Mortgage Programs

[Ima saver]

That was interesting, thank you rooskers!

[FrugalFish]

A couple days ago I searched online for "money merger accounts" versus "speed equity." I got a lot of hits for places in Australia and the information provided seems a little more down to earth than the as-seen-on-TV hype that the speed equity that is being sold with here in the US.

For some reason this whole speed equity thing reminds me of the gaggles of fad diets that are out there. People get sold on a trendy new concept and think this will be the thing that changes their lives for only 4 easy installments of $19.99, but the reality is that in the case of both mortgages and weight loss, it's simple math and ultimately the numbers don't lie. If a particular pay off plan or diet plan provides the motivation to put someone on track to finally succeed- that's great! But I fear for a lot of people it's going to be just one more Billy the Singing Bass that turns out to be nothing more than a waste of money.

[rooskers]

FrugalFish,

That is totally unfair. I still have and love my Billy the Singing Bass.

[Ima saver]

Me too!

[dayana]

Mortgage Loan Application Process

If you've decided now is the best time to buy a home, and you face the mortgage loan application.

You've done your research and have figured everything out, with one exception: how you're going to afford it. It's nearly impossible to contemplate home ownership without also considering a mortgage. Very few people have the money available to pay for their home all at once, and because of that, have to rely on a mortgage.

A mortgage is a loan that is repaid over a course of many years, and uses the home or property as a collateral. If you fail to pay the mortgage, or fall behind on the payment schedule, the lending bank then has legal rights to take your house and
sell it so they can get their money back. A mortgage is a very serious commitment to make, and the mortgage loan application is sometimes arduous.

Getting a mortgage is not a simple task. It requires a large amount of research and time. Mortgage rates rely on the economy, so there are better times than others to be applying for one. You obviously don't want to apply for a mortgage at a bad time and then get a bad deal with your
application, forced to pay high interest rates every month. It is also important to get your mortgage from a lender you know and trust. There are many lenders out there who will put you through a bad mortgage application process and try to entice you with other offers. Make sure you
know what you are signing up for, and all the details involved in that application.

A mortgage is a huge investment, and should only be carried out with a qualified lender whom you trust. As far as where you should apply for your mortgage, you have a variety of options. You might want to go to a local bank where you've been a customer for a few years. This way, you are working through the mortgage loan application process with people who know you, and will do their best to give you a good deal in order to keep you as a satisfied customer. You also have the option of trying a new bank or lending company.

[CafeMonkey]

So it sounds like my attempt at a helpful post turned into troll fodder. Sorry!

Dave says don't pay for any of these set ups (either the one with the $3,500 SW or the bi-weekly payment plans) because as some here have stated, it costs NOTHING to simply pay additional on the principal.

So fine... Don't pay! I bought the $149 Harj Gill program, and haven't learned any more information than I found online for free.

You can accomplish the equivalent to the bi-weekly pay plan by simply paying 1 additional payment a year, or 1/12th extra each time you make your monthly payment with the overage ear-tagged to principal.

Yeah, that's great! And a bi-weekly plan will keep you paying for the next 25 years instead of 30. I'm happy for you! But that's just not good enough for me... I've got to kick it up a notch!

Sure they do shift interest, but the 'testimonials' are so exaggerated, because their clients are also putting a lot more towards principal. It is very misleading about what you can actually accomplish "with little change to their day-to-day spending habits and without increasing their monthly mortgage payments."

That's fair... But who doesn't exaggerate comments these days? Any program that you hear of mainstream HAS to exaggerate to get any attention from the public.

Have you ever signed up for a diet that promised for you to lose 5 pounds in two months? Or a stock that MIGHT make you 2% returns? You gotta exaggerate to sell nowadays, and if you don't believe me, try it! I've done enough selling online to know the truth... You need to stretch every possibility of your product as far as it will go!

But... The truth is that this program makes perfect sense. Pay down your 1st mortgage with your HELOC, put your income into the HELOC right away, pay your bills on a credit card with a grace period... And pay significantly reduced interest.

Lots of work involved there. It's not automatic. But it's got to get the job done.

CafeMonkey,
Please tell me the following. When you do this hand-waving math when you are trying to sell this program to someone, what interest rate are you assuming the first mortgage is at?

First, I don't "sell this program" to someone. I like the idea of sticking it to the man, especially when the man is taking my money. And I thought that this was a discussion forum where we could discuss things. If I was wrong, I'll be glad to stop.

And for my hand-waving math. Sorry... I'm not an Excel genius; that's why I asked for help with it. I would LOVE for someone to show me that my math is wrong so that I could move on to the next big thing. Really. It makes sense in my head, but if my head is wrong, I'd submit that I was wrong and go back to paying my normal mortgage on time.

As for what interest rate the first mortgage is at? I don't think it matters. If you lower the balance on ANY mortgage, you will pay less interest.

And as for results... I paid down less than $1,000 in the first 2.5 years of my mortgage. In the few months since this post, I've paid down over $3,000. So, smoke and mirrors or not, I'm up 300% in 15% of the time.


Willowstudios... How are you doing with your Speed Equity?

[cptacek]

I just looked at bankrate.com, and a $50,000 HELOC has an interest rate of 7.59% (the best rate on there today) while a 15 yr fixed loan is 5.64% (not for a jumbo loan). Here are my assumptions so you can play along at home.

1st mortgate = $100,000, interest rate of 5.64%, 15 year fixed, with payments of $824.53 each month. If you get the mortgate at the first of October, pay $824.53 starting on the first of November, and continue through the regular schedule, you will pay off the mortgage on 11/01/2022. You will have spent $148,488.15

I am going to assume that you get a HELOC so you can put a first time payment of $5000 on your 1st mortgate. I am going to assume that you make the first payment of $5824.53 on 11/01/07 and then make regular payments of $824.53 each month thereafter. Using this schedule, you will pay off the mortgate on 09/01/21 with a payout amount of $142,243.70.

There, you say, you just saved $6244.45 and 14 months off of your mortgage.

Uh, just a second. You paid $5000 up front on the second loan (so you only "saved" $1244.45 on your 1st mortgage), and you had to pay interest each month on your HELOC.

Let's assume that the HELOC has an interest rate of 7.59% that is fixed (which doesn't exist, by the way...a HELOC interest rate is variable, and will likely go up).

So, let's go with your assumptions. You don't spend any money on the HELOC until the 4th week. Let's say that you put $5000 on your HELOC on the 22nd of every month to pay all of your bills. We'll say that means that you have to pay 7.59% interest on $5000 for 8 days every month. That is $8.32 a month. Not too bad a monthly payment, huh? Except you will be doing this for 166 months. 166*$8.32=$1381.12.

$1381.12 > $1244.45. You just paid more in interest on your HELOC than you saved on your 1st mortgage. =><=

cptacek - Basically my Graphing calc is just doing what your spreadsheet did lol. Depending on the difference in the interest rates between the HELOC and the 1st mortgage and other assumptions made you can save some money using these programs. The best scenario I could come up with was around 10 - 15 dollars a month. Of course I did not calculate the cost to refinance or monthly and upfront fees these programs charge you. On another forum I did exactly what you just did and got pretty much the same reply as willowstudios gave you. I give up as far as I am concerned if someone wants to pay someone for telling them through magic they can pay their 30 mortgage with no extra payments in 10, 15, 20 whatever years earlier then I say go for it. I will just trust the old sayings, NO SUCH THING AS A FREE LUNCH and IF IT SOUNDS TO GOOD TO BE TRUE THEN IT PROBABLY IS. Of course I also trust my calculations.

So two of us actually pulled out the spreadsheet/calculator and did the math. Where is your math, so we can compare?

[Seeker]

Okay, I haven't read this whole thread.... but my thoughts on it are Why?

The fact is you can do it yourself by paying anything extra and writing on the bottom of the check "apply extra to Principal."

No additional loans; no risk; no temptations. You're in control.

What happens if you lose your job? Revert back to the minimum payment until you get another job. With this "system" won't you be gaining debt during this time? With this system, won't you be losing equity if you continue to use your house for paying other bills? With this system, if your house looses value, how are you every going to revert back to a standard loan (a bank you left is not likely to take you back)?

These people have to make money somehow.... they have to get something out of what you put in. And they are, or they wouldn't be doing it.

[cptacek]

Scott Burns, a financial columnist for the Dallas Morning News, would like to weigh in:

Don't fall for line on mortgages | Dallas Morning News | News for Dallas, Texas | Scott Burns | Personal Finance | Business Columnist | Dallas Morning News

[jIM_Ohio]

A few anecdotal points:

1) paying off mortgage early makes sense if your interest rate is 7% or higher. I think money is best spent investing into a balanced fund if rate is under 7%, then paying off mortgage when balanced fund equals the mortgage balance.

2) anyone which gets into the programs mentioned in 4 pages of threads here is a sucker and deserves what comes to them, People need to be smart on personal finance and be willing to question to everything money. I question how much my wife pays for a box of cereal. Many others just pay the high prices. If people are willing to pay, good for the companies which make money on them.

3) I agree with the posters that mortgages are needed, and should NOT be entered into lightly. I have had 4 mortgages and it's clear I will be paying more than my house is worth to get it off the books, but it's necessary to own property if a member of the middle class.