Is The Ufirst Money Merge Account (MMA) a Scam?

By: Every Day Finance Tuesday, May 27, 2008 12:10 PM

Symbols: ACN, FFCH, GOOG, RATE

Email Article
Bookmark:
Font Size
Print Article

Since you borrowed $200K, your interest payments over the life of the loan are $231K. $231K is a ton of money, right? Well, not over 30 years. In fact, $431K simply the present value of $200K at 6% interest! Not rocket science, but without an excel spreadsheet and to the uniniated, this really sounds like a scary number. They fail to make any mention of the present value of money. That's where they prey on the gullability of the common consumer. But readers of Everyday Finance won't be duped that easily right :>

At 5:43 in the video, they highlight what happens if you pre-pay $5,000 of your own money into the mortgage. What's laughable is that there's no mention of the $3,800 that you pay for some silly software package. What if you just took that fee and put it right toward your mortgage instead? The video goes on to explain that by using the UFirst MMA sophisticated software, it manages to transfer money out of a Home Equity Line of Credit (HELOC) account to your mortgage based on your discretionary spending. If you make 5K a month after taxes and routinely spend $4k, the system will transfer the $1K excess funds to your mortgage. Where it seems to be a bit complex is when your spending varies and in some cases, exceeds your income. The system has already transferred funds to your mortgage and the HELOC now takes over so you don't overdraw your account. What gets little attention in the video or the face to face presentation is the fees you'll incur with the HELOC. This amounts to hundreds of dollars per year! When you add the $3800 "software fee" and these HELOC payments, you are now paying "Thousands upon Thousands of Dollars" in future dollars...the same future dollars UFirst quotes when showing the evils of the standard amortized mortgage!

Here's a little food for thought:

Present value of upfront fee: $3800.

Future value in 30 years at 6%: $21,000!

Present value of example HELOC fees in just year 1 alone: $800.

Future value in 30 years at 6%: $4,500

This means for the First year alone, you're spending $25,000 in Future Dollars. That's Year 1! While I don't want to beguile you with these large numbers in red, I am simply putting these future value dollars in the same context in which UFirst displays the future value of interest payment dollars. Now, that's a level playing field!

Is Pre-Paying a Mortgage Even a Good Idea If I Could Afford It?

The usual answer is No. At its most basic level, in this environment of low interest rates, you would be well served in investing any additional income as opposed to paying down a low interest rate mortgage which has the additional benefit of a tax deduction. According to Bankrate.com's rates as of May 22, 2008, the average 30 year loan rate is under 6% at 5.8% and the average 15 year rate is 5.36%, which may include points. For the sake of argument, let's say you're in a 30 year mortgage at 6% like the video portrays. If you're in the 25% tax bracket and you're early in the mortgage, the majority of your payments go toward principal, so you're getting a tax break of say, 20% on your payments. On 6%, you're now effectively paying under 5%. Since the long run U.S.


6/11/2008 11:38:06 AM Nice try by Trey Bowden The axom "Judge not, let ye also be judged" should be applied here. Your accusation that the MMA "associates" are involved in a typical "zealous" marketing plan should be balanced with the identification that your blog is written under the same "zealous" motivations for potential customers to invest in the stock market...and preferrably through one of your istockanalyst affiliates. Secondly, additional care should be taken when casting stones that the proper use of mortage terms be used. In the section titled, "is pre-paying your mortgage a good idea..." you stated that if the reader is early in their mortgage then the majority of their payment goes to prinicipal is incorrect. The majority goest toward interest. Thirdly, your argument against future dollars breaks down when you consider that the average home owner in America refinances their first mortgage (or buys a new home) every 5 to 7 years. Then the calculations start over. The MMA actually allows the home owner to benefit from the maximum interest reduction during these years thus increasing the total available equity in their home should they sell or refinance. Just a thought. Trey Bowden Reply Rating: (10) (13)
6/11/2008 11:38:06 AM Nice try by Trey Bowden The axom "Judge not, let ye also be judged" should be applied here. Your accusation that the MMA "associates" are involved in a typical "zealous" marketing plan should be balanced with the identification that your blog is written under the same "zealous" motivations for potential customers to invest in the stock market...and preferrably through one of your istockanalyst affiliates. Secondly, additional care should be taken when casting stones that the proper use of mortage terms be used. In the section titled, "is pre-paying your mortgage a good idea..." you stated that if the reader is early in their mortgage then the majority of their payment goes to prinicipal is incorrect. The majority goest toward interest. Thirdly, your argument against future dollars breaks down when you consider that the average home owner in America refinances their first mortgage (or buys a new home) every 5 to 7 years. Then the calculations start over. The MMA actually allows the home owner to benefit from the maximum interest reduction during these years thus increasing the total available equity in their home should they sell or refinance. Just a thought. Trey Bowden Reply Rating: (0) (4)
2/12/2009 4:33:38 PM Rebuttal by EverydayFinance 1) Speaking from my personal experience with a zealous associate, the attacks I've sustained at Everyday Finance from other associates that troll the internet for any critique on the service, and the readily available data regarding the actual service, I believe my opinions are valid. I readily correct any factual inaccuracies - if evident, feel free to visit the site and I'll update upon request. 2) Regarding statement: 'your blog is written under the same "zealous" motivations for potential customers to invest in the stock market...and preferrably through one of your istockanalyst affiliates.' - I'm not sure I follow. I'm not affiliated with istockanalyst in any way other than that I had allowed them to syndicate my content from my source feed at EverydayFinance after they approached me, which is pretty common. I'm also syndicated at SeekingAlpha, Reuters, Yahoo, USAToday, Alltop and more. Conversely, bloggers sometimes do derive benefit from writing a positive review and subsequent clickthroughs on an ad, but a negative review has little or no financial benefit since it has the opposite effect of enticing a reader to purchase a good or service. I just wanted to voice my opinion on the matter...nothing more. 3) The prinicipal/interest topic was clearly a typo/gaffe; I routinely post about amortization, NPV and the like, I've generated my own amortization cash flow calculators and more through both my MBA and for fun. By considering the context, any informed reader would ascertain the intent of the passage. 4) Regarding statment: 'The MMA actually allows the home owner to benefit from the maximum interest reduction during these years thus increasing the total available equity in their home should they sell or refinance.' - I don't challenge the simple notion that by making additional payments along the way, mortgage payment period is reduced. I challenge the fact that you have to pay an exhorbitant fee, of which a sizable portion goes to "associates" like yourself, for something that could easily be done manually. Don't forget those HELOC costs as well. Reply Rating: (5) (0)
2/25/2009 8:13:21 PM Misinterpretations by JimmyDaGeek I'm glad to see that Trey didn't write that mortgages are front-loaded, too. It's true that for the first few years, most of the money paid goes towards interest. But that's because that's when you owe the most amount of money. Anyone can prepay their mortgage balance - you don't need software to do that. But what does that have to do with people moving every 5 to 7 years? Banks will give you a 25 year mortgage at the 30 year interest rate, so technically it's possible not to "lose" any of your payoff. But, practically speaking, when most people move, they move to something more expensive and they also lose a chunk of equity to the selling process, so even if they wanted to buy their house again, they would have to come up with extra cash. But let's forget that argument. If you don't prepay your mortgage and put that money into an investment, the belief is that you will come out ahead in the long term because of a greater investment return, regardless whether you stayed in your house or kept moving. Of course, that argument sort of breaks down these days, but we are talking long-term. But, wait. What about all those people that prepaid their mortgage, only to see the value of their house drop, destroying their equity. What happens to these people if they lost income? Are they going to borrow it from their house with a home equity loan? How are they going to pay it back? Reply Rating: (4) (0)
9/19/2009 1:40:37 AM Early in the mortgage, payments go to interest- not principle by Paul Strauss ...::"For the sake of argument, let's say you're in a 30 year mortgage at 6% like the video portrays. If you're in the 25% tax bracket and you're early in the mortgage, the majority of your payments go toward principal, so you're getting a tax break of say, 20% on your payments."::... Did you mean to say that early in the mortgage, the majority of your payments go towards interest? Ammortization tables I have all show this to be the case. Reply Rating: (2) (0)

Post Comment

Name:

Alert for new comments:

Your email:

Your Website:

Title:

Comments:

Related Press Releases

Related Stories