Beware of Claims - Paying Off Your Mortgage Early With MMA Accounts!
Recently I was contacted by a mortgage professional about a new program that claims The average MMA customer will pay their 30-year mortgage off 100% within 8 to 11 yearswith little change to their day-to-day spending habits and without increasing their monthly mortgage payments.
Ive now received a couple of messages regarding the program and had just brushed them aside until I came across multiple advertisements for this program in craigslist. My initial reaction was that something with this program isnt quite right, but with as much as Im seeing it, I figure that my clients and customers are seeing it too, so I better look into it further.
Lets first look at the primary claim: The average MMA customer will pay their 30-year mortgage off 100% within 8 to 11 yearswith little change to their day-to-day spending habits and without increasing their monthly mortgage payments. Sounds too good to be true. Ive done the math several times and it just doesnt add up. Quite a few others have too. The following is an analysis by DLM on Scam.com:
If the mortgage on my house is a 30 year mortgage at 6% interest, how exactly could I pay off my house in 6-12 years without increasing my monthly mortgage payment? Even if my mortgage was at 0% interest and 100% of my payment went to principal, it would still take nearly 14 years to pay it off without increasing my mortgage payment.
Interest is interest, whether it's in a first mortgage or a HELOC. If I have a $100,000 mortgage at 6% and I pull $20,000 off a 6% HELOC to pay down my first mortgage, I still have $100,000 in debt at 6%. It's now just split between two loans. So let's separate fact from hype. FACT: You might save some interest if your HELOC interest rate is very close to your first mortgage interest rate. However, the interest savings only amounts to an average of $10-15 per month using the above example of $5000 per month income. What does that translate to? About 1.5 to 2 years off your mortgage term (paying off your 30 year mortgage in 28 years). That's a bit different than what they're promoting.
In the presentation, they passed out a sample report from the software. I filtered through the numbers that they gave (paying off a 30-year $150,000 mortgage at 6.5% interest in 8.4 years). The mortgage payment was listed at $850 per month (which should have actually been closer to $950). They even make the reports difficult to read, but here's how they arranged to pay off that mortage in 8.4 years: They took $5000 in monthly income and applied $2845 per month toward the "system" (note that the amount is three times the original 30-year amortized payment). My first question is, how exactly do you triple your mortgage payment "without altering your current standard of living" and "without increasing your monthly mortgage payment"?
Now here's the good part: Let's take that original loan amount of $150,000 at 6.5% interest. The MMA program was going to pay it off in 8.4 years by applying $2845 per month toward the first mortgage and/or HELOC. Now what would happen if we didn't use the MMA program and just paid $2845 per month toward the first mortgage of $150,000 at 6.5%? Ready for this?... 5.2 years! That's 3 years faster than using the MMA program, just by simply paying the same amount directly to your first mortgage. But how many people can afford to triple their mortgage payment anyway?
The bottom line is that UFF is in the software business. This system was created from a simple concept (accelerated mortgage reduction) and made extremely complex so the average person couldn't understand how the numbers really work. Then they make it look like they're going to save you $100K or more in interest without affecting your lifestyle, so $3500 for a piece of software that's really worth a small fraction of that seems like a bargain. DO THE MATH! They're complicating a simple concept to make you think you need to give them $3500 for a piece of software. Think about it.
Tony Rose, MBA, is the owner/founder of http://www.iswami.com, the user-driven web site that links to the most recommended locally owned and operated businesses throughout the US. Tony has been a successful business owner in the fields of Real Estate, Development and Web Development for over twenty years.
