IMO it's the same thing as paying as much as possible for your mortgage every month, not saving any money, and keeping a HELOC open in case of emergencies.
The idea of paying off your mortgage with a HELOC is ridiculous, interest on your mortgage is typically lower than on a HELOC.
Submitted by ucodegen on November 4, 2007 - 7:41pm.
A basic check confirms that this is BS. In their own example, the Mortgage loan is 6.5% but the HELOC is 8%. You are paying the mortgage with HELOC money, meaning you are paying down a loan rate of 6.5% with money from a loan rate of 8%. (Paying down cheaper money with more expensive money.) You really want to do the reverse.
By the way, many credit unions as well as brokerages have checking accounts that are interest bearing. Even some banks do to. Yield is not always that great, but you should use 30day, 60day, 90day CDs as well as Money markets etc for any amount over 1month, 2month... etc needs.
They are trying to sell this POS software. The interest saved is really interest saved compared to not paying the mortgage payment that month(which is not advised). One can easily do this with an eXcell spreadsheet. You will actually save more money by prepaying one month (which is what they sort of state the software as costing) than buying this POS.
Submitted by Raybyrnes on November 4, 2007 - 7:59pm.
The system factors that you are getting 0 percent on your money sitting in the bank. Right now with little efort you can get 5%.
It also figures that the HELOC debt is going to carry a lower interest rate than what you could get on other credit lines. I have carried over 20K in credit card debt for nearly 5 years and have never paid interest on any of it. Lot of 0% offers out there.
Last but not least I am wondering why I would pay 1000 dollars for a software program when if my goal was to pay my mortge off early I could simply send in an additional payment each month.
Submitted by Raybyrnes on November 4, 2007 - 8:21pm.
I am familiar with the system. What it is really addressing is the average outstanding balance. By using the HELOC approach you are able to immediately pay down a debt. So irregardless of the interest rate you are lowering the average outstanding balance of money so this is helping to pay down the debt early.
I get what they are doing. It is sort of like a diet plan. I think a lot of them are good but you have to be able to follow them and be disciplined. Additionally a lot of people who fall off diets get fatter afterwards.
Submitted by ucodegen on November 4, 2007 - 8:32pm.
I am familiar with the system. What it is really addressing is the average outstanding balance. By using the HELOC approach you are able to immediately pay down a debt.
With another debt at a higher rate.
Wow, I expect more out of the piggs....so quick to make a call with basic assumptions..
Wrong.. we see through the sales attempt. Debate with logic not sales brochures.
Submitted by 4plexowner on November 4, 2007 - 8:36pm.
The program starts with the assumption that you have a chunk of money sitting in the bank not doing anything
You pay down the principle on your mortgage with this chunk of money and then take out a HELOC - the HELOC is used for all your day-to-day checking activity and you deposit your paychecks into this account
Because the HELOC is short term money it COSTs less than the long term mortgage money even though the interest rate is higher on the HELOC (interesting concept that I haven't fully grasped yet)
The software tells you when to send in your HELOC and mortgage payments in order to maximize the difference between the short and long term cost of the two loans
Interesting idea but it does appear to be based on the assumption that you have a chunk of money somewhere that's getting dusty
Ucodegen, I'm not a rep nor do I have any interest in this program. As a matter of fact the youtube videos are for Equity Genie and the pdf is from United First Financial. If I had any kind of interest in either of those companies I would have hid the material of the one I didn't have an interest in.
You once again are quick to spout off without doing your homework. Page 3 and 4 addresses your concern about a "higher rate".
"Interesting idea but it does appear to be based on the assumption that you have a chunk of money somewhere that's getting dusty"
Correct me if I'm wrong but isn't that big chunk of money the HELOC? Part of the plan is securing a HELOC to get the ball rolling at least thats what I get out of it.
Ucodegen, I'm not a rep nor do I have any interest in this program.
Bunk, you use the exact same sales junk that's been posted to most of the blogs at least 3 or 4 times each.
Most of these blow up the same way, if you don't have extra cash left over at the end of the month, it takes longer and requires larger payments to actually pay off the loan.
Submitted by ucodegen on November 4, 2007 - 8:53pm.
Excerpts..
They developed a method to borrow
money at one cost and use it to eliminate a much higher-cost mortgage.
Pure BS. Mortgage loans are the lowest costs loan products. They are a securitized loan which the bank sees as low risk, therefore the risk premium is the lowest on them. HELOCs are subordinate loans to the mortgage, so they have a higher risk premium. In addition, they are callable by the loanee (ie. can be paid instantly and therefore the investor fronting the money for the HELOC has to find another place to put the money). This also contributes to HELOC rates being higher than mortgage rates. If your mortgage rate is higher than an HELOC... refinance!!
The MMA is a classic example of borrowing to make money. It borrows money from a line-of-credit (LOC) at one cost and uses it to pay down a mortgage at a much higher cost. Notice, I did not say rate, I said cost. That is because the rate of the LOC usually will be higher than the rate of the mortgage, but the cost will be the other way around, because the rate of the LOC will be charged for a very short period f time (usually less than three months) whereas the rate of the mortgage typically will be charged hundreds of months.
BS repeated with a twist, forgetting that on prepay, you also cut the carried balance on the mortgage for that month period. No point in carrying the higher rate of an HELOC.
When I tried to explain how the program worked, I just couldn’t do it. She said that if I
don’t understand something and can’t explain it, I shouldn’t do it.
The length of the loan is as important as the rate.
Wrong. If you are using the short duration as a revolving credit, you are actually carrying it for the full duration. It is either prepay the mortgage costing a lower rate over the month interval, use the HELOC to pay/prepay and carry a balance on HELOC until the check comes in or, pay and invest the balance. Duration of comparison on all is the same 1 month window. The HELOC is being used like a revolving line of credit, secured by the property but subordinate to the primary mortgage and any seconds. The HELOC is also a recourse loan.
Good advice.. but not directly presented by the MMA program. ..the software will do it all
While your money is accumulating in a checking or savings account waiting to be sent, it is not working for you. you. At best, it may earn a pittance of interest that falls short of inflation, which means it actually is losing value and, on top of that, you have to pay income taxes on the pittance;
Incorrect. Most checking accounts yield, some quite decently. In addition, the pittance yield is better than 1.5% points over the mortgage in costing you.
We are dealing here with a process similar to arbitrage
Yes, you are arbitraging yourself into more costs. The HELOC has a higher monthly carrying cost than the mortgage. The arbitrage is going the wrong way.
Yes, I think you are missing the fact that it has taken years to perfect the algorithms that are built into the program that tracks the comparative interest balances between the ALOC and the mortgage(s) and then produces action points on specific dates to make payments and maximize the net gain.
More BS. Make is sound like there is a lot of 'important stuff' behind it.
I am not going through the rest of that PDF because I am now having problems typing... ROTFLMAO...
Submitted by ucodegen on November 4, 2007 - 9:06pm.
That guy that wrote that pdf and backs it is Edward Griffin the author of The Creature from Jekyll Island: A Second Look at the Federal Reserve.
So... Sorry, it doesn't impress.
4plexowner Because the HELOC is short term money it COSTs less than the long term mortgage money even though the interest rate is higher on the HELOC (interesting concept that I haven't fully grasped yet)
They spin it with 'duration'. The problem is that you are carrying a revolving balance.. so the duration is actually full term. You compare from time period to time period, analyzing total debt/assets. It doesn't work.
You should notice that this 'MMA program' shows many similar characteristics of other snake-oil programs. You profit greatly from some proprietary process that took years to tune.... YAWN, seen it before
Ucodegen, I'm not a rep nor do I have any interest in this program. According to your statement... but this is the internet.. I have no proof of that, and you have rarely if ever posted on other matters.
You once again are quick to spout off without doing your homework. Page 3 and 4 addresses your concern about a "higher rate".
Sorry, I have done the homework. This is why I have the assets I have and can buy a house with cash, if I so desire. There are some other people (probably quite a few) that are in the same situation on this board. We are not hungering for some magic to make the mortgage costs go down.
"Bunk, you use the exact same sales junk that's been posted to most of the blogs at least 3 or 4 times each."
What are you smoking on? What are you talking about? Let's assume I do have an interest.....does that argue his case about the "higher rate"? No, I don't think it does...
Let's stick to the conversation.....If you are disciplined enough to follow the program...does it work?
"Sorry, I have done the homework. This is why I have the assets I have and can buy a house with cash, if I so desire. There are some other people (probably quite a few) that are in the same situation on this board. We are not hungering for some magic to make the mortgage costs go down."
Well, sorry, I'm not impressed by that. I'm in the same situation as you more or less, but that doesn't pertain to the thread.
Ucodegen, I still don't see how you are showing the board how it doesn't work?
One more thing...for the sake of the conversation, let's assume these software programs are free. (Once people think they are being ripped off it shuts down their brains, I know I can be like that :)
Submitted by Russell on November 4, 2007 - 9:27pm.
Maybe 4plexowner wants to tackle this? He is a big fan of Griffin's book, "The Creature from Jekyll Island".
I can't tell what the consensus is exactly, but I hear many perspectives from piggs which conclude that it is not wise to pay off a house prematurely. The reasoning being that the mortgage,including tax rebate program, is cheaper than one can capitalize money otherwise.
No one has defended paying off the house yet, so maybe they are right? I paid my mortgage off. However, this decision was based on my earning and spending habits rather than an in depth cost/benefit analysis.
I know your point is that you want feedback on this program. Yours truly can't defend it or denounce it.Even if it has the potential to function properly, it would never work for me because of the attention/discipline necessary, as compared to other strategies,namely, don't stretch to buy and send mo money.
Edit: Damn that took me a while to type 4 little paragraphs. Hello 4plexowner. BTW if this is bogus would it make you more skeptical about the book?
Submitted by ucodegen on November 4, 2007 - 9:24pm.
Ucodegen, I still don't see how you are showing the board how it doesn't work?
They are following, you are not. You refuse to sit down and run the numbers by hand. Trust the software.. which coincidentally is exactly what Edward Griffin told you not to do when it came to voting (The Coalition for Visible Ballots - founding member).
Well, sorry, I'm not impressed by that. I'm in the same situation as you more or less, but that doesn't pertain to the thread.
If you were in the same situation, this program would not even be on your radar. You would have absolutely no interest in it. Calling BS here too!
Let's stick to the conversation.....If you are disciplined enough to follow the program...does it work?
If you say no, show us.
Wrong logic. We are sticking to the conversation, but not accepting what you are postulation because you have not proving it and it violates basic logic. You have to show it works first. No-one gets to postulate and then say 'disprove me'. Show monthly columns, Excel format data from both the HELOC, mortgage balance, etc for two year period. Also show other withdraws, deposits. Each row is one time period. State time and date that interest load is calculated against outstanding balance.
One more thing...for the sake of the conversation, let's assume these software programs are free.
Not interested. Won't waste my time because I know it doesn't work. Just like all those other late night infomercials..
Submitted by ucodegen on November 4, 2007 - 9:28pm.
I can't tell what the consensus is exactly, but I hear many perspectives from piggs which conclude that it is not wise to pay off a house prematurely. The reasoning being that the mortgage,including tax rebate program, is cheaper than one can capitalize money otherwise.
BINGO. It is the cheapest loan form available because the interest is deductible. Because it is secured by hard assets, it is considered low risk and therefore has a low risk premium.
The only caveat is to make sure the balance of assets are not squandered and are instead put into some investment article that yields a higher rate than the tax adjusted cost of the mortgage.
Now I'm really skeptical - I'd want to see some examples before I spent any money on the software
I've seen at least four of them. Let me repeat they don't save you money.
They rely on one simple assumption. That assumption is you have excess disposable income each month above your bills. They apply that entire extra amount to "paying off" the mortgage and carry a big "safety cushion" on an HELOC. Wallah, like magic, the demo pays the loans off years as in a decade plus early.
In the end, the demo is really simple, each month, the borrower is making an extra $1000 or more pre-payment. Period. End of discussion. Take away the extra prepayment and you don't pay it off early. Make the demo so your bills equal your income and the balance will go up until you trip the loan caps and it straight lines you to an early payoff with a minor little footnote saying 'larger payments may be required'.
If you have the extra income, just prepay and get an credit card with a fat credit line for emergencies. No extra cost.
Submitted by ucodegen on November 4, 2007 - 9:50pm.
I have a mortgage on my home and choose not to pay it off early because my money is working harder in other places and for the tax deduction.
It is on my radar because it touts to help pay off your mortgage earlier WITHOUT YOU SPENDING EXTRA MONEY (i.e. no pre-payment out of your excess).
Call BS again!! You pay down the mortgage early, you loose the tax deduction on the interest. You have to use money to pay it down early. No magic is going to change that. Also important thing to note about HELOCs. Most charge interest on the peak balance during that period, not the average. If you were in the situation you could do a cash purchase, you would be more concerned with making the most return on income and you would know that you don't pay down principle without spending the extra money to do it.
Have you produced the data yet? It would be easy to fact check the data. I presume you have a copy of the program, so it should be easy to pull the numbers out... one row per time period.
I watched the first 3 minutes and realize the rest is a waste of time.
First - home prices are way higher than that, and most people don't have 2-3 months of mortgage payments sitting idle in checking
Second - There's nowhere I know of that you can gain more interest on savings than an 8% HELOC without risk
Third - to take out a HELOC you have to paid equity into it, so new buyers would have to wait years, and even longer in a deflatign market.
If there was a way to truly pay a mortgage off in 1/3 the time by revolving debt and savings it would be more prevalent than a video on youtube.
You love calling BS, but you calling it so quickly all the time is BS.
I call BS on you.
Yes, a tax deduction is nice, but who cares about the deduction in this case.
For example, let's say this "program" actually works (I'm not convinced either way yet).
It would NOT be smart to pay off the mortgage early (if you could). The best thing to do would be continue to pay the monthly payment for 10 years (1/3 of a 30 year mortgage) claiming the deduction during that time, at only 6% (give or take) and putting that lump sum money elsewhere (assuming it could beat 6%). At the end of the 10 years you could take that payment you would have been paying to the bank and invest it.
IMO it's the same thing as paying as much as possible for your mortgage every month, not saving any money, and keeping a HELOC open in case of emergencies.
The idea of paying off your mortgage with a HELOC is ridiculous, interest on your mortgage is typically lower than on a HELOC.
A basic check confirms that this is BS. In their own example, the Mortgage loan is 6.5% but the HELOC is 8%. You are paying the mortgage with HELOC money, meaning you are paying down a loan rate of 6.5% with money from a loan rate of 8%. (Paying down cheaper money with more expensive money.) You really want to do the reverse.
By the way, many credit unions as well as brokerages have checking accounts that are interest bearing. Even some banks do to. Yield is not always that great, but you should use 30day, 60day, 90day CDs as well as Money markets etc for any amount over 1month, 2month... etc needs.
They are trying to sell this POS software. The interest saved is really interest saved compared to not paying the mortgage payment that month(which is not advised). One can easily do this with an eXcell spreadsheet. You will actually save more money by prepaying one month (which is what they sort of state the software as costing) than buying this POS.
Wow, I expect more out of the piggs....so quick to make a call with basic assumptions..
www.wealthbuildinghome.com/MMA-GEdwardGr...
Read page 4....(actually read the whole thing)
The system factors that you are getting 0 percent on your money sitting in the bank. Right now with little efort you can get 5%.
It also figures that the HELOC debt is going to carry a lower interest rate than what you could get on other credit lines. I have carried over 20K in credit card debt for nearly 5 years and have never paid interest on any of it. Lot of 0% offers out there.
Last but not least I am wondering why I would pay 1000 dollars for a software program when if my goal was to pay my mortge off early I could simply send in an additional payment each month.
page 3 of the pdf addresses what you said...
I am familiar with the system. What it is really addressing is the average outstanding balance. By using the HELOC approach you are able to immediately pay down a debt. So irregardless of the interest rate you are lowering the average outstanding balance of money so this is helping to pay down the debt early.
I get what they are doing. It is sort of like a diet plan. I think a lot of them are good but you have to be able to follow them and be disciplined. Additionally a lot of people who fall off diets get fatter afterwards.
I am familiar with the system. What it is really addressing is the average outstanding balance. By using the HELOC approach you are able to immediately pay down a debt.
With another debt at a higher rate.
Wow, I expect more out of the piggs....so quick to make a call with basic assumptions..
Wrong.. we see through the sales attempt. Debate with logic not sales brochures.
Yes, one obviously needs discipline to do this. Let's pretend for conversation purposes that everybody has discipline and talk about this program.
That guy that wrote that pdf and backs it is Edward Griffin the author of The Creature from Jekyll Island: A Second Look at the Federal Reserve.
The program starts with the assumption that you have a chunk of money sitting in the bank not doing anything
You pay down the principle on your mortgage with this chunk of money and then take out a HELOC - the HELOC is used for all your day-to-day checking activity and you deposit your paychecks into this account
Because the HELOC is short term money it COSTs less than the long term mortgage money even though the interest rate is higher on the HELOC (interesting concept that I haven't fully grasped yet)
The software tells you when to send in your HELOC and mortgage payments in order to maximize the difference between the short and long term cost of the two loans
Interesting idea but it does appear to be based on the assumption that you have a chunk of money somewhere that's getting dusty
Ucodegen, I'm not a rep nor do I have any interest in this program. As a matter of fact the youtube videos are for Equity Genie and the pdf is from United First Financial. If I had any kind of interest in either of those companies I would have hid the material of the one I didn't have an interest in.
You once again are quick to spout off without doing your homework. Page 3 and 4 addresses your concern about a "higher rate".
"Interesting idea but it does appear to be based on the assumption that you have a chunk of money somewhere that's getting dusty"
Correct me if I'm wrong but isn't that big chunk of money the HELOC? Part of the plan is securing a HELOC to get the ball rolling at least thats what I get out of it.
I've done a few hours of reading about this and yes, that is what I get out of it also.
Ucodegen, I'm not a rep nor do I have any interest in this program.
Bunk, you use the exact same sales junk that's been posted to most of the blogs at least 3 or 4 times each.
Most of these blow up the same way, if you don't have extra cash left over at the end of the month, it takes longer and requires larger payments to actually pay off the loan.
You're right, you borrow the chunk of money to pay down the mortgage
The whole program is based on the difference in the cost between short term (HELOC) and long term (mortgage) money
Now I'm really skeptical - I'd want to see some examples before I spent any money on the software
Excerpts..
They developed a method to borrow
money at one cost and use it to eliminate a much higher-cost mortgage.
Pure BS. Mortgage loans are the lowest costs loan products. They are a securitized loan which the bank sees as low risk, therefore the risk premium is the lowest on them. HELOCs are subordinate loans to the mortgage, so they have a higher risk premium. In addition, they are callable by the loanee (ie. can be paid instantly and therefore the investor fronting the money for the HELOC has to find another place to put the money). This also contributes to HELOC rates being higher than mortgage rates. If your mortgage rate is higher than an HELOC... refinance!!
The MMA is a classic example of borrowing to make money. It borrows money from a line-of-credit (LOC) at one cost and uses it to pay down a mortgage at a much higher cost. Notice, I did not say rate, I said cost. That is because the rate of the LOC usually will be higher than the rate of the mortgage, but the cost will be the other way around, because the rate of the LOC will be charged for a very short period f time (usually less than three months) whereas the rate of the mortgage typically will be charged hundreds of months.
BS repeated with a twist, forgetting that on prepay, you also cut the carried balance on the mortgage for that month period. No point in carrying the higher rate of an HELOC.
When I tried to explain how the program worked, I just couldn’t do it. She said that if I
don’t understand something and can’t explain it, I shouldn’t do it.
The length of the loan is as important as the rate.
Wrong. If you are using the short duration as a revolving credit, you are actually carrying it for the full duration. It is either prepay the mortgage costing a lower rate over the month interval, use the HELOC to pay/prepay and carry a balance on HELOC until the check comes in or, pay and invest the balance. Duration of comparison on all is the same 1 month window. The HELOC is being used like a revolving line of credit, secured by the property but subordinate to the primary mortgage and any seconds. The HELOC is also a recourse loan.
Good advice.. but not directly presented by the MMA program. ..the software will do it all
While your money is accumulating in a checking or savings account waiting to be sent, it is not working for you. you. At best, it may earn a pittance of interest that falls short of inflation, which means it actually is losing value and, on top of that, you have to pay income taxes on the pittance;
Incorrect. Most checking accounts yield, some quite decently. In addition, the pittance yield is better than 1.5% points over the mortgage in costing you.
We are dealing here with a process similar to arbitrage
Yes, you are arbitraging yourself into more costs. The HELOC has a higher monthly carrying cost than the mortgage. The arbitrage is going the wrong way.
Yes, I think you are missing the fact that it has taken years to perfect the algorithms that are built into the program that tracks the comparative interest balances between the ALOC and the mortgage(s) and then produces action points on specific dates to make payments and maximize the net gain.
More BS. Make is sound like there is a lot of 'important stuff' behind it.
I am not going through the rest of that PDF because I am now having problems typing... ROTFLMAO...
That guy that wrote that pdf and backs it is Edward Griffin the author of The Creature from Jekyll Island: A Second Look at the Federal Reserve.
So... Sorry, it doesn't impress.
4plexowner
Because the HELOC is short term money it COSTs less than the long term mortgage money even though the interest rate is higher on the HELOC (interesting concept that I haven't fully grasped yet)
They spin it with 'duration'. The problem is that you are carrying a revolving balance.. so the duration is actually full term. You compare from time period to time period, analyzing total debt/assets. It doesn't work.
You should notice that this 'MMA program' shows many similar characteristics of other snake-oil programs. You profit greatly from some proprietary process that took years to tune.... YAWN, seen it before
Ucodegen, I'm not a rep nor do I have any interest in this program. According to your statement... but this is the internet.. I have no proof of that, and you have rarely if ever posted on other matters.
You once again are quick to spout off without doing your homework. Page 3 and 4 addresses your concern about a "higher rate".
Sorry, I have done the homework. This is why I have the assets I have and can buy a house with cash, if I so desire. There are some other people (probably quite a few) that are in the same situation on this board. We are not hungering for some magic to make the mortgage costs go down.
"Bunk, you use the exact same sales junk that's been posted to most of the blogs at least 3 or 4 times each."
What are you smoking on? What are you talking about? Let's assume I do have an interest.....does that argue his case about the "higher rate"? No, I don't think it does...
Let's stick to the conversation.....If you are disciplined enough to follow the program...does it work?
If you say no, show us.
"Sorry, I have done the homework. This is why I have the assets I have and can buy a house with cash, if I so desire. There are some other people (probably quite a few) that are in the same situation on this board. We are not hungering for some magic to make the mortgage costs go down."
Well, sorry, I'm not impressed by that. I'm in the same situation as you more or less, but that doesn't pertain to the thread.
Ucodegen, I still don't see how you are showing the board how it doesn't work?
One more thing...for the sake of the conversation, let's assume these software programs are free. (Once people think they are being ripped off it shuts down their brains, I know I can be like that :)
Maybe 4plexowner wants to tackle this? He is a big fan of Griffin's book, "The Creature from Jekyll Island".
I can't tell what the consensus is exactly, but I hear many perspectives from piggs which conclude that it is not wise to pay off a house prematurely. The reasoning being that the mortgage,including tax rebate program, is cheaper than one can capitalize money otherwise.
No one has defended paying off the house yet, so maybe they are right? I paid my mortgage off. However, this decision was based on my earning and spending habits rather than an in depth cost/benefit analysis.
I know your point is that you want feedback on this program. Yours truly can't defend it or denounce it.Even if it has the potential to function properly, it would never work for me because of the attention/discipline necessary, as compared to other strategies,namely, don't stretch to buy and send mo money.
Edit: Damn that took me a while to type 4 little paragraphs. Hello 4plexowner. BTW if this is bogus would it make you more skeptical about the book?
Ucodegen, I still don't see how you are showing the board how it doesn't work?
They are following, you are not. You refuse to sit down and run the numbers by hand. Trust the software.. which coincidentally is exactly what Edward Griffin told you not to do when it came to voting (The Coalition for Visible Ballots - founding member).
Well, sorry, I'm not impressed by that. I'm in the same situation as you more or less, but that doesn't pertain to the thread.
If you were in the same situation, this program would not even be on your radar. You would have absolutely no interest in it. Calling BS here too!
Let's stick to the conversation.....If you are disciplined enough to follow the program...does it work?
If you say no, show us.
Wrong logic. We are sticking to the conversation, but not accepting what you are postulation because you have not proving it and it violates basic logic. You have to show it works first. No-one gets to postulate and then say 'disprove me'. Show monthly columns, Excel format data from both the HELOC, mortgage balance, etc for two year period. Also show other withdraws, deposits. Each row is one time period. State time and date that interest load is calculated against outstanding balance.
One more thing...for the sake of the conversation, let's assume these software programs are free.
Not interested. Won't waste my time because I know it doesn't work. Just like all those other late night infomercials..
I can't tell what the consensus is exactly, but I hear many perspectives from piggs which conclude that it is not wise to pay off a house prematurely. The reasoning being that the mortgage,including tax rebate program, is cheaper than one can capitalize money otherwise.
BINGO. It is the cheapest loan form available because the interest is deductible. Because it is secured by hard assets, it is considered low risk and therefore has a low risk premium.
The only caveat is to make sure the balance of assets are not squandered and are instead put into some investment article that yields a higher rate than the tax adjusted cost of the mortgage.
Now I'm really skeptical - I'd want to see some examples before I spent any money on the software
I've seen at least four of them. Let me repeat they don't save you money.
They rely on one simple assumption. That assumption is you have excess disposable income each month above your bills. They apply that entire extra amount to "paying off" the mortgage and carry a big "safety cushion" on an HELOC. Wallah, like magic, the demo pays the loans off years as in a decade plus early.
In the end, the demo is really simple, each month, the borrower is making an extra $1000 or more pre-payment. Period. End of discussion. Take away the extra prepayment and you don't pay it off early. Make the demo so your bills equal your income and the balance will go up until you trip the loan caps and it straight lines you to an early payoff with a minor little footnote saying 'larger payments may be required'.
If you have the extra income, just prepay and get an credit card with a fat credit line for emergencies. No extra cost.
Ucodegen,
I have a mortgage on my home and choose not to pay it off early because my money is working harder in other places and for the tax deduction.
It is on my radar because it touts to help pay off your mortgage earlier WITHOUT YOU SPENDING EXTRA MONEY (i.e. no pre-payment out of your excess).
I have a mortgage on my home and choose not to pay it off early because my money is working harder in other places and for the tax deduction.
It is on my radar because it touts to help pay off your mortgage earlier WITHOUT YOU SPENDING EXTRA MONEY (i.e. no pre-payment out of your excess).
Call BS again!! You pay down the mortgage early, you loose the tax deduction on the interest. You have to use money to pay it down early. No magic is going to change that. Also important thing to note about HELOCs. Most charge interest on the peak balance during that period, not the average. If you were in the situation you could do a cash purchase, you would be more concerned with making the most return on income and you would know that you don't pay down principle without spending the extra money to do it.
Have you produced the data yet? It would be easy to fact check the data. I presume you have a copy of the program, so it should be easy to pull the numbers out... one row per time period.
I watched the first 3 minutes and realize the rest is a waste of time.
First - home prices are way higher than that, and most people don't have 2-3 months of mortgage payments sitting idle in checking
Second - There's nowhere I know of that you can gain more interest on savings than an 8% HELOC without risk
Third - to take out a HELOC you have to paid equity into it, so new buyers would have to wait years, and even longer in a deflatign market.
If there was a way to truly pay a mortgage off in 1/3 the time by revolving debt and savings it would be more prevalent than a video on youtube.
WITHOUT YOU SPENDING EXTRA MONEY (
Because they call it "budget".
Go to 4:02 of Part 2 from your initial links.
Average Income: $6037.50
Average Expenses $3431.25
Mortgage Payment $1453.76
Average Budget: $1152.49
Average Budget is disposable income used to "budget" and prepays the loan balance. It isn't "spent" because they say it's still available as HELOC.
Real simple, it's an extra Prepay to the outstanding balance.
If there was a way to truly pay a mortgage off in 1/3 the time by revolving debt and savings it would be more prevalent than a video on youtube.
touche'
Hey, youtube is the new high-quality advertising!!!
Average Budget is disposable income used to "budget" and prepays the loan balance. It isn't "spent" because they say it's still available a HELOC.
Yes.. and they fail to mention that the balance of the HELOC can not increase from month to month for the program to be successful!
You love calling BS, but you calling it so quickly all the time is BS.
I call BS on you.
Yes, a tax deduction is nice, but who cares about the deduction in this case.
For example, let's say this "program" actually works (I'm not convinced either way yet).
It would NOT be smart to pay off the mortgage early (if you could). The best thing to do would be continue to pay the monthly payment for 10 years (1/3 of a 30 year mortgage) claiming the deduction during that time, at only 6% (give or take) and putting that lump sum money elsewhere (assuming it could beat 6%). At the end of the 10 years you could take that payment you would have been paying to the bank and invest it.
This is assuming the program works.