[skydivingchic]

I’ve watched the video done by the United First guy. All they are doing is applying extra principle to the balance of the primary mortgage. Period. No voo doo. No magic.

Willow – can you agree that if you were to take the exact amounts of money that the program suggests at the time the program suggests and apply those amounts to your mortgage, you would end up with the same results?

There is no magic here. In the first example the guy gives, the couple has $1000 of “extra” income every month. The program always keeps some balance owed on the ALOC. So let’s say for example that the program keeps at least $2000 on the ALOC at all times. Every month, because of the couple’s “extra” income, they pay off just under $1000 (some amount goes to interest) of the ALOC. So, if they originally take $5000 from the ALOC and apply it to their mortgage, in just over 3 months, the ALOC will be down to $2000 and the program tells them to take another chunk of money from the ALOC and apply it to the mortgage. With the exception of the first draw on the ALOC, all the other money they take from it and apply to their mortgage is simply their “extra” income plus any windfalls (tax returns, gift money, etc) that they pay toward the ALOC.

So I went to Bankrate and used their mortgage calculator. Taking the example of $200,000 mortgage at 6%, I added the 1 time extra payment of $5000 at the start of the loan and monthly extra payments of $1000 as per the guy's example. Voila – the loan is paid off in 10 years. Actually a bit faster than the program said, which was a bit over 11 years. The difference between the Bankrate calculator and the “magic” program is the interest paid to the ALOC and the cost of the program! As you can see, it is not "much more beneficial to do this system than to just pay extra on the mortgage."

Doing it yourself is cheaper. Obviously you don’t have to pay United First the $3500 for the program. Also, you aren’t paying interest on the ALOC – something that in my opinion the guy completely glossed over. There is no magic “interest cancellation.” That is just a fancy phrase to make you think you are saving money. You’re not. You still have to pay interest on whatever the average daily balance is (or whatever the terms laid out by the bank say). The ALOC is not equivalent to "using the banks money interest free (or very close to it) to pay down your 1st mortgage."

Now, if you want to pay off your mortgage early and this program will give you the discipline to put that extra money toward your mortgage, then maybe this program is for you. Certainly spending $3500 for the program would be worth it if you are able to use it religiously and end up saving the tens (and possibly hundreds) of thousands of dollars of interest on your primary mortgage. But people need to understand that this program does absolutely NOTHING you can't do on your own (and cheaper for that matter). I also see a huge potential for abuse of the ALOC, so that certainly needs to be considered.