Money Merge Accounts - scam or for real?

[DeeinAustin]

I think this post has become an advertisement for a particular company and their services. I'm checking with the moderators on it. There's some information here that can be useful, but the purpose of the board is not to make a case for people to use a service you offer.

[christopher w]

Stickkee,

I think you are missing the point. Did you even bother to look at the link I posted that lead to a white paper written by the Federal Reserve Bank of Chicago discussing why it is better to NOT pre-pay your mortgage and instead invest that money into a tax advantaged savings account. Pre-paying your mortgage many of the tests of a good investment. That extra money earns ZERO interest. Thats right equity in your home earns zero rate of return as opposed to putting that money into a savings account that actually does earn you interest. It is not liquid. Heaven forbid someone should need to access money in their home especially if it is only a small amount. Good luck trying to find a bank to loan you $5000 in home equity on short notice. It is NOT going to happen. You would be safer burying it in your back yard. Go ahead and keep your depression era thinking. See where it gets you in 30 years. Not too mention that you are suggesting to people to register a false business to "write everything off" as an alternative? I am with Dee in Austin. All you people are trying to do is sell something to people who don't know any better.

[71tr]

Wow this thread has generated a lot of passionate debate.  I think its important to remember that not everyone is on the extreme ends of this discussion.  Money merge accounts are an interesting financial tool and for some people and lifestyles may be very appropriate.  On the other hand mortgage loans are likely the cheapest money any of us will borrow in our lifetime.   Why pay that off early if I can invest the extra funds and earn a yield/return greater than my net mortgage cost?  Then again paying off my mortage sooner gets me free and clear of a major debt obligation and cash flow drain.  To say that paying off a portion of your mortgage debt earns zero return is incorrect.  You have to consider the opportunity cost, if I prepay a 7% mortgage then I'm saving that cost of funds on the prepayed money, that is a return.  I don't see it in my pocket right away but it shortens the life of my mortgage and frees up that cash flow sooner rather than later which has a positive net present value.  Using this forum to promote a business is out of line with the rules, but using the forum to belittle fellow members is similarly inappropriate.

[christopher w]

7,

Your posting makes sense however due to inflation the money that you are saving in the future is going to be worth less than the money you have in hand now. I don't see how opportunity cost factors in at all. If I have a 7% mortgage after taxes my net rate is actually 4.62%. I could put that extra money in a savings account earning 5% and actually be making money on my mortgage. Hope this helps.

[jmark78]

I have read a lot of really good comments on this subject. One thing that I would like to point out with all of this debate about paying your mortgage off vs. investing your money and the claimed tax advantages. There are simply many homeowners out there that want to be free of this tremendous debt called a mortgage.

I paid my mortgage off personally, I am aware of the tax advantages of having a mortgage, so I simply purchased an investment property and put a renter in it. This takes care of my tax write off, and my personal home is paid for free and clear. There is no feeling in the world that can match having the place wich I live in paid off.

Regardless of other investment ideas vs. paying off your home, there are simply people out there that want to have their mortgage gone.

I will tell you, so many more financial possibilities open up for you when you dont have the manditory obligation of a mortgage payment each month. Thanks.

[thailanddave]

I'd like to get in on this one. A couple of things I have noticed.

No debt is better than debt. Why? because you are paying interest. Doug Andrew (author of Missed Fortune series. I have seen him live twice now) points out that home interest is tax deductible. The point he leaves out is that even with tax write-offs, you are paying interest which is more expensive than not paying interest.

Missed fortune talks about investment grade life insurance policies, compound interest etc. What he says in his seminars is "investment grade life insurance "AVERAGES" 6%+. What he doesn't tell you is the first few years you wont get that. More like 2-3% initially. The insurance agent that sold you the investment grade insurance makes as much as $20K for selling you the overfunded life insurance account at about $200K in overfunding. Of course you can't put $200K in all at once, because that would cause the policy to "meck" and be taxable. But if you pull $200K out of your equity and put $50K in your overfunded life policy, they will invest the other $150K for you somewhere else for a couple of years or the time it takes to continually overfund the insurance account.

The way the accelerated mortgage accounts save you thousands of dollars in interest is because you pay off the loan quicker so you don't incure interest on the outstanding balance. No arguement there. The bi-weekly mortgage works on the same idea. Anything extra you pay goes toward principle and reduces your loan balance. However most people could not afford the extra payment and ended up gettting out of the bi-weeklys.

HELOC's are variable and going up. Currently most of them are at prime which is currently around 8.25%. 30 year fixed is at about 6%. Please explain to me how paying higher interest is better than paying lower interest. These systems all take all the extra available cash at the end of each month and pay it towards the loan balance. You could do this yourself if you have any extra money left over yourself without paying for software. It will work the same way and at a lower interest rate.

The LIBOR is probably the worst index you could tie a mortgage to. It stands for the London Interbank overnight rate. Its the rate banks loan their money to other banks overnight to make up shortfalls. What could be safer for a bank than an overnight rate. The worst risk for a bank is something that ties up their rate for 30 years. Which do you think is more volative, something that changes every day or something that changes every 30 years? banks like adjustables for that reason. If their rates go up, your rates go up. Long term fixed rates is what caused the savings and loan melt down in the 80's. They were paying more for their money than they could lend it out at. Savings and Loans could not sell their loans to other investors. Its why you don't see savings and loans anymore.

MTA's (monthly treasury averages) are calculated monthy. Not as good for the bank as a daily average but better than a 5 year fixed. Thats why you get so many perks for takiing a loan tied to a LIBOR or MTA.

I believe that England and Austraila don't offer 30 year fixed. If I remember correctly, all their loans are ARMS.

$3500 for software to calculate how much I save for not buying a $250 dress seems exhorbinant. How much interest would you save over 20 years if you applied that $3500 to your mortgage?

[Jaime Buckley]

I paid my mortgage off personally, I am aware of the tax advantages of having a mortgage, so I simply purchased an investment property and put a renter in it. This takes care of my tax write off, and my personal home is paid for free and clear. There is no feeling in the world that can match having the place wich I live in paid off.

Regardless of other investment ideas vs. paying off your home, there are simply people out there that want to have their mortgage gone.

I will tell you, so many more financial possibilities open up for you when you dont have the manditory obligation of a mortgage payment each month. Thanks.

This was my exact point all along. I don't want to argue with Christopher or anyone else on the 100% financing or the MMA side...my point was simply this: get your actual home--the one your wife and kids live in, paid off and keep it off. Don't chance your home nest.

Then simply get a second property, and you can even have renters in it, and use the MMA to pay off the home faster/gain equity faster, and invest it. You now have the best of both worlds, and you can do it over and over.

...just don't mess with the homefront, that's all.

Happy wife, happy life.

[71tr]

Okay I was all done with this thread but couldn't resist.  While no debt is nice you have to remember that debt is nothing more than a tool to be utilized wisely.  Debt allows us to buy homes in the first place and start businesses and be productive.  Poorly managing our debt gets us into trouble.

While I'm not a major advocate of the MMA I do see their attraction.  Yes, you refinance what might have been a fixed rate mortgage with a HELOC at a variable rate.  Yes, you assume interest rate risk by doing so.  But you are also getting a transaction account which gives you the flexibility to pay down the balance more each month than you might have with a bi-weekly fixed loan and the ability to re-borrow the funds should something unexpected arise.  This is a valuable benefit to the consumer and should have a cost to it.

Interest rate risk is a major concern to banks and savings and loans, but they both manage it much more wisely now than in the 1980's.  I know I as a bank examiner in the '80s.  The Savings and Loan debacle was caused by many things, credit risk, deregulation, lending long and borrowing short and outright fraud.  Savings and Loans are still around, just in smaller numbers and with different names.  Washington Mutual is a good example, the nations largest thrift and one of the best home mortgage lenders in the country.

Again we are mixing finance with personal lifestyle choices here.  There is no correct answer only the best choice for each of us.

[jmark78]

The MMA system does not require you to refinance your existing first mortgage like the programs in Australia and Europe. If you have an existing low rate first mortgage, keep it.

The MMA works in conjunction with your existing first mortgage through a secondary line of credit.

The MMA system adjusts with your financial ups and downs on a daily basis. Each individuals financial situation is different. The MMA analyzes your debt, income and expenses and determines to the penny how much and when to transfer funds from your line of credit to your primary mortgage.

One reason why this is so critical is because if you transfer too much from your line of credit to your first mortgage it could cost you too much interest on your line of credit or loose you potential interest savings on your first mortgage, or visa-versa.

The MMA system is structured to save you as much interest as possible on your first mortgage, while at the same time, costing as little interest as possible on your line of credit.

The specific transfer amounts and timing along with your day to day financial ups and downs is why the MMA system works well for so many homeowners. This system comes with a lot of other financial features that I dont have time to mention right now.

Yes, I researched this thoroughly. I work in finance and I use the MMA.

This system works well for me, but I do advise you to evaluate all your financial options and make a decision form there.

[DeeinAustin]

This is a controversial topic and can go on and on.

FYI-A poster made comments regarding his negative experience with a particular company. The company immediately responded that the comments were abusive, false, inflammartory, etc. They probably have some employees here.

The poster didn't make it clear that he was only giving his opinion versus stating fact, so we had to pull his post.

Let the buyer beware when looking into these. See if the company you're working with is a member of the BBB. Also check with your local investment club to see if anyone has experience with the company. A legitimate company would have a somewhat of local presence and physical address so you can track them down if you're dissatisfied.