(WORK IN PROGRESS)

DIRECT LINKS TO LEGITIMATE BANKS OFFERING OFFSET ACCOUNTS

WaMu Mortgage Plus FW discussion

Wells Fargo

Salem Five

Recently there has been a dramatic increase in people scamming others to signup for these programs. Its only likely to increase, so I am going to maintain This one thread so we have a centralized place to refer people.

Offset accounts have been discussed for years here at FWF, and heres a good thread discussing them, back from when scammers werent filling this forum

The questionable programs are known as the Tardus method, Harj Gill, United First Financial, CMG, Home Ownership Accelerator, etc. these programs are all a variation of using a HELOC as a checking account, depositing your paychecks to "paydown" your mortgage and then drawing out funds to pay your bills. The theory is that the reduction in average daily balance of money borrowed saves you interest charges, thus speeding mortgage repayment.

The REALITY with the scam programs is that the interest rate is often much higher than your first mortgage, and combined with the closing costs/fees/software costs, you WILL NOT see a savings. Worse of all, the people pushing these use MISREPRESENTATIONS to confuse novice owners.

The scammers say that , with "typical" 3000-8000/month paychecks sent to a HELOC you can reduce your mortgage by 20 years. WHAT THEY FAIL TO MENTION IS THAT THE REDUCTION IN MORTGAGE TERM COMES FROM THE EXTRA PRINCIPAL PAYMENTS, not an "average daily balance reduction" of total interest paid trickery. Every penny of your "discretionary income" is applied to loan paydown(see page 3 of this thread where I debunked a UFF scammer) You can accomplish the same thing yourself for free, just by sending in additional mortgage principal payments.

Most people dont like funneling all their discretionary money into mortgage paydown since they cant access it once its paid. If you must have access, you can replicate the same thing by picking one of manyNO CLOSING COST HELOCS,

Some creative ideas include doing an App-O-Rama, then paying down the HELOC with 0% BT money, using the HELOC to slowly repay the 0% cards. This is sound strategy. And it made LOTS of sense a few years ago when HELOC rates were low.

However, now deposit rates are high, and even no closing cost, good rate HELOCs are still about 1-2% more than typical fixed mortgage rates, so there is LITTLE SAVINGS for most people depositing a few thousand $$ paycheck amount each month...it would take HUGE monthly income/paycheck deposits (or large 0% BT deposits) to see a significant benefit and reduction in average daily balance. Moreover, any claimed savings by HELOC shuffling tricks is reduced if you normally keep your paycheck money in a high rate deposit account, rather than a 0% account, since the interest you earn in the deposit account creates a wash against the interest saved.

If you are ever approached by these scammers, pay special attention to your "discretionary income" figure, as they apply your discretionary income to mortgage paydown - which is the same as making extra principal payments!

Some legit banks in the US like WELLS FARGO, WAMU and SALEM FIVE are starting to market products like this, and soon we may have even more LEGITIMATE providers touting these systems with products at more attractive rates. but so far, its mostly SCAM OUTFITS and MLM hucksters. DO NOT FALL FOR THEM - USE ONLY A DIRECT BANK SUCH AS THOSE MENTIONED AT THE TOP OF THIS THREAD.

While the CONCEPT of "offset accounts" is sound, they are being MARKETED BY SCAMMERS pushing the WORST possible products. Just watch to see HOW MANY NEW MEMBERS signup at FW just to post in this thread promoting them....this thread will likely need heavy moderation. Hopefully other FW readers can help explain/debunk these products when people come to this thread to ask questions.

Edit by Mod- Please ignore the ugly red text. This thread was deleted on accident. Sorry SIS
Edit by SIS - no worries

Do you want to keep this solely focused on these "offset accounts", limit it to any plans that pay off your mortgage sooner (like bi-weekly or just paying extra principal at times) or open it up for the whole gamut (e.g. if two of the main reasons to buy a house are the leverage and that the interest is deductible, why would you deliberately work against these)?

Guys don't get rich having debt.

Go tell it to Ted Turner and Donald Trump.

lostdude said:People here are so short-sighted and self righteous.Mike, what's the point of your post? What does your view of this forum has ANYTHING WHAT SO EVER to do with the OP or Talljay's post? Why crap a good thread to show you are not one of us "little people"?

Of course debt is not desirable but not all debt are the same. While there are many companies pushing a pay for home ownership acceleration program, there are some (Wells Fargo) that do not charge you anything to do bi-weekly payments. Talljay is talking about those who charge fee for such program but that topic is covered already in the FAQ #5

Learn to read. He asked if the discussion was for pay programs or for both pay and non-pay biweekly programs. He also stated that "...(like bi-weekly or just paying extra principal at times) or open it up for the whole gamut (e.g. if two of the main reasons to buy a house are the leverage and that the interest is deductible, why would you deliberately work against these)?" which shows that he is thinking that biweekly payments are bad as well.

And you once again are showing that your thoughts should be the only one that matters with your "not all debt is the same" statement. Not all debt is the same maybe to you, but that doesn't mean it is that way for others. To some, any debt puts a ton of pressure on them so in that sense all debt is the same.

umcsom said:Don't feed the trolls

Ahh I am a troll because I answered a question a guy had. I love how jealous you are. Anything I try and say you shoot down.

mikef07 said:He also stated that "...(like bi-weekly or just paying extra principal at times) or open it up for the whole gamut (e.g. if two of the main reasons to buy a house are the leverage and that the interest is deductible, why would you deliberately work against these)?" which shows that he is thinking that biweekly payments are bad as well.

Thread title is " Mortgage Accelerator / Offset Account / Pay off Your Mortgage Sooner Myths and Facts FAQ" and I was simply asking about what should be included in the "Pay off Your Mortgage Sooner" part and giving examples that I could think of. I never said anything about these being bad or good ideas.

If you want to know what someone is thinking, I suggest asking instead of assuming.

It's the same yield, taking only the fed taxes into account. State taxes vary ...
The HYS has a definite liquidity advantage.

EricGo07 said:Simplest is to simply send the mortgage payment in earlier in the cycle.

Not usually. Most first mortgages are not simple interest calculations, so as long as the payment is sent before the end of the grace period, the interest is the same. So whether you send in your July payment, due July 1 on June 15 or on July 14 (assuming you have a grace period until the 15th), you will pay the same interest. You are better off to cycle money through HYS between your payday and the end of the grace period. I try to pay my mortgage (due the 1st) between the 10th and the 14th every month and take advantage of the float time by parking the payment in my Money Market until then.

CitiMortgage keeps sending me mail about a bi-weekly payment program administered by NC Insurance Agency Inc. (which is owned by CitiGroup). I read their little spiel and calculated what the difference would be if I just saved it biweekly and paid twelve times a year with 1/12 of a payment added as extra principal. Their terms state that they just sit on the money all year until a full payment is built up, and then they pay it towards the principal in one lump sum. They also charge $375 to sign up, and $0.75 per transaction (or $585 over the life of a 30-year mortgage paid biweekly). So, they get $960 in fees and they get to sit on your money and earn interest.

On my $117,000 mortgage, I determined that I would save $3,000 more by doing this myself, plus there would be no fees. CitiMortgage allows you to setup automatic payments drafted from your savings account. I setup my direct deposit to add half of my mortgage payment to my savings each pay period.

It isn't really that difficult. This draws down your principal a little throughout the year, so that you have even more interest savings, plus, you get to sit on the money for a little while (which adds up to over $1700 if it increases your average daily balance by $600, at 5.05% for 22 years).

If a company spends money to send you mail or place a phone call to you so that you can save some money, chances are that they get some benefit from doing so. Why not try to realize the benefit for yourself?

Saving pennies by sending in a mortgage payment early may be a ymmv item. I have a HEL with PenFed that says:

"I will pay interest at a yearly rate as set forth above. Interest will be charged on that part of principal which has not been paid."