupid for not understanding something simple and I don’t like that. Maybe you can take my figures and get your agent to do the analysis. Thank you. You have some good things to say and I like that you will see that someone can do this on their own if they want to like changing the oil filter.
JimmyDaGeek thank you for your correction. So what you are saying is if I send in my discretionary income to my mortgage principal each month instead of using HELOC shuffle I will pay off my mortgage in 134 months and if I also send my savings to principal I will pay off my mortgage in 129 months. You also say if I do this with HELOC shuffle I will save maybe $2000. Is this what you are saying? If this is so I would like to know how you made this analysis so I will have it to compare. Thank you.
Bonhoeffer,
I am an UFF agent and just got caught up on 5 days of reading the thread. If you want your numbers ran, I will work on them. I am not sure how to post them publicly but I will try. I am not a MATH person so everything that these guys talk about, personally, amazes me because they make it look so simple.
If you already had it ran please tell me so I don’t re-run them. I also do not want to get “kicked around” on this thread either. I believe if you do not have the discipline yourself then the software is good for you. If you can follow the spreadsheet and save the money, then do that. No arm twisting.
WhackAShill let me start with you by saying you tell me I have now seen the math so it is much easier to skip the interest cancellation and just send extra money. JimmyDaGeek made $31,000 mistake in his math then he corrected it. Then he gave me figures but also said I will save $2000 with HELOC shuffle but he just gave me his figures and did not tell me his precise math and how he came up with these figures so I can compare them. So I will wait until he gives me this before I will think I have seen the math.
Then you tell me we are not discussing car dealers. We are discussing how UFF agents scam people out of $3800 for a useless product. I am sorry to say this but we are also not discussing Jiffy Lube or apple orchard. When you try to make your point by bringing something else up it is ok. When I do it is not ok. Also you make many judgmental comments like useless product and scam. May we be civil and fair in our discussion. Also you keep saying $3800 and JimmyDaGeek and others say $3500. This is very small point but worth noting.
Then you say at least banks disclose the interest rate and all that information up front. I do not agree. They give you fine print documents but they do not tell you how interest is compounded and many other details. They are in business to make money from you by giving loans and using your money for them to make interest so they don’t want you to know all that information. Maybe I am wrong about some of them but I don’t think so.
You say that UFF claims that they save you hundreds of thousands of dollars, when in actuality, it is the “clients” own money that is saving the money. What I read in this discussion board is that UFF people are not saying it is not your own money and that maybe this product will help people with discipline who need it instead of going bankrupt or losing their home.
What I am sorry to say I find most offensive is that you say to me Bonhoeffer perhaps the jiffy lube definition was a little confusing for you. What you are really saying is Bonhoeffer you are not very smart to be able to understand this so I will talk to you about the apple orchard. No it was not confusing at all to me. I made my point because I thought your talk about Jiffy Lube only made sense if you carried the logic out farther.
WhackAShill please I am not mad at you. I just do not understand your methods for trying to prove your point and I do not understand that you think everything you use as method is good but another persons method is not good.
Jennifer you have my information so please yes run those numbers and tell me how much interest I save and how long until I pay off my mortgage if I use UFF. You can post it here because I think it is good for everyone to see either way. Thank you.
My post disappeared. I will try again
Ok…I have tried posting the results 3 times but it is not showing up?????? Sorry!
To Everyone:
I don’t have any credit cards which I am paying off. (I always pay the one I have in full as I stated in an earlier post.)
I don’t have any car payments. I’ve always paid for my cars in full and then drive them for as long as I can. Cars to me are not a good investment, they depreciate the moment you drive them off the lot. I typically try to buy a used car. But either way I pay the car off when I buy it.
ALL of my bills are recurring expenses: Utilities, Phone/Cable/Internet, Insurance, Property Taxes, Garbage, etc. Bills which AREN’T ever going to be paid off!
So, I don’t believe that I’m going to suddenly have extra money to pay towards the mortgage in the future. Plus, yes, I get paid Bi-weekly. The software has a place where you check “apply extra paydays to mortgage”. If you choose to check this box then the software will re-calculate and pay more towards the principal. If you don’t then it won’t! Simple!
Bonhoeffer,
I hope you are able to get the numbers for your analysis from both JimmyDaGeek and Jennifer. It would be great if you could post your numbers here. If the software will work for you – I’m happy! If going about it on your own work better, that wonderful, too. It just would be benneficial for folks in general to see a real life comparison and example of both systems. Then, they can use this information to make the right decision for their individual situation.
Jennifer,
Just take the numbers I posted and tell me results of your analysis like how many months to pay off mortgage and how much interest saved. Maybe you can tell more information without posting the actual analysis.
Jennifer are you saying someone is removing your results before it can be posted?
Your points are seem logical but as a mortgage broker for the last 18 years they only make sense to people who don’t know financing…which seems to be the majority of homeowners even with all the information on the internet. e.g. The biweekly plan has been around for quite a long time now and that saves interest and builds more equity quickly like what the Money Merge Account does for people but the biweekly plan does so in a less effective way (the savings are 6-8 years on average vs. MMA 22 years saved)…BUT…and this is the real issue…less than 3% of homeowners now take advantage of a biweekly payment plan…AND THAT’S FREE. Whether the MMA was $100 or $3500 the ROI – return on investment is tremendous. You can do a biweekly for free and save 6-8 years of your mortgage OR you can pay $3500 and save 20-22 years off your mortgage. So the question is…are you (author included) doing anything now to pay less interest like this? If not why not? Does it make sense not to pay $3500 AND not save 20-22 years of interest off your debt/mortgage if your not doing anything at all? Are you saying you’d rather “save $3500 or pay it to my mortgage 1 time” and not have any or very little benefit? Bottomline…most homeowners…more than 97% are doing NOTHING…even when it’s free…to pay less interest. It seems that paying for something…like when we we’re taught when we we’re younger…we appreciate more what we pay for….AND we get what we pay for.
I have no idea why it isn’t posting. I see that other people have posted links but mine is not working. Here are the numbers
$118,767.66 interest savings
10.8 Years payoff in June 2019
$58,722.15 interest paid
This is based on a 2.9 HELOC so if you want that increased to whatever you think the average will be…I can do that.
The actual software will allow you to change that interest rate as it changes at the bank.
I hope this helps.
JimmyDaGeek according to your analysis if I pay my discretionary income each month I will pay off my mortgage in about 11 years and 2 months with HELOC of 4%. Jennifer if I use UFF softwaware I pay I pay my mortgage off in 10 years and 8 months about with HELOC interest of 2.9%. If I don’t use UFF software I still have $4000 about in savings I think, or JimmyDaGeek do you show I am using that. If I do use UFF software I also still have $4000 in savings but if I pay for software with savings I only have $500 left but it changes pay off date if $3500 is not financed into system so I still need some more information.
It seems to me that there is not much difference whether you use software or not. If this is true I see product as harmless but not necessary to get the same almost results. So I think that I will not get the software but I will not think people who get it are dumb people. Maybe it can help them get on path to pay off their mortgage so if it does not misuse their money or cost them more how can it be bad for some people. I do not see that it is good for me but I do not see it will hurt people like other financial dealings can do to them.
So the title of this discussion board is about if UFF is legit or a scam. I would say after looking at this and reading from all people that it is not a scam and it is not taking advantage of people like some other programs do that makes them do foreclosure and lose the real estate investment all together. But it is also guilty of making big claims that cannot be true like many other programs do too. So my conclusion is that the system does what it says it will do and nothing more than that but you can do almost the same thing without the system just like you can change your own oil instead of taking the car to Jiffy Lube.
I still will like to get the precise analysis from JimmyDaGeek and to know if he is using my savings and I would like to know how using my savings to pay for the software or financing it with my HELOC would change Jennifers analysis. Thank you to everybody for your patience with me.
Kenny Said:
“Your points are seem logical but as a mortgage broker for the last 18 years they only make sense to people who don’t know financing…which seems to be the majority of homeowners even with all the information on the internet.”
If people want to pay off their mortgage early themselves they can just pay extra each month with their regular payment. No tricks to it, pay more, save more. UFF attempts to hide this fact and makes it seem like it is hard to do, it is not.
“e.g. The biweekly plan has been around for quite a long time now and that saves interest and builds more equity quickly like what the Money Merge Account does for people but the biweekly plan does so in a less effective way (the savings are 6-8 years on average vs. MMA 22 years saved)”
Homeowners can achieve better results by paying down the mortgage themselves, this is easier then using UFF. If they want to track their progress they can use Microsoft Money or Quicken at 2% of the cost of UFF.
“…BUT…and this is the real issue…less than 3% of homeowners now take advantage of a biweekly payment plan…AND THAT’S FREE.”
Many homeowners have other debts to pay off first that have higher APR, many homeowners invest their extra money earning more then the APR of their mortgage. Paying your mortgage early is not always a good idea.
“Whether the MMA was $100 or $3500 the ROI – return on investment is tremendous. You can do a biweekly for free and save 6-8 years of your mortgage OR you can pay $3500 and save 20-22 years off your mortgage.”
Or you could do it yourself more easily and save even more money. The return on investment is less then $0 when you compare it to doing it yourself.
“So the question is…are you (author included) doing anything now to pay less interest like this? If not why not? Does it make sense not to pay $3500 AND not save 20-22 years of interest off your debt/mortgage if your not doing anything at all? Are you saying you’d rather “save $3500 or pay it to my mortgage 1 time” and not have any or very little benefit?”
I do not pay extra on my mortgage because I am paying off higher interest debt first. Many people would not pay $3500 for a product that they could easily replicate with a calculator. If the HELOC shuffle truly saved 20-22 years off your mortgage I would be the first to buy it, however it is the discretionary income that is doing the savings. I can simply use this money myself to pay off my mortgage If I wanted.
“Bottomline…most homeowners…more than 97% are doing NOTHING…even when it’s free…to pay less interest. It seems that paying for something…like when we we’re taught when we we’re younger…we appreciate more what we pay for….AND we get what we pay for.”
You don’t get what you pay for with UFF. People that buy the UFF product believe that the HELOC shuffle is saving them 20-22 years of their mortgage. They do not realize that the analysis that UFF gives them takes all their discretionary income and puts it towards their mortgage. This is something that they can do themselves more easily, and for free.
Jennifer,
Can you think of one scenario where the UFF software can outperform simply sending in your extra money each month? We have run several scenarios and UFF has yet to outperform the simple do-it-yourself system.
Bonhoeffer said:
“It seems to me that there is not much difference whether you use software or not.”
After analyzing several scenarios UFF usually takes at least 6 months longer and costs the user $10,000-$20,000 more then doing it yourself. Doing it yourself is easier and takes less time the the software.
“If this is true I see product as harmless but not necessary to get the same almost results. So I think that I will not get the software but I will not think people who get it are dumb people.”
The people who get the software are misled by the agents so I would not consider them dumb, just misled.
You have done your homework before you decided to not get the software, good job! How many people do you think just blindly trusted the UFF agent and lost $10,000-$20,000? I have a feeling most of the people who bought the software did not know they could get similar or better results for free by doing it themselves. This is why UFF is a scam, they hide the fact that you can easily do it yourself for free.
“Maybe it can help them get on path to pay off their mortgage so if it does not misuse their money or cost them more how can it be bad for some people.”
People do not buy it for that reason, they buy it because they believe the software is actually saving them $100,000 or more in interest, as you know it does not do this.
“I do not see that it is good for me but I do not see it will hurt people like other financial dealings can do to them.”
It is not good for anyone, think about those who buy the $3500 program and then find out later that they could do it better for free, don’t you think they would feel ripped off?
“So the title of this discussion board is about if UFF is legit or a scam. I would say after looking at this and reading from all people that it is not a scam and it is not taking advantage of people like some other programs do that makes them do foreclosure and lose the real estate investment all together.”
I disagree, it is a scam because agents lie to the people that buy it. Its no different then a car salesman telling you that a car gets 100 miles per gallon when it actually gets 15 miles per gallon.
“But it is also guilty of making big claims that cannot be true like many other programs do too.”
The claims are so deceptively put together by UFF that it is obvious their intention is to scam.
Definition for you:
A confidence trick or confidence game, also known as a bunko, con, flim flam, gaffle, grift, manipulation, ploy, power play, scam, scheme, stratagem or swindle is an attempt to swindle a person or people (known as the “mark” or sometimes “griftee”) which involves gaining his or her confidence.
“So my conclusion is that the system does what it says it will do and nothing more than that but you can do almost the same thing without the system just like you can change your own oil instead of taking the car to Jiffy Lube.”
The system does not do what it says it does, you know that!!
You can do better without the software, the software only slows you down.
Bonhoeffer
Here is a link to an interactive spreadsheet. I’ve already set it up with your numbers:
http://spreadsheets.google.com/ccc?key=pszjmlNnSFKgsNpkCb9sHSg&hl=en
I did not use your $4400 savings. I used 4% for your HELOC because you said you were getting prime – 1%. Prime is currently 5%. The HELOC shuffle savings is on the “No HELOC Payoff” sheet. Look at the bottom. If you want to use your savings account, subtract $4400 from cell B8. You need to ask Jennifer why she used 2.9% for your HELOC when interest rates are going up and not down.
WhakAShill,
I have made my assessment and I am comfortable with it. I cannot see with UFF it takes at least 6 months longer basing on the analysis of JimmyDaGeek and Jennifer and it costs $10,000-$20,000 more then doing it yourself unless you are saying that either JimmyDaGeek or Jennifer or both are not giving honest analysis. From what I can understand myself I do not think this is so.
I cannot see that the agents are trying to mislead people and they are lying as you say but I have not talked to any agents in person just on this discussion board. This is something you cannot know for sure but you want to believe that because you have already decided that is what you will think and probably nothing will work to make you think different. What is the expression. You are entitled to your opinion.
You say it is a scam because agents lie to the people that buy it. I will say again that you do not know this you just want to think this because you have already decided. Well I have already decided what I will think too and I will not think this about people so please do not tell me what I know what I do not know as you did. I thought this was about the software and not about the people who want to use it or want to sell it. What is the expression there is no such thing as an honest salesman. I know that is meant to be a humorous expression but it tells a truth that anyone selling anything can be looked at as not being honest. Even someone trying to sell himself as being smarter than everyone else.
Jennifer what is your analysis if my HELOC is 4%.
JimmyDaGeek thank you I will look at your spreadsheet. It seems that it makes little or no difference but I will wait for Jennifer and I will compare that to your spreadsheet. I might be a few days before I can come back because I am traveling this week.
Bonhoeffer,
Here are the stats for the 4 % HELOC. I am not sure how the program would use your money that is in savings. I have the $3500 coming out of the HELOC on day one.
Interested paid $60,117.23
Payoff 10.9 years
That is a difference of $1,395.08 from the prior analysis of HELOC at 2.9%
We are told that these analysis are not as accelerated as they could be. Meaning, the pay off and savings is potentially more once the client gets on the program and sees how “little changes” in their in coming and out going of money, make big differences in the long run. I am personally ahead of schedule due to seeing my software on a daily basis.
Wackashell– go ahead and run the numbers based on sending the full discretionary income to the mortgage. Does it beat MMA?
let me know if you want anything else.
I am sorry you guys….I just looked at the spreadsheet and noticed that I made a mistake.
I was starting with a mortgage balance that was too high. I re-ran the numbers based with a mortgage balance of $176,970.67 and this is what I came up with:
Interest paid $58,560.60
Interested saved $112,103.62
Pay off in 10.8 years
It looks like the MMA beats the spreadsheet by $2731. That is also including the price of the software already.
Am I right to assume that if you can beat doing it by yourself by even $1, that the software is WORTH the price. It is already figured in so in Bonehoffer’s case, he is beating it by $2731 while also enjoying the “extras” of the software.
Am I wrong?
Ok…I am having posting problems again so if this is posted twice I apologize.
I made a mistake on my numbers above. I was starting with a mortgage balance that was too high. I just looked at the spreadsheet and realized that.
These numbers ase based on a mortgage balance of $176,970.67 with 322 months left :
Interest Paid $58,560.60
Interested saved $112,103.62
Pay off time is 10.8 years
This is including the cost of the software already.
That seems to differ from the spreadsheet by $2731.00 in interest costs plus the interest on the HELOC of $901.58. That equals $3,632.58 in interest that is being paid in extra that the Money Merge Account is not paying.
In Bonhoeffer’s case, he would benefit from using the MMA by $3632.58 while already investing the $3500 for the software.
On top of that, getting to use all the extras that the software brings to your daily life while dealing with your finances. Why would that be a SCAM?
To Everyone,
I looked at the spreadsheet and right off the bat I realize you are just using the HELOC loan to borrow money from. It now makes a lot more sense to me why people keep saying it only works to borrow money off the HELOC if the interest rate on the HELOC is lower.
** However, I don’t think this example is a good comparision to what the MMA software system does. **
1. With the MMA software system you deposit your paychecks in to HELOC system and pay your bills out of the HELOC system. This keeps your average daily balance low, leading to lower monthly interest charges. Allowing
2. In the spreadsheet, you don’t use any specific “timing” of the draws from the HELOC to apply to principal. You have set it up to just dump a set amount of money towards the loan without ever varying. Its the same dollar amount you would put over if you were paying the principal each month, though instead you are just paying it every six moths. With the MMA software, this principal payment varies. Its an ever changing amount and it doesn’t go over at set intervals.
3. Your situation doesn’t account for any unexpected change in financial situation. With the MMA software, if you want to do a small remodel project like build a fence our install a sprinkler system you can. Just plug in the numbers and it will tell you how this project will effect your mortage payoff. I wonder how your senario would play out if somone decided not to make the principal payments for 4-6months? It may not effect it much but I was just curious.
4. One last advantage of the software is it gives you the ability to set up a monthly expense budget. Each month you can see if you are under or over budget. It does make you more cautious/responsible about your spending habits. I guess what you are paying for is a financial organizer, plus a plan to get your mortage paid of sooner.
That all being said, if people feel they are disciplined enough to stick with the additional principal payments on their own, have no need for fancy software (financial organizer) and don’t want to pay for the software fee, than don’t.
However, if in the end the MMA software does work and maybe can even beat the numbers here or sometimes come close, with the added benefits I mention above, then maybe to some it may be worth the investment.
One final point. Most of the time the MMA analysis gives you a conservative projection for paying off your mortgage. I know I was told a specific number of years and now that I have all my numbers plugged in, I am beating those numbers by 1/2 the time the original analysis gave me.
99% of HELOC’s are at a higher APR then the mortgage APR. Can you tell me what bank is offering HELOC APR at prime -1? Are you sure this will not adjust and is not a promotional rate?
If the HELOC account is truly prime -1 and the APR of your mortgage is above that, the HELOC shuffle will create a slightly better savings.
The problem is 99% of HELOC accounts are at a higher APR then the first mortgage.
UFF is more complicated then doing it yourself, so the slight savings in this rare case may still not be worth the trouble.
Bonhoeffer
I expected MMA to beat do-it-yourself, because the HELOC interest rate is LOWER than the mortgage. If the HELOC interest rate were to stay that way, I would borrow enough money from the HELOC so the discretionary income would only pay the interest, and not pay off the HELOC until the mortgage were paid off.
Unfortunately, the HELOC interest rate is not fixed. So how much can be safely borrowed if the HELOC rate rises? The most conservative amount would be that much that can be offset by the HELOC shuffle. But that reasoning only makes sense when the HELOC interest rate is greater than the mortgage. So, the next logical amount would be the above amount +plus+ one month’s discretionary income, assuming you would only need one month to pay down the HELOC to a manageable level.
But, if you were going to gamble and maximize your savings now, it would be some multiple of the monthly discretionary income now, which would be used to pay down the HELOC later. So, instead of paying down the HELOC in one month, it would take that many more months, incurring extra interest charges.
If you go back to my spreadsheet, there is a tab at the bottom marked “No HELOC Payoff”. This represents a do-it-yourself HELOC shuffle. The assumption is that you borrow an amount equal to your take-home pay. The payoff is done in 132 months – 11 years and the total interest paid is 60870.76. If I double this borrowed amount, the payoff come in 130 or 131 months (there is an error in the spreadsheet that I haven’t fixed) and the total interest paid is 58832.55. And Jennifer is claiming an number even better than this, including the $3500 MMA cost. Did she also include your $4400 savings account?
JimmyDaGeek,
I’m in my hotel room and will be here for a few days but I cannot get to this information as I usually would because of meetings. I do not think Jennifer’s analysis includes the $4400 from savings. Is this true Jennifer? Jennifer’s analysis also has $3500 being borrowed against the HELOC.
WhackAShill,
You say 99% of HELOC accounts are at a higher APR then the first mortgage. Can you show me where you get this. All you have to do is go to search engine and you will find many banks offer HELOCS for prime or less. Where do you get your 99% number? Here is just one link for AIG. This is prime minus 1.01% which is 3.99% today and not introductory rate. You can also call AIG at 866-694-2769 to see if this is true.
http://web.aig.com/2008/bnk7176/bnk7176_heloc.html?KNC-Google-HELOC&HBX_OU=50&HBX_PK=heloc
On bankrate.com it says “The average home equity line of credit — or HELOC — rose 3 basis points, to 5.59 percent.” So average just went up 3 points this week and I would say average is still below most mortgage loans.
I actually can get HELOC for 2.99% for first 6 months then prime minus 1% after that but it might be better to lock in 3.99% if I decide to get HELOC.
WhackAShill can you please tell me where you get 99% figure. If your family really owns those Coldwell mortgage companies you said they do I would think you would know that that 99% of HELOCS are NOT higher interest than first mortgage not even close. What will you say to this WhackAShill.
Jennifer thank you for your analysis. No I do not think it is a scam. I like to see things on both sides with no calling names. I will look at this when I have some time . Thank you Jennifer and I will talk to you again.
“I actually can get HELOC for 2.99% for first 6 months then prime minus 1% after that but it might be better to lock in 3.99% if I decide to get HELOC.”
How much are they charging to startup the HELOC? You should figure that cost into the analysis as well.
If you can get a HELOC at 3.99% why don’t you just pay off you whole mortgage with it?
WhackAShill to answer your question they would charge nothing for startup – no application fees and no closing costs and nothing else. Did you look at the link or did you call the phone number I gave for the AIG HELOC details or did you read what bankrate.com says about HELOCS that contradicts what you said. How can you be so wrong and say that 99% of HECOCs have higher APR than first mortgage and then expect that we accept everything else you say.
Also to answer your question if you can get a HELOC at 3.99% why don’t you just pay off your whole mortgage with it. Do you think I can get a HELOC for that much money. The answer is no because I do not have that much equity in my home. Very few people I think would be able to get that much of a HELOC. I do not know how you and your family can own all of these Coldwell mortgage companies and you not know these answers. What will you say to this WhackAShill. I am not mad at you but I cannot understand how you come to your conclusions about so many things I have read that you say.
Bonhoeffer, WhackAShill is suggesting you call up AIG and transfer your entire mortgage to the AIG HELOC at 3.99%. You can use a HELOC for a mortgage – I did. I had a large HELOC. I never borrowed from it, but it was there if I needed it, and I got a better rate on my HELOC than the bank would give me for a traditional mortgage (they were counting on me borrowing from it at a higher rate). Paid biweekly as well. Prepaid as much as possible to pay it off fast, too.
The problem you may find is, very few will qualify for the 3.99% rate. Look at the asterisk (*) beside the rate. Find the “Click here” link next to the other asterisk on the page. Here is some of what you’ll find:
“Not all customers will qualify for the lowest rate.”
“Home equity lines of credit have a $49.00 annual fee.”
“A reasonable range for these closings costs is $50.00-$1,800.00.”
Point is, if you didn’t qualify for a good mortgage rate, you probably don’t qualify for a HELOC rate of 3.99%. If you do, then great. Transfer your whole mortgage to AIG, as long as the penalty isn’t too severe. Either way, you don’t need the MMA.
Craig,
Where I can get my HELOC locally this are no fees. I cannot get more than I have equity. I have excellent credit rating so qualifying is not a problem.
WhackAShill I apologize I did not say this but you can negotiate HELOC rates so you don’t have to pay startup fees. If many banks know you are comparing they will try to get your business.
“WhackAShill I apologize I did not say this but you can negotiate HELOC rates so you don’t have to pay startup fees. If many banks know you are comparing they will try to get your business.”
Does playing the HELOC shuffle game with a low APR HELOC, like your 3.99%, come out ahead of just transferring as much as you can from your mortgage to the HELOC account, after which you pay the higher rate mortgage off first? This seems much simpler then the HELOC shuffle.
WhackAShill I don’t know if you come out ahead by transferring as much as you can from your mortgage to the HELOC account instead of using the UFF product. I cannot tell from JimmyDaGeek’s analysis if this is so or not and I cannot tell you except that Jennifer’s analysis seems a little bit better than Jimmy DaGeeks using the same information. That is a good questions and I am glad to see you are asking good questions now.
Its good that dozens of web sites and several hundreds of people online are voicing their mathematical conclusions that UFF does not do what it claims to do.
I’m glad you chose not to buy UFF Bonhoeffer, you made the right decision.
WhackAShill I am perplexed. You bring out statistics like 99% of HELOCS have higher interest rates than mortgage and that is not true. Now you talk about dozens of web sites and several hundred of people saying UFF does not do what it claims. Most I read people says it does what it claims but maybe you can do it yourself. I also do not see that JimmyDaGeeks analysis says what you are saying either. It seems like no matter what you want to keep digging your point and talking about numbers and percentages you pull from the air. Do you not know there are also many websites and many people saying UFF does do what it claims. So what does this prove. Only that there are differing opinions on this just like on many things. You have succeeded only in showing how you are not able to look at this without your bias and without giving your loose numbers that have no connection to anything.
Bonhoeffer, the math has been done to death. Assuming the HELOC rate is higher than the mortgage rate, DIY is easier, faster, and less dangerous than the MMA.
Now, version 4 of the MMA is supposed to be able to use your credit card. What a remarkably dangerous and mathematically idiotic idea.
If you mean the MMA will pay down your mortgage, it works. If you mean the MMA will “pay off your mortgage in 1/2 to 1/3 the time with little or no change in cash flow”, that’s one of the biggest marketing lies ever told, and puts UFF firmly in the “scammer” category of businesses.
Craig you say assuming the HELOC rate is higher than the mortgage rate DIY is easier, faster, and less dangerous. But as I showed you can get it for lower and not higher if you have good credit so what will you say now. I have looked at both sides and I see very little difference but if Jennifer is right MMA will save some money and I think it does provide some discipline as some have said. Also you say it is one of the biggest marketing lies ever told. I do not agree from what I have seen. What I do know for fact is that biggest lies on this discussion board and easiest ones to check out for truth come from people against UFF such as 99% of HELOCS are higher than first mortgage. I do not think anyone on this discussion board in favor of UFF that I have read is a scammer so I do cannot agree with you on this. It is your opinion and your opinion seems to be based on thinking HELOC has higher interest rate than mortgage. You do say assuming it does and not that it will so I give you credit for this not like WhackAShill.
Once again, here’s the implication of what you’re saying about low rate HELOCs:
If you can get a HELOC (or a mortgage) at 3.99%, then transfer your entire mortgage there at renewal time, or transfer it early and swallow the penalty if the old rate is that bad.
I can not make that statement any more clear. Read it again if you have to.
Point is, if you can get a $20,000 HELOC at 3.99% when you already have a $500,000 mortgage (say) at a higher rate, then you should qualify to simply transfer your entire mortgage to a $500,000 HELOC. You’ll don’t need the MMA to take advantage of the low rate.
And the point WhackAShill and I were both trying to make, is that the HELOC as commonly used by the MMA, is basically a second mortgage. Second mortgages are riskier than first mortgages, because if the owner defaults, the first mortgage is paid first when the house is sold. Only if there is enough left over, will the second line of credit be paid off.
If you qualify for a HELOC at a better rate than your first mortgage, you have a lousy first mortgage. This situation is very uncommon. 99% sounds about right.
Bonhoeffer,
Up to now, I stayed out of this discussion trying, to understand why Jennifer’s numbers look so good compared to doing it yourself. I still don’t understand it for a few reasons:
1) $3500 fee. Regardless whether the fee was taken out of the HELOC or paid by your savings, it accrues an interest cost for the life of the mortgage because it is not being used to pay down your mortgage. So, over a 12-year paydown @ 4%, it will cost you at least an additional $1680.
2) MMA HELOC inefficiency. Because of the way MMA works, borrowing large lump sums from the HELOC and paying down the HELOC over time, MMA keeps a HELOC balance greater than your take home pay’s ability to take full adantage of interest cancellation. In your case, where the HELOC interest is less than the mortgage rate, it’s possible that MMA goes for broke, and plans on withdrawing a much larger lump sum than normal to take advantage of that fact, allowing it predict a much larger savings than normal. I am curious to know what Jennifer’s numbers would be if the HELOC rate was 6%.
3) Interest cancellation. As we have posted before, interest cancellation has a maximum possible value based on the HELOC interest rate and your take-home pay. In your case, the most you can save per month with a 4% rate is $15. My spreadsheet assumes you can only offset 1/3 of your expenses, meaning your savings is only $5.
I would feel better if Jennifer posted the same kind of PDF report that James Barnes did, showing all the assumptions. I know that Jennifer has a website, so perhaps she can upload it to there.
Craig,
You are flat-out wrong and don’t know what you are talking about. Here is a link to a bank in my area: https://web.provbank.com/Personal_Banking/Loans/HomeEquity/hoe_loc_rates.html
Notice that the rates will go below prime. I assume that these rates are given to people with a minimum 720 rating. Also notice that these rates are for 80% LTV. No bank in its right mind is going to give a 100% LTV HELOC at any decent rate. And, finally, none of these HELOC rates are fixed. Given the current economic times, I don’t expect these rates to stay where they are. I am sure that people using CMA are ecstatic with their low rate, but wait until after the election and inflation needs to be fought.
Craig, I am not sure about your first point that you can of get a low HELOC and then transfer it to a HELOC for your entire mortgage. What the bank tells me is they can only give a HELOC for amount of equity in my home and 2.99% for first 6 months then 1 percent below prime and this rate is guaranteed until September 2. They will pay for the appraisal to find out how much equity with no fees for me to pay. Your second point that the HELOC as commonly used by the MMA is basically a second mortgage I don’t think this is true. I know in Australia that is how some of the MMAs worked and some companies were investigated for this but as I understand the HELOC in this country for most MMA plans it is not second mortgage and not advertised as second mortgage. In fact some people with the MMA have said also be careful and do not get second mortgage but a HELOC with low amount, like maybe $20,000 as you say.
Craig you also said if you qualify for HELOC at a better rate than your first mortgage then you have a lousy first mortgage and 99% sounds about right. Please tell me how you can say this. Who has a first mortgage as low as 3.99%? Who has a first mortgage for 1% below prime? Where do you get this information please. My first mortgage is 5.75% fixed for 30 years. Is this a lousy rate. What will you say now.
Maybe I should clarify. Bank that would give me HELOC guarantees until Sept. 2 I can sign up for 2.99% HELOC for first 6 months sthen 1% below prime after that.
Bonhoeffer,
Now that you have seen the math and know that the APR of the HELOC directly changes the savings when using the HELOC shuffle, don’t you find it deceptive that agents, the uff web site, and uff videos state that the HELOC rate does not matter? This is another lie that UFF has created so that even people who only qualify for a high HELOC APR will still believe the software is saving them money, when it is costing them money in actuality.