EricGo07 said: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."

Yes, all HELOCs that I'm aware of (thus the creation of mortgage accelerators), a good percentage of HELs and auto loans are simple interest, such as you described. I had an auto loan that was simple interest, due on the 15th, grace period until the 25th, and every payment I made calculated the interest since the last payment and recalculated the principle, and had I gotten an amortization schedule when I got the loan, I'm sure I'd be way off. If per chance I made the payment later one month (say the 22nd) and early the next month (like the 10th), the interest portion was very small, since it was a lot less than one month's interest.

I don't have the contract language (and, honestly don't feel like digging it out when I get home and typing it out), but in basic language it says the interest is amortized through the loan and payments will be applied according to the amortization schedule. On my payment coupons, it asks if any amount over the payment should be applied to future payments or to principle. If I apply to future payments, it does not change the amortization. For example, I could make a payment today for 3X my monthly payment and if I chose to apply to future payments, I'd get a receipt stating the next payment was due October 1, for the regular amount, and would not change interest calculations or amortization of the loan. If I chose "apply to principle" the principle would be reduced, and the calculations are made, but my same payment would still be due on the 1st of the following month, and the payments would NOT be reamortized (now this is a fixed 30, an IO is probably different), the payment would just have more go to principle and less to interest, but nothing else changes until I get to the end of the loan (which is reduced by the principle payment). Does that make sense???

I had reason to call PenFed, so I also asked about home loans.

Regarding my HEL, early payment in a cycle reduces interest. And in fact, paying more than is due delays the next payment due if the total overpayment is more than one monthly payment. Dave Hanson wrote a thread a couple years ago describing a method whereby a simple interest loan of this type could be exploited by paying ahead periodically -- see above post.

PenFed's standard 1st home mortgages are more in line with what berlinsmommy describes: extra or early payments pay down principal, but do not change the monthly payment or it's due date. Makes me wonder if an extra payment just before the end of a cycle gains a month of float.

Anyway, back to topic: Since a HEL can be simple interest, pay ahead delays payments, and the interest rate is often (at least in PenFed's case) the same as a standard mortgage, perhaps it should be used as the offset account rather than a HELOC ?

mikef07 said: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.

Take a deep breath. Relax. You don't talk to real people you encounter face-to-face this way, do you? There are real people here too. We like it better when you talk to us nicely. Have you considered using some vacation time this summer?

I don't know about this Mortgage Offset Account. By setting this account and you 'accelerating' the payments and you have to pay a 'service fee'? I was fortunately enough to get a 15 year loan adjustable every 5 years at 4.99% and I don't have any prepayment penalty. In the beginning, I would agressively prepay pay down the loan because my interest rate is higher than my savings rate. Now that the saving rate is higher than my interest rate, I am just putting money in cd's until they plan to adjust my rate in the 5th year.

Mortgate offset Accounts is just another way for them to rip you off, otherwise why would they stay in business?

I am not going to say wether I am for or agains this MMA product. What I will say is how it works because it doesn't seem like anyone does understand EXACTLY how the product works. So here you go. Once again I hope this comes off as unbias cause I really am trying to be just that. I just want people to know EXACTLY what they are talking about.

Money Merger Account- U First claims to be first company in US to offer this product. It is built to help their customers pay off their 30 yr. Mortgage in 8-11 years on average; without changing their spending habits a great deal and without increasing their mortgage payment. The general idea behind this is to use the HELOC to make large principle payments to your 1st mortgage so you can lower the amount of interest paid in the long run. To do this you need to use the HELOC as a checking account and put your monthly income into the HELOC which will look like a payment to the bank. Even though the client will be using the funds deposited soon to pay their living costs.

3 Main Components to the MMA
1- 1st Mortgage
2- HELOC (Home Equity Line of Credit)
3- MMA Software & Website

Mortgage Component- Closed-End Loan. You can put money into this account, but cannot access the additional equity. Does not matter what type of mortgage you have. The lender does not matter either. This is a stand alone product that works independently of the lender. An MMA helps you make additional principle payments to bring down your amortization schedule and therefore decrease your interest paid on the mortgage. The interest paid is only changed every month, so if you make your regular payment and two additional payments to principle it will not change interest owed until the next month.

Component 2- Advanced Line of Credit (HELOC) - This is what will drive the MMA product. An open-end loan, lender will apply money to loan balance when received. Lender will adjust principal balance multiple times per month. View daily balance to assess interest charges. You can put money into this account and also take money out. HELOC needs to function like a primary checking account. Apply all income to the HELOC and use the HELOC to pay bills.
Optimum performance of an HELOC-
Deposit maximum amount of money into the line of credit per month. Keep it there as long as possible. Have the least amount of money spent possible at the end of the month for living costs.

Model Budget- $5000 Monthly NET income. $4000 monthly living expenses (mortgage, car payments, entertainment)
Discretionary income (money left over after Net income – Cost of living) = $1000
This client gets an HELOC for $60000. (It doesn’t matter if the HELOC is for $10000 or $200000, they will pay off their 1st mortgage in the same amount of time)


MMA Month 1
$3500 MMA one-time upfront fee which comes straight out of the equity line of credit. The client then uses the HELOC as their primary checking account. They write checks for their $4000 in living expense every month. So they have now used $7500 of their $60000 HELOC. They then deposit their paycheck into the HELOC ($5000) to adjust their daily balance down to $2500. So the bank is now only charging interest on $2500. The bank was expecting a payment of $20.83 (based on a 10% interest rate) but instead received the paycheck deposit of $5000. This reduces interest greatly. The client also pays no interest on the $4000 they used for their living expenses since they made the $5000 deposit. So the HELOC is the Interest Cancellation Account when used as a checking account. In some cases the interest that ends up being paid on the HELOC or a portion of it is tax deductible as well. So the total owed at months end in the HELOC is $2500 plus the interest of $20.83. $2520.83
(some people have argued about the interest earned in checking accounts that is being missed out on. at most banks you need to keep a very high amount in your checking account to earn more than .5% on your account.)

MMA Month 2- Balance in HELOC $2500 (rounded here just to make things easy) Now lets say paychecks come around and you want to deposit it into the HELOC and then pay your bills. Well you can’t do that right now because you don’t owe the $5000 that you make, on your HELOC right now (it cannot have a negative amount of money owed) For example on a credit card you can overpay your bill by $100 and that extra money is available to you through your card. On a HELOC you cannot do this. It can only be at a zero balance. The MMA software helps to make sure you don’t have to worry about this as long as you follow the game plan. So the software tells you to move $5000 from the HELOC to the 1st mortgage so you can make your payroll deposit into the HELOC account. You then also pay your living expenses which is $4000. So the balance is now the original $2500 left over + $5000 mortgage payment + the $4000 living expenses = $11500. Then to help cancel interest you deposit your $5000 in payroll to the HELOC account to bring the balance to $6500. Lender can only charge interest on the $6500, which at 10% is $54.17. So once again, you are paying no interest on the $5000 you used as your additional principle payment to your 1st mortgage. Now it seems; well if you do this ever month then your HELOC balance is going to spiral out of control. The software of MMA will make it so if that would be the continuing trend, you will just make normal mortgage payments for a month or two...etc. instead of a huge payment out of the HELOC. That way your paychecks are going to drop the balance in the HELOC to a reasonable amount and once that happens you can then make another large payment to principle on your 1st mortgage.

In another example the amount of principle that you pay every month on the closed-end loan(1st mortgage) increases very slowly. But by making these large payments every month or so, it increases the amount of principle being paid on every regular payment as well. For example the principle being paid increased only $.69 a month on the regular amortization schedule; but by making these large payments to the 1st mortgage through the line of credit; the client was able to increase the principle payment by $12 in the same amount of time. So in those months when you are only making the normal mortgage payment you are way ahead of the amortization schedule anyway and decreasing your principle exponentially.


Goals for the closed-end loan- Eliminate interest
Control your money so it doesn’t control you
Get your money to work for you instead of working for the bank
Goals for the Open-End Loan- Income Forces adjustment to principal balance.
Interest cancellation account

Component 3- MMA Software and Website

Financial Dashboard
Financial Planning
Online account register
Maximizes money performance
10 minutes per month to update

It will not be able to move money or pay bills.

The software allows you to see the deposits to and withdraws from the ALOC. It also adjusts to show you how quickly you will be paying off your mortgage. The software automatically tells you how much of a payment to make towards principle and when to make normal mortgage payments for a while to decrease the amount owed on your ALOC.

If you are to partake in this, you have to have the goal of paying off your mortgage in a short period of time. If you are spending the money in the HELOC on things that are not working towards this goal like a car or remodeling the kitchen for $10000; youre not understanding the reason for the HELOC. The goal is to keep that at a controlable balance so the interest is never too high; and use the funds to pay down large sums to the principle of the 1st mortgage.

neilruby said:
MMA Month 1
$3500 MMA one-time upfront fee which comes straight out of the equity line of credit. The client then uses the HELOC as their primary checking account. They write checks for their $4000 in living expense every month. So they have now used $7500 of their $60000 HELOC. They then deposit their paycheck into the HELOC ($5000) to adjust their daily balance down to $2500. So the bank is now only charging interest on $2500. The bank was expecting a payment of $20.83 (based on a 10% interest rate) but instead received the paycheck deposit of $5000. This reduces interest greatly. The client also pays no interest on the $4000 they used for their living expenses since they made the $5000 deposit. So the HELOC is the Interest Cancellation Account when used as a checking account. In some cases the interest that ends up being paid on the HELOC or a portion of it is tax deductible as well. So the total owed at months end in the HELOC is $2500 plus the interest of $20.83. $2520.83

WRONG!!!!!

The MMA figures interest on a daily basis, so you do have to pay interest on whatever the balance was each day. You didn't do dates, so let me throw in a hypothetical timeline:
1st: $3,500 for miracle software purchase
$3,000 of $4k living expenses
($2,500)paycheck
$4,000 balance carry to 15th

15th: $1,000 living expenses
($2,500)paycheck
$2,500 balance

Interest accrued= $26.71 and we still owe $2,500 moving into next month and didn't make any extra mortgage payment.

Month 2:
$2526.71 balance
$3000 of $4k living expenses
($2,500)paycheck
$3026.71 balance carry to 15th

15th: $1,000 living expenses
($2,500)paycheck
$1,526.71 balance

Interest accrued: $18.71 and we still owe $1,545.42 (after adding in the interest) going into month 3.

I won't continue calculating, but as you can see, there is clearly no extra money to move to the first mortgage in months 1, 2, or 3 and we took a family who has an extra $1k/month and after 2 months they owe $1,545.42. Instead, had they saved that extra $1k/month and not purchased the software, they could either have $2k plus interest in savings or have paid off $2k on their mortgage (without knowing what the mortgage is or at what rate I cannot calculate interest saved or how many years has been lopped off the mortgage).

neilruby said:Control your money so it doesn’t control you
Get your money to work for you instead of working for the bank

Let me guess, you spend all your savings on Kool aid.

The "goals" of the program are nothing but sale gibberish that this guy would be ashamed to use.

All these people here jumping to conclusions about wether an MMA/ALOC is a scam...
Here's a quote I think we all need to ponder:

"There is a principle which is a bar against all information,
which is proof against all arguments and which cannot fail to
keep a man in everlasting ignorance --
That principle is contempt prior to investigation."

-- Herber Spencer

It is very clear that NO ONE person on this forum has bothered to
truly investigate the MMA!

Shame on you all!

You are right, the math does not lie. And if you work the numbers
from the UFF soft ware, it all makes sense. Have you gone that far?

Consider this, the MMA is growing exponentially every month here in the US.

And from what I can see, it ain't about to get shut down.

If it was a scam it would have been stopped in it's tracks in Europe and Austrailia over 15 years ago.

jgd51 said:You are right, the math does not lie. And if you work the numbers
from the UFF soft ware, it all makes sense. Have you gone that far?

Consider this, the MMA is growing exponentially every month here in the US.

And from what I can see, it ain't about to get shut down.

If it was a scam it would have been stopped in it's tracks in Europe and Austrailia over 15 years ago.Learn to read, no one is saying MMA is a scam. But the outfits that pushs "special" software and setup fees are scam.

Just like there are mortgage scammer, HYIP scammer, etc... If you bothered to read the past threads links, MMA were very well received back when the interest rate made sense for doing MMA.