You don’t need a HELOC or MMA or spreadsheet to pay off your mortgage. All you need is discretionary income. Unfortunately, when combined with its $3500 fee and its wasteful way of using HELOC interest cancellation, MMA costs much more than simply doing it yourself.

While the banks in the UK and Australia do this for you they do charge a substantial fee for refinancing into a loan like this and the client ends up with their entire mortgage on an adjustable rate.

Check them out here.

http://www.bankrate.com/brm/news/mortgages/20061102_equity_accelerator_mortgage_a1.asp

– The basic idea is sound, i.e. minimize interest by offsetting daily vs. monthly interest. It’s significantly more effective than simply sending in an additional principal payment once a month.

– You can do this yourself provided you have a mortgage with no prepayment penalty, a HELOC, a checking account, Web access to do all the transfers, and time on your hands.

– For the above two reasons these accounts are very popular in the UK and Australia, where the bank will do it for you automatically.

The Programs only benefit that I see is that it gives you clear numbers of what should be in the Heloc, mortgage and other accounts on a monthly basis so this would help keep you on track. If you have self discpline you don’t need the software. I say just buy the book it on Amazon it is called “Own your home years sooner” it tells you excatly what you need to do don’t buy the software that cost $3500 it is truly a waste.

Below is part of a private email I sent to a friend with my findings on this and similar program.
———————————–

These programs are based on an ounce (maybe 2 ounces) of truth so I can’t call them a complete scam. However, I have no problem calling the MARKETING of most of these programs a SCAM. They are often very deceptive.

The pitch is that by following the advice of the software you will use all of your cash flow to lower the balance of your mortgage (actually the HELOC). You are turning the tables on the banker and making the compound interest work for you instead of against you. This is where the ounce of truth comes in and I agree with it assuming the interest rate on the HELOC doesn’t have an offsetting or negative impact when compared to your first mortgage.

However, the scam is in the presentation of the significance of this technique. While following it can save you a little money it is nowhere near the amount needed to pay off your mortgage in 1/3 the time (8 years vs. 30). The marketing also misleadingly claims you will have more equity in the first month than most people get in the entire first year. So how can they say this stuff?

The true power of these programs is to calculate the effect of using 100% of your discretionary income toward paying off your mortgage. When you punch in the numbers you will put in your monthly income, your monthly expenses and then anything left over (i.e. that you can’t remember or account for) is where the real savings takes place. Think about this simple alternate strategy instead:

————
A) Enter your monthly income: _________
B) Enter your monthly expenses: _________
C) Subtract B from A: ________

To pay off your mortgage in record time and to save tons on interest send your normal payment plus the entire amount in “C” to your mortgage company each month.
———–

See how easy that is to understand and how it will obviously work (assuming you have money left in C)? It is this same type of extra principle payment that is at work with the “money merge account” programs. This is the reason they are claiming (but not explaining) that you will pay off your mortgage in 1/3 the normal time. It has less to do with the compound interest aspect and more to do with extra payments being applied to your principle.

Is this realistic in the real world? Not for most Americans! I can assure you that the amount of money that should be left in “C” and what is left in the wallet at the end of the month is very different. Where does it go? Beats me… but I don’t have it and therefore it won’t make it to the mortgage company.

So anyway, if you want to compare apples to apples then take my “A-B-C” strategy above and run the numbers. Then compare it to the “money merge account” which adds the compound interest savings. The amount of money you save (if any, depending on the variables) is not so impressive. If presented truthfully a lot less people would plop down $3500 to learn this strategy. So instead in their “scam marketing” when they compare they include the equivalent of part “C” in their numbers but not in the “old way” numbers. This is an apples to oranges comparison but of course makes the cost of the program look tiny compared to the savings. When in the real world it doesn’t work for you, they will say that you didn’t follow the program because you spent that “C” money elsewhere (i.e. real life).

I confess that this program could work for some people for the following reasons:
1) Seeing the numbers could help you understand finances better (educational benefit).
2) If you actually do it for a while you will see bottom line results (motivational benefit)
3) They tell you exactly what to do and when to do it (discipline benefit)
4) The technique is based on an ounce of truth (technical skill benefit)
5) You just have to follow and trust it rather than figure it out (convenience benefit).

If it were promoted in that manner with honest numbers instead of confusing smoke and mirrors then I wouldn’t take issue with it. People would know going in that the cost of the program is mainly for the support and tools it provides to get them to actually do it when they otherwise wouldn’t take action.

Instead however, the marketing of these things is designed to appeal to people’s greed, gullibility and lack of financial understanding. Greed also appears to be the motivating factor of most of the promoters.

Also, for the average American I think this program puts many of them at greater risk. Discipline is a serious problem and having easy access to their equity in the HELOC (home equity line of credit) will be tempting to abuse. Many will end up in worse shape when it is all over.

I understand these guys are trying to sell the software, but the thing is once you understand what is actually going on that is saving you the money – you don’t need the software. Granted, it will probably make the process easier, but you could build something comparable on EXCEL for free.

Bottom line, if done correctly it will save you money, but it would be a big time consuming hassle. I think that is the trade-off that people need to decide on