UFF is a very expensive version of the money merge account (MMA) idea. Salary, home mortgage, and home equity are linked together through a HELOC. In a fashion one can think of having one big account.
There can be advantages:
1. Salary saves a few dollars of mortgage interest until it is spent. This is worth about $5/month for every $3000 of paycheck
2. The UFF program also offers a web interface that can be used to track expenses, make a budget, and see how much is left to pay on the mortgage. This mortgage balance is translated into years till repayment if current spending/savings patterns continue. If a person keeps accurate track of expenses and can see where money is going, it might influence spending patterns. In personal finance lingo, a strict budget can be a behavioral modification tool. Of course, the person has to be motivated in the first place to keep a budget and track expenses carefully, so the tool is only a tool.
There are disadvantages:
1. HELOC puts the home equity right in front of the consumer in the form of checks or a debit card. The HELOC issuer tries to make it *very* easy to spend that money, and collect variable rate interest. Many people are well served by it not being too easy to spend.
2. The common money pot is a variable interest account that costs the consumer money when rates go up.
3. The UFF program costs $3500
The snake oil part of MMA, and particularly the UFF version:
These programs are sold *very* aggressively in the US as part of a multi-level marketing scheme by people who do not really understand what they are selling, but are highly motivated by a $1400 commission for each customer they reel in. Part of the pitch is nonsense, part of it is deception:
Deception: While is it true that salary will gain a couple of dollars of interest each month as mentioned above, UFF would have the potential customer believe it is thousands a year. They do not say this, they just imply it. And it is wrong.
Nonsense: There is no magic math that the MMA has invented or discovered. Early repayment simply requires that the a mortgage holder apply more of their paycheck to the mortgage.
Deep Deception: The UFF program wants the customer to believe that the advertised quick mortgage pay-off happens from salary interest, and is inherent to buying the program, when in fact it happens when a bigger part of the salary is sent to the mortgage. This is why UFF always asks what the customer's discretionary income is. The program assumes *all* discretionary income goes to the mortgage. Tell the UFF program there is no discretionary salary, and *poof*, the early mortgage payoff is gone. It is because of these deceptions that UFF is called a scam on this board.
A better way:
It is really easy to use readily available tools and money vehicles to do everything the UFF does, only better; and keep the UFF fee of $3500 in your pocket (or have $3500 less debt, as the case may be).
A. Put your salary into a HY checking account, and draw down for bills as late as possible; just be sure to avoid late fees. This is not a lot of money, -- also around $5 dollars per $3000 paycheck, but it is free. Sometimes a HY savings account offers higher interest rates, but only limited transaction activity is allowed without fees. A multi-tier accounts setup of minimal complexity can make this work, but is outside the scope of this summary.
B. Every penny saved, is a penny that can be put extra into the mortgage, or an investment. Or a new business. Or the stock market. Or a CD. Or an emergency cash fund kept in a HY savings account. Or ... well, you get the idea.
C. If all savings have been put into mortgage pay-down, a free HELOC is one way to get at the equity if needed
D. Want to track expenses and/or set up a budget ? Try MS Money, Quicken, or dozens of other programs. Or use a pencil and paper. Or go to a cash only life.
E. Want to know how many years remain on the mortgage, if a constant monthly savings continue and are sent to the mortgage as pre-payment ? Hundreds of amortization calculators are available free to use on the internet. Here is an excellent one. Input remaining balance, interest rate, and (monthly payment + extra-payment - monthly_escrow_contribution). The answer may be inaccurate up to a month, because of accrued interest since the last payment you are not accounting for.
F. Tell the MMA scams to UFF off.
Mathematical model describing the breakeven point (When hell freezes over) of how UFF can win
If people would like to help improve this post, go for it! Please add your name to the contributor list, and a very brief description of edits made.
Contributors: EricGo07 - initial post
I am a shill because I did not spell ellory's name right?
