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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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JimmyDaGeek ~
I have only been using the software since the beginning of August. I don’t know if I should share all that personal information in a public forum. I feel a bit leary doing that, but I really would like to. What are you going to do with the information I provide? My situation is a good one, I comfortable saying my loan term is a 10 year note with a little less than 8 years to go (without the software).
I really believe in the software, but I also believe as I’ve said before, in order for the software to work, you do have to have a good salary, positive cash flow (the more the better) and some discretionary income (again the more the better).
I’ve played around quite a bit with mortage calculators and just by making extra payments with my discretionary income, I can’t come close to beating the results I’m getting with the software. Using the software helps you use your money, plus the banks money to its highest potential.
Its similar to using a credit card to pay all your montly bills. Then, paying it off each statement. You just used their money, for one month, interest free to pay your bills. Its all about leverage. When you utilize the HELOC as your “checking account” you have all your “money” in one place.
Putting money in a savings account doesn’t “SAVE” you as much money as borrowing money off of a HELOC and paying down your mortage with it. Then using your paychecks to offset the interest you would have paid.
I will repost my example from an above post:
Here’s an example:
—————-
Loan: $275,00
Rate: 5.875%
Term: 30 years
Start Date: Jan 2006
Average monthly interest paid: $941.28/month
Beginning interest paid for first year: $1468.75
What the goal would be is to keep the total DOLLARS of interest per month BELOW $941.28. Any time this happens in a month the borrower is saving money and shortening the term of the loan. Just try and imagine what one would have to borrow on the HELOC to accumulate $941.28 in payment/interest each month!
On the above example if the borrower draws $3500 from a HELOC on month 28 of the principal mortgage and applies it to principal it will save them $13,796.85 in interest over the life of the loan.
***Yes! Borrowing just a minimum of $3500 from a HELOC can save someone almost $14,000 in interest ****
Its all about INTEREST SAVINGS, that’s what’s paying down your mortgage loan! You aren’t going to be able to take that same $3500 into a saving acount and MAKE that kind of money!
In addition, how long did it take you to save up that kind of money?
From the MMA challenge.pdf docuement it says the mortage payment is $1,740.80 per month. If I use the pmt function in Excel for a $200,000, 30 yar 6% mortgage I get a payment of $1,193.14 or $1,199 depending upon if the payment is at the first or end of the month.
Can somebody help me out?
I watched the new video for the new software where you don’t need a HELOC for the MMA program and you can just use a credit card. It shows how John and Rebecca Jones can pay ALL expenses with a credit card.
One must consider that credit companies charge merhcants a fee to take payments with a credit card. The fee varies upon the size of the merchant. The typical fee per transaction ranges from 2 to 4 percent. A mortgage company will have little incentive to accept a credit card when it will have to pay a fee to take the payment. I doubt many car loans can be paid with a credit card as well. This means that the cash float used in the video is really not as large as it seems. My question about the MMA Challenge.pdf data is, does it assume just the other expenses of $2,979 are floated on the card, or does the primary analysis include the mortgage payments in the float as well?
Scott
Scott,
You missed the post above where James says the $1740.80 payment includes the escrow amount. And, BTW, since all mortgages are paid in arrears, that is, a month after you borrow the money, the monthly payment is $1,199.10
mma user, please clarify something.
Using a mortgage calculator and your numbers: $275,000 borrowed for 30 years @ 5.875%, I get a monthly payment of $1,626.73 with $1,346.35 interest paid for the first month. And, for you to pay less than $1,000 per month interest, average, for the last 20 months, you would have had to put about $7000 per month extra towards your mortgage.
mma software user said, “Its all about INTEREST SAVINGS…”
As gr8whyte at the simpledollar thread said aptly, “Saved mortgage interest isn’t an accurate gauge of how well your MMA’s working. What’s important is the actual total interest paid (mortgage + HELOC) because these are actual dollars leaving your pocket. Saved interest dollars won’t leave your pocket; they’re just a number on paper. A person who buys my $1 million 92 Civic for $10,000 would be saving $990,000 but he’d lose on the deal because a 92 Civic isn’t worth anywhere near $10,000. What the buyer should do is ignore the $990,000 savings and evaluate if the Civic’s really worth $10,000.”
MMA Software User:
“I’ve played around quite a bit with mortage calculators and just by making extra payments with my discretionary income, I can’t come close to beating the results I’m getting with the software. Using the software helps you use your money, plus the banks money to its highest potential.”
Sure UFF helps you do this, nobody is disputing this point. The fact is that the leveraging your paycheck really is not difficult to do on your own. Not to mention the money saved by using a HELOC shuffle or CC shuffle is not really that much and definitely not worth $3500.
The amount of interest you can cancel is directly related to your monthly salary and the interest rate of the amount you are canceling. If your canceling interest on your mortgage at 6% APR and your monthly salary is $5000. The VERY BEST case scenario, assuming all your bills are paid at the end of the month, and you are paid on the first of the month, you can save $25/month. If your canceling CC debt you can save slightly more because your canceling a higher APR debt.
Your statement that you can’t come close to the results on your own is false, the MMA simply does not save you that much money.
James Barnes,
You said in various posts to Craig and others:
“There is no way you could duplicate the effects of using the software yourself. Go ahead. Take 25,000 in credit card debt and a $200,000 mortgage and $50 (fifty dollars) in monthly disposable income. Lets make it easy and say that all the credit cards are exactly the same rate of 11%.”
“Your going to find out quickly, how hard it is to figure out how and when to move the money to maximize the elimination of interest on the credit cards with only $50 in decretionary income. ”
“It never fails that when people like you say they will show us they can do it themselves or better than the MMA, they never do.”
“Everyone on this board who says the math has been done never does the math on a situation like the one above.”
Now that JimmyDaGeek has posted an easy payment method shown in his spreadsheet showing the interest saved versus using MMA, what are your thoughts? For all the “chest beating” you did to get someone to do your debt challenge, I hope you can help us address the possible differences from your MMA analysis and the “debt snowball” method.
-L2G
I think James Barnes went to the COLONY to look for David Moore.
With the Mortgage Market the way it is, and UFF getting harder and harder to sell, James Barnes is probably posting his resume on Monster.com.
WhackAShill I thought you said this forum was about the UFF product and its uselessness, not about who someone is or where they went.to look for somebody else or where they are probably posting their resume on Monster.com. It looks like bigdon is also talking about somebody instead of talking about the UFF product. Like Jim said, “You’re focusing on the messenger rather than the message.” That is why I do not care if you own many Coldwell mortgage offices or not and how do I know if you are telling the truth anyway.
Scott and JimmyDaGeek I think you have good information so I think now that UFF is not good for. But I will wait before a final decision to see what somebody else has to say. I have learned to not trust somebody who talks about other people to try to make himself look good and I have learned to get more than one opinion on something. If James Barnes cannot answer the questions I will have to say that what he says is not true. I think what I am saying is good for people to read so you will not be tricked by either side.
Strategy: pay minimum payments on the smalles interest rate debt, apply all extra funds to highest debt first.
I ran the numbers in about 10 minutes and came up with total interest costs of $109,548 ($5,753 car, $4,812 credit cards, $98,982 house)
I made three amoritization tables and made sure the monthly debt service did not exceed $2,480 per month.
The total amount of money to service debt is $1,199 + $720 + $510.93 + $50 = $2480/month for the challenge .pdf file.
Here is the scenario.
months 1-41 pay $770 to credit card, $1,199 to house, $511 to car
month 42 pay $552 to credit card (it is now paid off), $1,199 to house and $728,94 to car
month 43-51 pay $1,280.92 to car, $1,199 to house
month 52 pay $239 to car and $2,241 (car is now paid off)
month 53-147 pay $2489 to house (house is now paid off)
Assumptions” no HELOC, no paying expenses from a credit card, and not tapping in to the $2,100 in savings.
It looks like this simple method I did in less than 10 minutes beats the $3,500 MMA software by $14,759 if I did not make any mistakes.
MMA
Total Interest paid $122,309
Total payments $379,305
Simple method
Total Interest paid $109,549
Total payments $364,548
I have it all docuement in an excel sheet. It is not hard to do this. Anybody with a simple math education can do it. Just follow the rule: Pay minimum payments to the lowest interest rate debt until it is paid of and pay as much as you can to the highest rate debt. Once that debt is paid off, do the same again and again until all debts are paid off.
Scott
ps. I’ve had trouble posting here. If this is a duplicate please forgive me.
Bonhoeffer,
What else is there to consider? The math that Jimmy and others have shown proves the uselessness of the product. If you still want to purchase the product, I ask…… why?
Excuse me if I find it humorous that James Barnes left after discovering he was blatantly wrong.
For what purpose would any of the “naysayers” have to trick anyone? There is no financial benefit for any trickery. If anything we are here to show the truth of the product which UFF tries to hide.
WhackaShill it is good that you now say you want to show the truth of the product instead of just criticizing other people and acting like you know something about them. I think you have made the right decision.
Maybe I missed this, but I do not think somebody answered Kevin who said “Speaking of doing things yourself but choosing to rely on services that make life easier…Hiring a Real Estate Agent falls into that category! That is a service that you are backed into a corner to use since everyone else is! I guess that is a SCAM also.” I do not agree with Kevin that this is a good comparison because I do not think it is the same thing, but I still like to see someone else answer this.
You also say you think it is humorous that James Barnes left after discovering he was blatantly wrong. Maybe it is also a good thing to say that I think it is humorous that you only answer some things and not when I say that you want to look smart by saying someone else is a shill or is not smart. If you really want to show the truth of the product why can you not stay on that subject instead of trying to show the truth or false of the person, like attacking the messenger instead of the message. I hope you see that this is a good thing I want to show you and not be offended and get mad.
What else is there to consider? The math that Jimmy and others have shown proves the uselessness of the product. If you still want to purchase the product, I ask…… why?
Ellory this is hard to admit yet I have to say I tried but I cannot understand the math. It is too hard for me to make sense yet I do have education. So maybe I will not use this product for now since nobody who is using it can tell me it is good. Thank you for making your comment.
JimmyDaGeek ~
I’m sorry, the mortgage calculator reverts back to $300,000 loan. I forgot to change it back to $275,000. That’s where my discrepency is…
Here are the correct numbers: (I’m just going to stick with $300,000 for loan)
Loan: $300,00
Term: 30 year Fixed
Interst: 5.875%
Monthly Payment: $1774.61
——————————–
Avg montly interest over life of the loan: $941.28
Interest paid in first month’s payment: $1468.75
————————————-
If someone was to pay an extra $3500 to principal in month 28, the total interest saving on the life of the loan would be $13,833.90.
The average monthly interest for the life of the loan would decrease from $941.28 to $902.85.
Hope this clarifies my numbers, sorry for the mistake and thanks for pointing it out.
————————————————————-
I’m not sure what you meant by this statement, “And, for you to pay less than $1,000 per month interest, average, for the last 20 months, you would have had to put about $7000 per month extra towards your mortgage.” ?
What point are you trying to make here?
mma user
I am not sure what point you are trying to make either. Why are you trying to reduce the interest below $941.28 per month? Any dollar you contribute extra to your mortgage will save you money in the long run. Why did you choose month 28 to pay $3500 to the mortgage?
To truly understand what is going on in a mortgage, create an amortization table for your loan. Each month’s payment will be broken down to interest paid and principal paid. The interest paid is calculated on the prior month’s balance.
In the beginning of the loan, your principal payment is small compared to the interest you pay each month. One way of understanding accelerated loan payments to pay the principal you owe for the *next* month as an extra payment this month. This will let you “skip” forward one month on the amortization table. And the total interest you save is equal to the interest you “skipped” for that month.
So, to use your example, if when making the first month’s payment, you added in the second month’s principal of $307.36, you would save $1,467.25 in interest and skip to the third month on the table. This is a savings of almost 5 to 1.
JimmyDaGeek~
The point I was trying to make was to show the numbers were more about comparing dollars of interest on the mortgage to dollars of interest on the HELOC, not merely comparing interest percents.
Someone was saying it doesn’t make any sense to borrow money off of a higher interest rate variable loan to pay down a fixed lower interest rate mortgage. I was trying to show how it was, many times, worth it.
————————————–
If someone wants to spend the money (like I did) on the MMA software, what you get is the ability to NOT change your monthly spending/financial plan, BUT still be able to have the money to pay off your loan in significantly less time.
The examples you all have been illustrating show how an individual DOES have to change the way they budget and spend. They actually now have to come up with an extra amount of money which will go to principal each month. In your example it would be around $300/month. Most people don’t have that kind of discretionary income! With the MMA software you just have to have some discretionary income to have success. In your examples you have to have a lot!
The reason I bought the software is because I didn’t want to change my budget or the way I spend in order to pay off my mortage. I just wanted to leverage the money I had more effectively. For me, it gives me peace of mind knowing the spending I am doing now, is not going to negatively effect me in the future.
mma user
I wonder if you see the irony in your statement.
You don’t need $300 a month to pay down your mortgage, just a dollar a month, or any amount you want. You are telling us that you couldn’t find an extra dollar in your budget to pay towards your mortgage each month, but you could borrow $3500 to pay for software to find that dollar for you.
And, now you are telling us that you did not change anything about your budget or your spending habits, and MMA is finding money for you through interest cancellation only. As you have posted above, that $3,500 is costing you $14,000 in interest you did not cancel. I hope you find that $14,000 somewhere. And, as others have posted, the maximum interest you can save each month through interest cancellation is equivalent to your take home pay times your HELOC monthly interest rate. This is not magic, just math.
You asked what I would do with your numbers? I thought I posted that when I made the request. I would show you how doing it yourself will beat MMA. If you are paying a higher interest rate for your HELOC than your mortgage, MMA is costing your interest, unless they have changed their strategy which seems to keep between 1.5 and 2.25 times your take home pay in the HELOC as a balance. The ideal amount should be below your take home pay.
Jimmy DaGeek please tell me 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. My salary is paid 2 times each month so 24 payments per year. Bills average $3785 per month with house payment. This includes tax and homeowner insurance I don’t pay with mortgage payment. Net income is 2251.66 each pay day or 4503.32 per month. I have discretionary income of 718.32 per month. 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. Jimmy DaGeek what do you think I should do and why do you think so. Maybe I can understand your math if you work with my figures.
JimmyDaGeek~
Nope I didn’t change a thing with my spending habits. Of course the MMA software is not finding me money either. Its just putting to better use the money I had to work with. For starters:
1. I pay all my bills and living expenses with my credit card. Then, I pay it off each month. This entitles me to use the credit card companies money interest free for one month. It also earns me free airplane tickets. :-0
2. Next I never include my property taxes or anything else with my mortgage payment. I have no escrow acount, just a mortage. This ensures me that I don’t loan out my money interest free for a year to the bank. Because we all know mortgages companies are paying property taxes annually.
3. I pay as many bills as I can yearly or biannually (ie: car insurance, life insurance, AAA, etc.) Freeing up money to go to work for me…for most of the year.
4. I have very little debt in addition to having very decent montly income. So when I do have to deposit my paychecks to the equity line, I don’t have to pay much money out.
All of the above points give me positive cash flow and a lot of extra money each month. This extra money, though, is not necessarily discretionary income. Its money I may have to pay out in bills, but not until later in the year.
Before the MMA software, I was keeping this extra money in a “holding” account. (An online checking account – fee free). It wasn’t gaining me anything. Now, with MMA, the software can look ahead and see where/when I need to utilize this money. In the meantime, though, I borrow against the HELOC @ 4.99% interest and pay off my 5.875% mortgage, using this money to keep the balance low.
I’ve only used the system for less than 1 month. For the month of August I’ve made 1 principal only payment so far, approximately $3500. The software has scheduled another principal payment with my next payday of around $1700. Then, again on my 2nd payday in Sept. it instructs me to make an additional $7500 to principal.
So far the highest balance I’ve carried on the equity line was around $14,000. Right now my balance is less than $6900. Thus far I’ve paid $18.74 interest on the MMA and cancelled significantly more interest on my mortgage.
There is nothing I am doing differently with my finances, I have the pay the same bills, incure roughly the same amount of living expenses and nothing has really changed other than my mortage will be paid off in 1/4 the time.
The only reason I keep typing messages on this board is because I believe the software works. Yes, you may be able to do this yourself, but most people can’t! I’m great with my finances, but I couldn’t ever “stomach” something like this without “seeing” forward. The software enable me to do this. I think it works, I’m so excited about it I wanted others to see its benefit too, but instead I just keep running into people like you who say it can be done without paying the fee and on your own. I don’t dispute this can’t happen I just believe for most everyday folks, this could actually help set their finances straight!
Bonhoeffer,
I am pretty sure the fancy features of the MMA program are not enough to pay for the software itself.
I ran your numbers in my “mortgage gps” excel spreadsheet and it says you can cut your mortgage by 15.6 years and save $106,218 in interest.
If you want to be more aggressive and put your savings to work and use the LOC for a rainy day fund then you save a total of 16 years and $114,465 in interest.
You can probably save a few extra bucks by playing the HELOC shuffle but those extra bucks will never pay for the software. Has a MMA guy run an analysis for you? I’d love to compare it.
Scott
MMA Software User wrote:
The point I was trying to make was to show the numbers were more about comparing dollars of interest on the mortgage to dollars of interest on the HELOC, not merely comparing interest percents.
Someone was saying it doesn’t make any sense to borrow money off of a higher interest rate variable loan to pay down a fixed lower interest rate mortgage. I was trying to show how it was, many times, worth it.
____________________________________________________
I’ve heard this many times and maybe I can explain it. The people who say this will usually explain it with an apples to oranges comparison. It goes like this. Borrow say $5000 from the HELOC to prepay your mortgage at 8%. Pay the HELOC back over the course of one year. Say you have $200 in interest costs from the HELOC.
Now the people who want you to believe that was a good decision say “look $200 in interest saved you $13,000 in future interest on your 6% loan!” The $200 in interest did not save the $13,000 in interest, it was the $5,000 prepayment that you made over the course of 1 year!
Believe me an 8% loan runs up interest costs fast than a 6% loan. So borrowing the $5,000 at 8% to pay the mortgage was really not the optimal situation. You should have just prepaid the mortgage as the cash came in that you used to pay off the HELOC Now if the HELOC has a lower rate than the mortgage then it will save you money.
You can always split hairs on the timing of the payments but on month-over- month basis you will never save any money borrowing at 8% to pay off a loan at 6%. If you were expecting a $5,000 windfall on the day just after your mortgage interest calculation for the month was made, it would then pay to borrow from the HELOC to prepay the mortgage and then pay the HELOC immediately off when the $5,000 came in. This way the prepayment can effect the calculation of the next month’s interest. If the prepayment comes after that date, it did not help you for the first month, but it will help you in the following months.
The original MMA software example with Bob and Rebecca Jones has such and example and it is easy to show the MMA results were worse using a HELOC with a higher interest rate than the mortgage rate. See this video.
http://www.youtube.com/watch?v=wuHzh15Ko5A
Ok here is my rebuttal to the MMA Challenge from James.
http://spreadsheets.google.com/ccc?key=pX0OcvF_IKpGIwVE7b5dnAQ&hl=en
You can see for each debt an amortization table and the payments which will change from time to time as something else gets paid off. It’s all out in the open month-by-month unlike the MMA documentation. I highlighted the transition month payments in yellow. These are the areas where a high interest rate debt is paid off and the month is shifted to the next highest rate.
At first, until I worked the numbers myself that it would tough to pay off that much debt and still come up with time savings on the mortgage. In effect the user had plenty of discretionary income, just not in the first few years. The real kicker to the mortgage was once the car and CC’s got paid off, those funds were free to really work on the mortgage. The key is that the user doesn’t take on new debt after the car and CC’s are paid off.
It took me about 15 minutes to create the three amoritization schedules and then adjust the payments so the monthly debt service was always the same to meet the assumptions of the challenge.
Where has James been lately?