Mortgage Programs

[jlvkfyang]

I was approached by my brother about this United first program. I understand the concept, but is it worth the time and money to invest. Anyone here have first hand experience?

Researching further into this, I think that I might go to bi-weekly mortgage payments, to help pay off my mortgage sooner, and save on interest. Any thought, suggestions, recommendations on how to pay off mortgage sooner, or use the program.

That site looks like spam/scam to me.

If you want to pay your mortgage off sooner, simply pay extra principal. No need to pay extra fees or set up a formal program (unless your mortgage has a prepay penalty, then you have to decide whether it's worth it to prepay or not).

[cptacek]

I agree. There is nothing magic to paying off your mortgate early. You owe so much to the bank, (the principal). Because they lent you that money, you pay them interest. The monthly payments you have were figured out by your lending institution to pay off the loan in so many months. If you have a 30 year term, they figured out how much you have to pay every month to get the principal and interest payed off in 30 years.

If you want to pay off the mortgage early, you have to pay the principal off faster than they figured. There are lots of "systems" to do it, bi-weekly; send in an extra payment every year; with every payment, send in an amount equal to the interest accrued that month, etc., but these are just games people play to get themselves to send in extra money to the principal.

It might take an extra envelope every month and another piece of paper telling the lending institution to apply the extra money to the principal, but that is all you have to do to send it in yourself. You don't need to pay anyone else to handle it for you.

[willowstudios]

I've also been looking into these "Money Merge Account" things.

What I've learned is that they might actually work - but, it's hard to know without actually trying it out.

The main thing that people are worried about seems to be:

#1) The cost of software and #2) The HELOC #3) Can you opt out #4) Why can't I do it on my own?

The cost seems to be relative to what they say you'll save. So, the high cost is because you'll save a ton more than what they charge (I'm not crazy about that idea). The HELOC seems to be needed because of complex calculations that the software does that connects the dots between your paycheck, HELOC and 1st mortgage. Apparently, you can opt out anytime. As far as doing it on your own...the word on the street is that doing it on your own is possible to an extent, but ultimately (apparently) the software method is superior because it does things you can't do on your own. (I'm not sure if that is true, but instead of arguing that point I've decided to let it go. If the software is a glorified calculator then so be it)

Because I don't like to jump into anything without learning all aspects of it I'm taking my time learning more about it. But, I must say...from everything I've been reading and seeing it does seem to work. It's not really the "system", but more the person using it. If you don't follow a budget you'll end up getting off track and into debt with the HELOC. If you are able to follow the program exactly then it seems the ultimate goal of paying your mortgage off early (earlier than by yourself without the system they have with software) is possible.

Also, in all my research I've found what seems to be the founder (or that's what he says) of the whole concept. I took a "webinar" with him and I must say that it did make sense to me. I understood everything clearly and do see how the software works by doing calculations. His system is much cheaper and it's called, "Speed Equity". (you can Google it) His name is Harj Gill. It's strange because apparently he invented this whole thing in Australia and has a big following there, but I can't really find anything about him. He does have a book about the concept which I've ordered from Amazon and it should arrive any day now. "Own your home years sooner"

I haven't made the leap to buying into concept just yet, but I might in the near future depending on what else I learn about "Money Merge Accounts". I'm fairly close to paying the fee for the online software at the Speed Equity site ($149 - the software does the exact same thing as far as I can tell)...it's a lot cheaper than the $3500.. I'd NEVER spend that on software!!!

Another thing that I found is something called, "Precise Principle Pre-Payments". This looks interesting...this guy discusses it on his blog:

Combine “Speed Equity” with Precise Principle Pre-Payments and Turbo Charge Your Way to Being Mortgage Free! « Ron Borg ’s Mortgage Advice

So, with that....I'm curious to know what others think??

[rooskers]

I hate to say it but there is no magic plan that lets you pay off your mortgage that involves some super genious mathematical computations or some sophisticated software. Basically the money merge account program can be simplified as you paying more each month to prinicipal. Now how you go about paying more to your principal can be done in a variety of ways but that is the only way you will pay off your mortgage quicker. Some might call me a disbeliever or basher for those that do I have a Bachelors of Science in Mathematics and and Minor in Computer Science. If you would like I can make you a program just like theirs giving you an amortization table and all sorts of features like if you make this additional payment to principal you will pay it off in X years and save X amount in interest. Don't worry I will only charge you 49.99 but if you act now I will charge you 29.99 and as a bonus I will send you a free sucker (Or you can go to Bankrate.com and use their calculators for free. Here is a good article that explains in detail what a merge account program is and how you can do one on your own.

The Simple Dollar » Money Merge Accounts: Are They A Good Deal For Home Borrowers?

[AmyKay]

I was just coming to this board to ask questions about this! My "guy" at KAP financial is trying to sell it to us. They have a nice presentation at:

KapFinancial dot com. click on the green "home accelerator" button.

It seems like a great idea, just SO different. It's a "line of credit?"

[Ima saver]

Well, let me tell you how i paid my mortgage off early and I did not have to pay a dime. I took my regular payment to the bank and i always had a separate check that said "principal only" They applied both checks and I made sure I got a receipt for two separate payments. I kept track of it on a piece of paper to make sure our records agreed. I got my first house paid off in about 10 years and I have not had a big mortgage since.
Occasionaly, we borrow to buy land and I take a mortgage. I do the same thing every month, with two checks (everything I can save up for that month) and I got my land paid off in 2 years.
Don't waste your money on anything like this.

[Ima saver]

I just went to the site. It looks like a rip off to me. You don't need to pay anybody to pay your mortgage off early.

[willowstudios]

Hey guys, I went and actually bought the "Own Your Own Home Years Sooner" book on Amazon.com. It's written by the guy who "invented" this whole concept. I'm starting to read it...and I must say that so far there's information that isn't really being discussed on all these forums. It's really hard to explain, but it's a lot of facts and figures.

I consider myself intelligent and very curious. My initial reaction to the book is very positive...everything that I'm learning points to this actually working. I'll know more after I finish the book.

Also, I found a bunch of Podcasts that I'm listening to about "Money Merge Accounts". They seem to be very helpful, but I have to warn you that they talk about the United Financial software ($3500) which I DO NOT plan on buying regardless. The book I got has a free code to the online "Speed Equity" software and it seems perfectly fine.

The podcasts are here, but start with the Mac Saunders guy. The other guy has an annoying voice. Jubilee Project Podcasts » Podcasts


I'm hoping to finish the book within the next 1-2 days..

[loanstar]

Originally Posted by devils_advocate

That site looks like spam/scam to me.

If you want to pay your mortgage off sooner, simply pay extra principal. No need to pay extra fees or set up a formal program (unless your mortgage has a prepay penalty, then you have to decide whether it's worth it to prepay or not).

i second that, if it does have a prepay penalty, you can change your mortgage plan in due course..

[AmyKay]

My husband and I met with my rep at KAP Financial tonight. I do think there's more to it than just paying extra toward the principal. The key point is that all your money sits in the account, which lowers your interest rate. Our paychecks will get deposited directly into the account. We'll pay all our monthly bills on an American Express, and pay it off at the end of each month from that same big account. That way, the money sits there all month, lowering our interest rate. The less we spend each month, the more we save, the more stays in that account which lowers our interest.

It is complicated. But it made a lot of sense to my husband. I think we're going to do it. If it's a disaster, we can refinance back to a traditional loan anytime we want. I think the video presentation on KapFinancial dot com's website explains it well.

[rooskers]

AmyKay what is the interest rate KAP Financial will be charging you for this new loan and will they charge anything to have your existing mortgage refinanced? If this doesn't pan out like you think it will how much are they going to charge to have it refinanced back to a traditional mortgage?

[AmyKay]

The guy is going to give us a good faith estimate next week. I hope it's reasonable. I'll let you all know.

[autoxer]

Originally Posted by AmyKay

My husband and I met with my rep at KAP Financial tonight. I do think there's more to it than just paying extra toward the principal. The key point is that all your money sits in the account, which lowers your interest rate. Our paychecks will get deposited directly into the account. We'll pay all our monthly bills on an American Express, and pay it off at the end of each month from that same big account. That way, the money sits there all month, lowering our interest rate. The less we spend each month, the more we save, the more stays in that account which lowers our interest.

It doesn't lower your interest rate. It lowers the balance on which interest accrues. Until you write a check to pay your bills, then the balance goes back up. I would only recommend this type of loan to someone that is extremely disciplined about their spending.

Originally Posted by AmyKay

It is complicated. But it made a lot of sense to my husband. I think we're going to do it. If it's a disaster, we can refinance back to a traditional loan anytime we want. I think the video presentation on KapFinancial dot com's website explains it well.

Keep in mind that refinancing is expensive. You don't want to do it too often.

[AmyKay]

You're right, it doesn't lower my interest rate. In fact, the interest rate will vary, but with a cap of like 8.5%. Even at that rate, we'll pay off the house much sooner.

I'm gone for the weekend, will report back when I have the good faith estimate.

[cptacek]

Originally Posted by willowstudios

It's really hard to explain, but it's a lot of facts and figures.

I consider myself intelligent and very curious.

This is what worries me. An intelligent person should be able to understand the system that they are going to use to pay off their house. Wait, EVERYONE should understand the system they are going to use to pay off their house. Isn't this why the sub-prime and ARM crisis is happening? People didn't understand what they were getting in to, but instead trusted the other guy, the guy trying to make money off of them, to be honest and look out for the consumer's interest? That just doesn't happen, my friend. If there is money to be made from suckers, it will be made. I just choose not to be one of those suckers.

[cptacek]

Ok, I just went and looked at the kapfinancial recap of it. I'll concede that what they say is true...IFF (that is, if and only if) your spending habits stay the same.

While watching, one thing kept popping into my mind. What is in it for them? You do know that their goal is not "let's help the home owner pay off their house. It would be great for us if they did not pay us interest." right? So, what is in it for them? Here's what I came up with...they are counting on you spending MORE than you do now, so the principal balance never truly goes down. There is nothing that keeps you from spending more than what you put in that paycheck, so there is a real possibility that you will actually build your mortgage back up to that 90% home equity level.

Also, it never said, but it sounded like the loan would be variable rate. Mortgage rates are still at historic lows, but if this is variable rate, then wow that mortgage could get expensive.

You could do the same thing with a credit card if you had a high enough credit limit. But would you? Would you charge 90% of your house to your credit card, one with a variable rate, and every paycheck pay ALL of your money to that credit card, and then use that credit card for your expenses for the month? Hey, at least if you did that, you would get points for it. But the variable rate and the unlimited cap on spending (ok, a cap of 90% of the value of the home) scares the bejeezus out of me.

[rooskers]

While watching, one thing kept popping into my mind. What is in it for them?

cptacek this is the exact reason in my previous post I asked how much is the interest rate and how much are they going to charge you to refinance from the current loan into the 90% one. Of course if the person doesn't like it how much are they going to charge to get back to a regular fixed rate loan. By the way if you run the numbers which I have you will not be saving huge amounts of money from the manipulation of your average daily balance in the home equity loan. Instead most of the savings will come from you supposedly not using your whole paycheck that month and the extra going to principal. Many people with that much spending power will get themselves into a lot of trouble. I know lots of people on this board will tell me they wouldn't but frankly not many people are like the ones on this board. This is why the average daily balance on credit cards in the united states is huge. Now just imagine instead of having that $5000 dollar credit card limit you had that $290,000 limit.

[cptacek]

Just to clarify, I agree with you rooskers, and there would be no way in hell that I would do this.

[FrugalFish]

I agree with everyone who would not get involved with this. Every time I see some amazing program like this, I think of that line from The Princess Bride- something to the effect of 'life is pain and anyone who says differently is either lying or selling something.'

When you borrow a dollar, you have to pay back a dollar plus the interest it accrues as the months go by. If you pay an extra dollar on your mortgage principal this month, it's 1 dollar you'll never accrue interest on again. Pay $500 and it's $500 that will never accrue interest again. There's no magic pill here, just simple facts. The fact that the program is made to be confusing should set off red flags. I do see where someone with extreme discipline could save a couple of bucks with the average daily balance computation (didn't they say you will save about what you spend in software for the program?), but I also see this as another way to get behind for the not-as-well disciplined.