Paying down mortgage

[PJJ]

Hi All,
Does anyone know about that program where you can pay at certain times, without really paying anything more to pay your mortgage off in 7 years.

I think you have to pay $2K for the software.

Anybody used it/have experience one way or another?

Thanks,
PJJ

[msjd123]

You don't need special software! You just pay half your mortgage every 2 weeks or send in one extra payment a year. Easy-peasy! Just make sure there isn't a prepayment penalty on your mortgage.

[PJJ]

Thanks

Yes, that takes 7 years off--I was looking for the pay off in 7 years. My mortgage company makes it painful to pay every two weeks and will only accept the bi-weekly if another company does it and I have to pay the fees associated.

I am specifically talking about paying in a timed manner software.

Thanks again.

[TiredX2]

From what I understand that is more of a scam.

Good luck on finding something helpful!

[SiValleySteph]

Originally Posted by PJJ

Does anyone know about that program where you can pay at certain times, without really paying anything more to pay your mortgage off in 7 years.

I tried to do a search on this to see what you were talking about, but I didn't find anything.

This doesn't make any sense really. If I multiply my monthly payment x 12mo x 7 years, I only get <50% of my principal. So it would be impossible to pay off my mortgage without paying any extra with 7 years of payments even with NO interest.

[Cheshire]

I have alarm bells going off in my head. $2,000 to help you pay off your mortgage in 7 years without really paying extra sounds too good to be true and probably is. Have you googled the software name?

I'd put my money on it being a scam.

[mammastar2]

Well, if you save a whole ton of money on the side, you can always throw it at the mortgage when it comes up for renewal. If you put enough money into it at that point, you could pay it off early. I think the software sounds scammy. Anything where you pay a bunch of $$$ to learn someone else's special money-saving method (or get rich quick method) sounds off.

[Eman'smom]

Originally Posted by SiValleySteph

This doesn't make any sense really. If I multiply my monthly payment x 12mo x 7 years, I only get <50% of my principal. So it would be impossible to pay off my mortgage without paying any extra with 7 years of payments even with NO interest.

I get just over 50% of my principal but yeah something doesn't sound quite right.

[skueppers]

I believe what you're talking about is called a "Money Merge Account". Try plugging that into Google, you should get some useful information.

[PJJ]

Mma

Thanks so much.
Did you try to MMA?
Take care.
PJJ

[ShaggyDaddy]

A money merge account is great when used properly, it seems like the kind of thing that would protect your money from you (which is the kind of thing I need) the problem is a MMA takes just almost as much self-control as say.. making periodic principle only payments. Since you can take all your money out of the MMA or you can leave it in and just what is left over gets paid toward principle, it isn't much different. I find that if I have access to the money it is gone. period.

The biggest difference to me is that an MMA costs $1800-$5000 up front, and making principle only payments costs 39 cents...unless you have direct bank draft available .

In my situation, an MMA would add 4 more months of payments to the end of my mortgage, regardless of what benefit it actually gave me. It is just one more thing besides principle to waste your money on.

[SiValleySteph]

ShaggyDaddy,

Can you break it down exactly what a MMA is?

This is what I gathered from google searching/message board reading:

You pay $3500 for the MMA software.
You open a HELOC on your home (addt'l closing costs for this perhaps)
You deposit your paychecks into your HELOC, vs. bank account.
You pay for your normal life expenses with checks from your HELOC.

This amazing software developed by a Aeuronotical Mathematics PhD (what?) will tell you when to make principal payments from your HELOC to your primary mortgage.

I guess I'm missing where the big benefit is? Is it you just get rid of your savings and use your HELOC as your emergency savings so you can put more money to principal of your primary mortgage?

All I could really find were ads for MMA OR people saying it was a waste of $3500 because you could do it yourself.

[Herausgeber]

This is so obviously a scam. Run far, far away.

[fuller2]

HUH?? You don't need software to pay down your mortgage!! and you certainly don't need to pay money to do it. This sounds crazy. Wherever you heard about this, don't go there again!

All you do is pay more every month. You can figure out yourself how much to pay to get it paid in 7 years.

[ShaggyDaddy]

Originally Posted by SiValleySteph

ShaggyDaddy,

Can you break it down exactly what a MMA is?

This is what I gathered from google searching/message board reading:

You pay $3500 for the MMA software.
You open a HELOC on your home (addt'l closing costs for this perhaps)
You deposit your paychecks into your HELOC, vs. bank account.
You pay for your normal life expenses with checks from your HELOC.

This amazing software developed by a Aeuronotical Mathematics PhD (what?) will tell you when to make principal payments from your HELOC to your primary mortgage.

I guess I'm missing where the big benefit is? Is it you just get rid of your savings and use your HELOC as your emergency savings so you can put more money to principal of your primary mortgage?

All I could really find were ads for MMA OR people saying it was a waste of $3500 because you could do it yourself.

I actually write software of "The nation's biggest mortgage lender". There are a million ways to give your mortgage company your money... This one just happens to be a little more complicated.

Here is what an MMA is: A combination bank account and heloc. you deposit all your earnings there. You only sort of have a minimum payment, and you pay your bills and whatever out of this account. Instead of a minimum payment, you would have something like a minimum difference between deposits and withdrawls. If you keep a positive balance, instead of sitting there earning interest, it is temporarily (or permanintly if you never take it out) reducing your principle.

It is called money merge because that is what you do, you basically deposit your paycheck into your mortgage principle each month.

It's like paying closing costs again in order to treat your house like a savings account.

So for instance lets pretend you are the IDEAL candidate for a MMA. You have a 150,000 mortgage and make say 4000 per month and get paid on the 1st. You pay all your bills on the 31st. Lets say you spend ALL your money each month. You are paying interest on 146,000 each month instead of on 150,000. Not only that but if you don't spend all of your money then it starts to collect and reduce your principle even more, while still allowing you access to it.

In my opinion, a MMA is perfect for someone who has no money problems, manages their budget well, but can't manage to earn more interest on their savings than their mortgage interest rate. For people like me who get paid2 times a month and spend all their money quickly (specifically have spending problems) all this will be is a $1800-$5000 loss with very little benefit and a lot of hassle.

[rsummer]

Not a scam

This is actually really common in europe and is gaining popularity in places like california with the jumbo mortgages so that those people might actually someday be able to own their properties. I'm not exactly sure who is running these but I think I heard GMAC (?????) might have their hands in it. I think that it takes the interest you make off your money (that makes no money in your checking account) and applies it to your mortgage. My brother's roommate sells these out in santa cruz. I'll try and find out more info from brother.

[cristeen]

Originally Posted by SiValleySteph

You pay for your normal life expenses with checks from your HELOC.

This one line caught my attention. Writing checks on HELOCs can be troublesome. A lot of places won't give it a second look, but some will. Some places will not accept the check because it can take weeks to process, that is weeks of them not having their money, and not even knowing if the funds are available or whether the check will clear.

[velochic]

If I can't understand it (and I consider myself quite financially savvy), then I won't do it. Period. And if I have to pay money in order to pay a debt I already have, then I'm doubly sure I won't do it. The money is better spent simply putting it toward your mortgage principal.

Believe me... the mortgage companies' goal is NOT to save you money... it's for them to MAKE money. They are never going to do something that's in your best interest... it's going to somehow profit them.

[ShaggyDaddy]

Originally Posted by velochic

If I can't understand it (and I consider myself quite financially savvy), then I won't do it. Period. And if I have to pay money in order to pay a debt I already have, then I'm doubly sure I won't do it. The money is better spent simply putting it toward your mortgage principal.

Believe me... the mortgage companies' goal is NOT to save you money... it's for them to MAKE money. They are never going to do something that's in your best interest... it's going to somehow profit them.

yeah, with an MMA it is actually better for the bank for the majority of loans even though you actually do pay them less interest... because they get to hold on to your money in the mean time... this means that instead of making the 5-7% interest from you, they can invest it elsewhere or write new loans for higher than your interest rate.

So while technically it saves you money on mortgage interest, there is an opportunity cost of not having your money in an interest yielding account... but most people don't have enough money to get the kinds of interest rates on their savings that they got on their home loans.

So in a way it really is a win-win... but the bank will ALWAYS have the biggest win.

Keep in mind that many lenders make their money on the following (in this order):
Points
Closing costs
Late Fees
Mortgage interest

So it makes sense that they would trade another round of closing costs and the right to hold your money for you for a measily few hundred dollars worth of interest every month.

It really isn't a scam, but it isn't what it sounds like either... it is not a way for people to save money and work their way out of debt... it is yet another way for people who have money to keep a bigger chunk of it, and a way for people who don't have money to lose a bigger chunk of it (closing cost).

[velochic]

ShaggyDaddy, no offense, but it cannot be win-win because you're stuck putting your money one place... a HELOC from which you take out money. That kind of restriction is not in any consumer's best interests. It forces the consumer into a corner that is dictated by the mortgage company and if you want to ever get refinance or move your money, you are so tightly bound by the terms of the contract, you cannot make a change. Moreover, if you have a need to put the money elsewhere, too bad. It's almost like financial handcuffs.

I admit, though, that perhaps I don't understand the full implications of this kind of arrangement.

It might be a tool you use as a last-gasp effort to save your home, but I don't see any advantages for the consumer.

I'm surprised that anyone would say that it's popular in Europe. Mortgages are rare, and they're actually quite straightforward and simple. We own property in Europe and just sold some over the summer (it took literally one single signature on one piece of paper to sell it). The attitude toward debt of any kind is quite different from the US model. It may be different in different countries, but I think the consensus at least in that part of the world, is to avoid debt at all costs.

Again, perhaps I'm not understanding it.