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FIB - Scams 101

MEL... Re: It's a sweep account (Re: $3500 for software to pay extra on your mortgage?)

Posted By: Sue Copening
Date: Monday, July 9, 2007, at 2:39 p.m.(pst)

In Response To: It's a sweep account (Re: $3500 for software to pay extra on your mortgage?) (Mel. White)

>> Actually, I was a little skeptical of it when I read the financial
>> analysis. Many banks offer them, though I haven't yet figured out why
>> these guys want $3500 for it. I've seen it discussed elsewhere, and if
>> you're living on the margin, a sweep account is not the best idea.

>> http://www.investorscommunitybank.com/biz.html#sweep

Mel... you are smart.. in some ways it IS similiar to a sweep account. However it is much more than that as well. If all you do it set up the HELOC and use it to throw your monthly discretionary at the mortgage... you are not being aggressive enough and you would be leaving thousands of dollars in savings on the table.

I left an example on another of my posts showing where we saved a client 6 years and $48,000 in interest over what they could do throwing EVERY penny of their $200 in discretionary income at their mortgage.

You have to have the concepts of the math explained ...then it makes perfect sense. I was not going to post them... but there seems to be enough interest so I will.

This works off 5-FIVE math concepts. Two are things you can easily do yourself... The first 3 are the ones that the software is necessary to manage properly and get optimum results for.

1. Value of your stagnant money (money sitting around waiting to be spent)
2. Leverage of open-ended simple HELOC interest structure against (effectively) compound closed-end interest structure on the primary mortgage
3. Interest cancellation (properly treating HELOC so effective interest rate remains lower than interest on mortgage - about 3% or so
4. Discretionary income (easy to do yourself)
5. Debt restructure (easy to do yourself also)

Value of Stagnant Money? It is the arbitrage that the Money Merge Account puts to work for you. See, normally we pay the bank 6% for our mortgage, and they pay us 3% for our savings and 0% for our checking. This spread puts our money to work for the BANKS. Now you can put it to work for YOU. What is the value of your Stagnant (sitting around) money? This is one of the math variables our software is able to calculate for you on a average daily balance basis - down to a gnat’s whisker. Calculating the average daily balance of your sitting around money, in context with the average daily balance of your heloc... Is necessary to eek the nickels and dimes and maximize the performance of this program.

Interest Cancellation? This is what happens when you treat your Home Equity Line of Credit (HELOC) like a checking account. For instance, even if your heloc is at 10%. It only costs you 10% if you pay it back the LAST day of the year. But what if you pay it back in 3 months or less? Then your EFFECTIVE interest rate is actually less than 3%. Because you start depositing your INCOME into your HELOC account... You are replacing borrowed money very quickly. Also... You drive down the principle balance with each deposit... So even though you may spend most of that money during the month... The Average DAILY balance of the account stays low. Our software is able to calculate exactly how high you can let the balance on the HELOC stay... In order to end up with the appropriate EFFECTIVE interest rate for maximum savings. Calculating the average daily balance of this account... In context with your other numbers... Is crucial for optimal savings.

Leverage of interest structures of the 2 loan products? What we mean by this is this... If you borrow $1 from a HELOC – even IF the HELOC was 10% interest... The most you would pay in interest – even if you waited till the last day of the year to pay it back – would be 10 CENTS. However... If you take/borrow a dollar and then apply that $1 as a principle payment to your primary mortgage... That $1 will save you $4 to $5 in interest on your mortgage (on average). For example a $1 principle payment on a $200,000 30yr mortgage @ 6% - would save you $4.99 in interest if it was applied with the first loan payment. On a 15 year loan it would save you $1.44 in interest. Does it make sense to spend 10 cents to save $1.44? How about $4 to $5? Strategic short term borrowing from HELOC helps rapidly drive down the principle of your primary mortgage.

These 3 math principles/concepts are why our algorithm-driven software is necessary for maximum savings. Can you do this yourself? Absolutely! Our company has always said that a disciplined person, who does not mind doing (and knows how to do), the MATH required (average daily balances), could get similar results doing it on their own. However... This is MATH... Not horseshoes or hand grenades. Close could still be $10,000, $30,000, $60,000+ away from the results you can expect to get when you use the RIGHT TOOL for the job. This is the right tool.

Remember these calculations have to be done in real time every month. Every month a slightly different amount of money goes to your interest and principle of your primary mortgage. This means that every month your calculations would have to be adjusted for that as well for optimum results. So you could TRY to do this... and hope you do it right... but the math would take at least an hour every month... IF you knew how to program an EXCEL spreadsheet properly AND was willing to go back and recast all the daily numbers and adjust for the constantly shifting amortization table on the primary.

OR... you could get this software ... and type your numbers in the boxes and click the mouse... 10 minutes a month.

I sold this program 3 months ago to a woman that STILL does not understand how it works. But she has sent me 3 referrals already because this is saving her about $400,000 in interest on her various properties and debts.

>> I couldn't figure out where these thousands of people are, since
>> there's less than 300 mentions of it online. And Accelerated Equity seems
>> to be in competition with the resellers of this. In fact, I'm not sure
>> where that $3500 goes. There's something I've seen that says you can use
>> the software for $170... so what's the rest of the money for? Setting up
>> the account?

Half of the mortgages in Australia are CAM's... current account mortgages... they are like giant helocs and take advantage of the value of stagnant money. 1/3 of the mortgage in Europe and the UK are CAMS as well. THIS concept is nothing more than a work-around solution... however one that works BETTER than the concept it is based on.

Also.. Accelerated Equity is our PARENT company. John & Skyler still own and run AE. They also founded u1st. Both companies sell the software... same price. They formed a separate entity because Accelerated Equity is a mortgage company and they did not want to appear to have a conflict of interest. Our software is represented by many mortgage companies and financial professionals as simply an addition to the portfolio of services and products they already provide... though many use the Money Merge Account as a prospecting tool.

Do not know where you got the $170 from. It does cost $175 to become an agent for the software... for that you get to use the Analysis software as well as all the training modules, support, etc. But you do not get the real software... that is $3500. for everyone. Agents are not required to buy the product... in fact the company will not sell the software to someone who does not have the proper loan products in place... they even require copies to be sent in to be checked over and if their HELOC does not have the right features the sale is rejected. Remember ...it comes with a money back guarantee so why sell it in the first place if it will not work. The HELOC has to be open-ended.

>> And if it's for setting up the account, then where in the heck does
>> the "downline" get all the money from?

>> You can. Just set up a mortgage and budget account on an Excel
>> spreadsheet. At the end of the month (before your new paycheck comes in),
>> send whatever's there to the mortgage company.

Again... this will beat that plan by thousands of dollars... just using every penny of your discretionary income is NOT being aggressive enough. Put us to the test.

>> I did try to check that angle out and came up a blank. Couldn't find
>> any planners promoting the product. Didn't google for planners and sweep
>> accounts, but having used financial planners, I'm not sure they'd really
>> recommend that for someone in serious financial trouble.

Of course not... someone in serious trouble would not be a candidate for this program. They would have to have good enough credit to get a HELOC anyway. For those folks we would refer them to a reputable Credit organization (careful some are better than others).

>> And as one blogger said, folks with that kind of financial problem
>> don't usually have a significant amount of extra dollars to put down. I
>> couldn't see sending the mortgage company $25 at the end of the month.

The first rule to this program is to set a BUDGET and stick to it. Our Analysis is based on the clients budget... we guarantee it conditioned on that. This program is NOT for everyone. In my opinion... someone with a spending disorder should not put their house at risk with the temptation of a HELOC. They should get counseling and reign in their spending habits first.

This program is for folks that are financially disciplined... or are pretty good, and just need a little incentive and organization to get better.

Saving thousands, and hundreds of thousands in interest should be a good incentive for anyone who considers themselves financially savvy.

Money back guarantee - 10,000 clients - 0 complaints in BBB.

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