I have had several inquiries about the "real" cost of the Money Merge Account software as it relates to the mortgage. Of course, your real cost may vary as it is dependent on how much longer you have in the mortgage and what interest rate you are paying.
But, going to the same numbers used in United First Financial’s own presentation, as I have done in my series on the MMA, here is a breakdown of it’s cost over the course of the loan…
The question really is summarized as this: "If I simply paid $3,500 extra toward principal, how much of a savings would I get?"
So, using a a primary mortgage of $200,000 and an interest rate of 6% in a 30-year fixed product, that $3,500, if used as an extra principal (in the second month) would result in a $16,560.18 savings and knock off 16 months from your mortgage.
Looking at it as a cost, that MMA program is actually costing you up to $16,560 dollars over time! Now, will it truly cost that much? No. Why? With the program you will not have the mortgage that long.
However, it does show that the cost of the software does take a bite out of the savings and adds to the timeframe of your mortgage payoff. It also should be noted that with basic understanding of how the program works and cost of things over time, such as my Starbuck’s coffee example, the software is a waste of money. In fact, unless you need to be spoon fed, if you want to use a mortgage acceleration program, you are better off adding the $3,500 towards principal instead of the software.
(Update: Further evidence the program is a waste of money…)
I decided that the above information was not satisfactory enough to thoroughly convince you that the Money Merge Account is a complete waste of money, so I ran some more numbers. Of course, since I love playing with strategies and scenarios as I am a numbers guy, it was fun.
So, to give you a better understanding of the cost of the MMA program, let me return to the same assumptions made in my Money Merge Account/Mortgage Acceleration Series. So, this will now be a Pseudo Part 2 1/2.
Taking the same assumptions from United First Financial’s (UFF) own presentation, we will now simply compare the MMA payoff date with that of taking the $3,500 added to the principal instead of buying the MMA program, followed by sending in the $1,000 discretionary income each month and guess what. That’s right, not buying the software and simply sending in the money each month pays off the loan faster, in fact, you would be free and clear in 10 years versus the 10.4 years the MMA is showing as a payoff.
As you can see now, the MMA program is costing you at least .4 years of your mortgage and that is without you utilizing a HELOC to add interest cancellation effects at all!!!
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