MMA - is it for real?

It sounds like it might be the program Scott Burns wrote about a while back in

if so, it is not all it is cracked up to be. Dave

Background: A company called "United First Financial" (UFF) coined the name "Money Merge Account" or "MMA" for the product you mention in the subject line. Fact is one has to exercise the same amount of discipline with UFF's product that he or she would without it.

If you must spend money to figure out precisely how to pay down your mortgage as quickly as possible, spend it on a reputable, fee only financial advisor. It should cost you a lot less than the services/product of UFF. The discipline will always be up to you.

If you are already saving in your 401(k) and/or IRA, and have no credit card debt you carry month to month, and you have a comfortable emergency fund, well then, you are disciplined enough to start a mortgage prepayment plan on your own, aren't you? If you don't have the above, that should be the priority.

You mention nothing else about your finances, so let's just stick to this decision. What is the rate, term, and balance on your mortgage? If the rate is high, you might consider a refinance. With money drying up, you should explore your options there.

Let me offer this - if you have 20 years left and a 7% mortgage, just taking that $3500 will cut $14000 off the back end. Maybe a year, maybe not, but that's a huge amount to throw down the drain. Since the average time in a house is 7 years, it's a very small group that buys a house and keeps the mortgage for the full term. That's something else to think about.

JOE

Follow your first impression: this is a scam. I brought this package up back in July in the thread, "Formulating decision to take out mortgage or pay cash for home." A friend of mine almost bought this package. Using a simple spreadsheet I showed him how MMA would cause him to

*lose* money, even though he would pay his mortgage off early. After all, MMA works by shifting you out of your mortgage into a higher rate line of credit.

Would you refinance to a higher rate mortgage? Or use those credit card checks you get in the mail to make extra principal payments on your mortgage (assuming non-teaser rates)? These options don't make sense for the same reason that MMA doesn't make sense.

Good luck,

-Will

william dot trice at ngc dot com

tnx for the link - interesting reading - I've often wondered about those radio commercials that say... they got rid of their mortgage in just 3 years!

Our LaSalle-ABN/AMRO mortgage just went to Citi, and their statement makes it easy to track principle pre-payments so we have been adding $2k every month or so.

Ok, I investigated them, I studied, and I think they are real, and have a valuable product. For me, something that keeps me in mindset of paying off debt is worth a lot.

Please, if you have an extra $3500, pay down your principal with it, don't give it to someone else. How does it make sense to borrow money at say, 8%, to pay back a loan that is only charging you 6%. Don't throw your money away. The primary rule of getting ahead is "Pay Yourself First".

Elizabeth Richardson

They *are* for real. That still doesn't make it a good deal or a prudent use of your money.

The fact of the matter, however, is that:

(a) You can do this yourself, without plunking down several thousands of dollars of your hard-earned money

(b) The examples they give (I watched about an hour long video 2 or 3 years ago -- are they showing the same video on their website?) ... anyway, the examples they give, while real, are actually "best case" and assume you're chucking in money over and above your minimums, which leads us back to (a) that's something you can do yourself and don't need to give them thousands of dollars for.

.

Update, I bought it, and have no regrets, the financial education, and goal setting help is worth the price alone, and I have a path to pay off my debts much faster. My bank knows and likes the MMA - it helps people get out of debt. So, if you hate the MMA - make sure you talk to people who bought and use it before dismissing it as a scam, it is not.

Tom, in your first post you mentioned a $3500 fee. Can you tell us the interest rate on this deal? And, is that fixed or variable? If variable, how is the rate set? As always, the group appreciates the follow up. JOE

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The prime rate is currently 7.25%. So I take it your HELOC is prime +

1/2%. A good site to see historical rates for the prime is see how we bottomed out in 2003-4 at 4%? This is what I would wish for you in the current cycle. Although, if we reach that level, you will likely see the 15 yr fixed rate touching 5% again, and I'd hope you'd consider that shift if you plan to stay in the home you're in. I understand your hesitation to offer much more detail on this product. Perhaps another visitor with inside knowledge can explain how a variable product at 7.25% can be a better deal than a 30 yr fixed at 5-7/8% (this is what I find as of last week's data). Thanks for the reply, Tom

JOE

Typo, of course. "prime + 1/4%"

From their website, "Qualified homeowners using the Money Merge Account system can now potentially pay off their mortgage in as little as 1/3 to

1/2 the regular time ? with little to no change to their day-to-day spending habits and without increasing their minimum required monthly mortgage payments."

-Will

william dot trice at ngc dot com

This is where I get to be dense, Will. I trust the website

5is an example of one such plan. Shortening a mortgage from 30 years to 11-1/3 yrs. In that example, a $138,058 mortgage at 5.25% is what is in place. Is it fair to say that the likely family income is about $70,000 for such a scenario? They have maybe $40,000 sitting in MM funds as an emergency account? Given the numbers, the current payment is $751/mo. It would take $1330/mo to get down to 11-1/3 yrs. $579/mo higher payment or $6948/yr. Now, I understand there's a neat trick to throwing one's emergency funds at the mortgage, and using an untapped HELOC as 'emergency'. Been there, done that. But here, in this example, 2 or 3% that can be captured (the delta from the mortgage rate down to today's MM rates) is $1200 at best, not $7000.The only other option I can see is if there's some huge CC debt, so that debt is wiped out by the HELOC, and the payments are kept the same but all sent to pay off the mortgage+HELOC. But who needs special software for that?

JOE

There you have it. People do not always make rational economic decisions, and often are willing to pay others to do what they cannot bring themselves to do, regardless of capability.

For example, if you and I both are able to routinely change the oil in our cars, but you enjoy it and I despise it -- or I have plenty of disposable income and you don't -- guess which one of us will pay a premium at the quick-oil-change place?

It's not "paying yourself first", but it happens. Or, as the OP stated, "The heloc is open-ended, meaning I put my paychecks in there to help pay it off."

-Mark Bole

Ha! You're not being dense at all, that's my job. The site you cite is the site where I got the quote. I didn't want to cite the site so as not to encourage others to go there...

There is no dount that a user of this software will end up worse off financially.

Indeed. Back in July (and earlier in this thread) I wrote about a friend I talked out of buying this software. I offered to write the software for him for $2000 (remember that MMA costs $3500). He didn't take me up on it. I lowered my price to $1500, then $1000, then I told him I would do it for free, if he just wouldn't buy MMA. By then he had gotten the point.

-Will

william dot trice at ngc dot com

"Will Trice" wrote

Now that's effective persuasion. Well done.

But to be complete I guess one has to be a bit rude and ask: Is your friend paying extra on his mortgage at this point, so as to reduce his principal more quickly?