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FIB - Scams 101
Re: $3500 for software to pay extra on your mortgage?
Posted By: Sue Copening In Response To: Re: $3500 for software to pay extra on your mortgage? (JimS)
Date: Thursday, September 20, 2007, at 8:02 a.m.(pst)
I did not even bother to read your resonse all the way through as I saw right away you have missed some basic elements of how this works. You are like every other person that I have encountered that thinks this is a scam... you saw one presentation, missunderstood it, did not gather all the facts and made a snap judgement. You also seemed to have added some hostility in the mix which confuses me.
We just had an announcement that several NATIONALLY RECOGNIZED names in the finance world are going to be publicly endorsing this program and announcements will be made in next couple of weeks as to who they are. We have had TWO major banks try to BUY our company and/or privately license the software for their own use.
However... I am sure that YOU are much smarter than these folks that offered millions of dollars for this, right?
I was initially skeptical, like yourself. Unlike you though, I actually did the math... about 6 ways from Sunday... and EVERY time I did that I discovered that this program beats any other way you could try to do this. It also beat savings accounts and most other investment strategies too... many of which carry more risk and fees than the safe strategy of saving interest and paying off debt.
You have missed a couple of VERY BASIC things about this program... I suggest you do some more research before you damage your credibility even further.
Just a few of the things you missed/misunderstood... that most of the savings IS in your own discretionary income (of course!), you do not understand the concept of EFFECTIVE interest on the heloc (and how the interest cancellation effect handles that), so you have not recognized the interest differential you get with each transfer from HELOC to primary and you have not run the numbers on ADVANCE payment of the principle of the mortgage up against the cost on the heloc. I am sure you missed some other things (like tax implications) but I quit reading half way through.
Most folks have to look at this 2 or 3 times before it clicks in completely... even a retired math professor I have as an agent looked at it 3 times before he grasped it. The edge edge the math gets you is created by some very small margins. If it was EASY to do this math... you would not need the software.
But... bottom line... the extra edge in the precise math that the software gets you only has to be enough of an edge to pay for the program to make this an excellent deal... then you have a FREE TOOL that becomes your own PERSONAL TRAINER... your personal FINANCIAL trainer that is.
You may think you are smart enough to do this on your own... GREAT FOR YOU! Are you doing it already? YES? Even better. NO? Why not?
I have never found anyone so far who says... I can do this myself... that actually IS doing it themselves. Not one in 6 months of marketing this. I even offered a PRIZE on another blog for anyone that could prove our math wrong or show me that they WERE doing it themselves. I did not have even one response to that.
The thing is... our market is not math geeks who think devoting their weekends to playing with spreadsheets is a fantastic form of entertainment (though some of them are our customers also). Our market is the Average Joe American family and business person who considers their time valuable and best spent elsewhere.
There are lots of things you can do yourself... do you wash your clothes in a bathtub or a washing machine? Does the washing machine pay for itself or did it cost you money to buy it? Why did you buy it? Just to save time, right? How about your power lawn mower... you know you could use one of the whirly blade things or a scythe, don't you?
You are being UNKIND and UNFAIR to call this a scam. This is simply a product, like any other. Some folks will see the value and buy it... others will continue doing things the same way they have always done them. Do you call the MAYTAG company a scam because you could wash your clothes in the bathtub instead?
You think you are as smart, or smarter, than a software program. Good for you. However that does not make this a scam. It simply makes it something you choose not to buy.
United First Financial has sold more than 12,000 of these Money Merge Account software programs so far... they have ZERO complaints in the Better Business Bureau and our sales increased 65% last month alone! In the past six months we grew over 30% each month in sales... and last month we doubled that. The agents in our company include CPA's, Attorneys, Math Teachers, Mortgage Brokers, Financial Planners and regular folks who simply see the value in taking a different approach to get out from under their mortgage and debts.
You keep on doing what you are doing, and best wishes to you. ME? I am paying off my mortgage in 6 years. It was supposed to be 7.4, but like most folks, I am getting a better result than my initial Analysis showed, now that I am using it. Could I have done the math myself and done this? Maybe I could have... but I doubt it... and I have better things to do with my time. This only takes me about 15 minutes a month and I have enough discipline to stick to that.
I am going out to the pool now. Ciao for now!
Sue :)
PS: You have not even done enough research to know that most banks offer HELOCS at no charge or set up cost. Come on, Dude... are you Chicken Little? Do not be running around telling folks the sky is falling... look up! Or, in this case... look it up. Do some research and gain some knowledge before you form an opinion... it makes you look better. You even say... "I did not get far enough into the pitch..." REALLY? Then... shouldn't you be embarrassed to be opening your mouth at all? My Dad, genius IQ, Aerospace engineer, used to say that the reason that people who are prejudiced are stupid people... is because an intelligent person does not PRE-judge. They gather all the facts BEFORE they form an opinion. They look at all the angles... not just the first angle they see.
>> Sue,
>> You don't have to be good at math to solve the problems in this scam.
>> All u have to do is look at the limits and you will see the best case
>> scenario.
>> In the power point demonstration that I watched, the home owner
>> borrows $200,000 at 6% interest and makes payments of $1,191/mth. Assuming
>> that the home owner were to borrow this money at 0% interest and make
>> payments of $1,191/mth it would take this home owner 168 months or 14
>> years to pay off this mortgage.>> If I was loaning you money at 0% interest would you be in any hurry to
>> pay off the loan?>> I was told that the advantage to this mortgage plan was that I was
>> substituting 'cheap loan money' for 'expensive loan money'. This is in
>> fact NOT true. The reason that the HELOC at 10% year was 'cheaper' than
>> the home mortgage at 6% year was supposed to be because on the home
>> mortgage money did not have to be posted against principle until either
>> 'the end of the month' or 'when the full monthly payment is made'. Both of
>> these statements were made.>> First, with every loan that I have made, I have been able to pay down
>> the mortgage by writing a check and clearly stating that I wanted this
>> additional money 'applied only to principal'.>> Second, let's look at the math. In the power point that I saw the home
>> owner in question was spending $4,000/mth on 'bills'. Let's say that I
>> have $4,000 that I can place against principal, but I am saving that money
>> to pay my next months bills. For the sake of argument let us say that the
>> HELOC costs us no interest at all (just as my non-secured credit card does
>> if I pay off the balance at the end of each month). If I place my $4,000
>> against my mortgage I pay off 20 months of mortgage payments if my
>> principle payment is $200/mth. I can then use the HELOC to pay bills
>> during that month. If, however, at the end of that month I pay off the
>> HELOC with my paychecks, unless I make more than $4,000/mth I will be
>> broke and there will not be anymore 'Advanced Equity' payments.>> If I do make more than $4,000/mth I can always write a check for the
>> difference to make an early payment on my mortgage. Now let us consider
>> the argument that my money will not be posted to my principle until the
>> end of the month. If each month I post an extra $1,000 to my bank and that
>> money is not posted until the end of the month, in reality, I have only
>> lost one month's interest. I do not continue to loose one month's interest
>> each month. You can think of the situation like this: Posting the money at
>> the end of the month is no different than if I kept the money in a
>> non-interest earning saving account for one month and then began paying
>> $1000/mth against my mortgage and having that money posted against
>> principle immediately. My loss in this case would be 6% of $1,000 divided
>> by 12 or $5.>> On the other hand the average amounts that the UFF program was keeping
>> in the HELOC avg. approx. $2,000/mth or $200/year versus a one-time loss
>> of $5.>> The scam part of is this program's story that you are using the banks
>> money to pay down your loan and that this is because of some complex
>> calculations done by some complex software algorithm. When you take the
>> cases of borrowing money at 0% on your home loan, or on your HELOC, you
>> quickly see what the maximal savings can be. You then see that there is no
>> money to be made on the HELOC. In fact, there is money to be lost, since
>> you are using more expensive money to pay off your mortgage; money for
>> which you are paying 10%/mth so that you don't lose $5.>> Were you make your money is by paying down your mortgage early,
>> thereby reducing you interest payments. But as you can see from the first
>> example, you would be just as well off taking the $3,500 that you paid for
>> the program and placing that against your mortgage. That would save you
>> 17.5 months of payments right there.>> My concern here is with the HELOC's. What do they cost to initiate?
>> Since the software program keeps approximately $2,000 on the HELOC tab at
>> 10% interest, the HELOC is making the bank $200/yr plus any initiation
>> costs. I can see why the banks would want to sell similar 'software' to
>> their customers!>> I did not get far enough into the pitch to find out the details about
>> the HELOC, but I was told that there was a cost for this initiation and
>> that these costs would also be rolled into the first draw on the HELOC. My
>> concern is with the story about 'using the bank' when in fact the bank is
>> using you. If the 'friendly lenders' of these 'compassionate' loans use
>> the story that since the software is 'using the bank' you should accept
>> particularly stringent 'repossession' clauses on the HELOC, then you are
>> putting your house at risk for something that you could have done with a
>> non-secured credit card with a credit limit of $4,000. (And in this
>> scenario the interest would be 0% with no initiation fees!)>> The argument that the Software makes complex calculations that save
>> you thousands of dollars and hours of time (if you were a rocket
>> scientist) is bogus. The most you can lose by having your $4,000 posted at
>> the end of the month is a onetime loss of $20 (5 x 4). Since all your
>> bills that you are so diligently paying according to some complex schedule
>> by some mysterious software only amount to $4,000/mth the maximum loss to
>> you due to inefficiency is $20, not per month, but $20.>> Now, if you are using this tool as a motivational device to save money
>> that is great. But you can go on line for free and see what sort of money
>> you will have in 5, 10, 15 years if you put away $1,000/mth into savings.
>> Better yet, put this money into a 401K and you may get matching dollars
>> from your job, decrease your yearly tax burden and make 10 to 15% return
>> on your money. Not to mention that you get to use your home mortgage
>> interest as a tax deduction. With interest rates as an all time low, I am
>> not surprised that banks would get on the UFF bandwagon and have you spend
>> $3,500 of your money to help them make more money off you.
>> Oh, I forgot one more piece of math fiction, the NBC news story that a
>> man in Los Vegas, Nevada was using the UFF software to save $300,000 in
>> interest and pay off his loan in 5 years. The fiction here is that the
>> HELOC is being used to miraculously do this for the man. Let us look at
>> the initial numbers: If a 30-yr loan of $200K results in 231K of interest,
>> then in order to save $300k in interest, the man in question must have a
>> loan of at least 260K. If this man had this loan at 0% interest, then to
>> pay back this loan in 5 years he must be paying $52K/year in payments
>> (100% principal, no interest). Since by the numbers given in the opening
>> statement, the usual payment (principal plus interest) for borrowing 260K
>> would be approximately $1560/mth (300K/231K x $1,200/mth), this man must
>> be making additional payments toward equity of $2,770/mth (assuming that
>> the UFF software magically reduced the interest portion of each months
>> payment to $0).
>> We were told at the beginning of the lecture that the UFF software
>> worked by allowing us to replace expensive 5% interest with inexpensive
>> 10% interest, thereby not making us change our current lifestyle in any
>> way. Even if the UFF software was to eliminate all interest we pay each
>> month we would not be able to pay back the sample loan of 200k in less
>> than 14 years or the NBC loan of 260K in less than 16.6 years without
>> additional payments out of our disposable income. In the UFF sample of
>> 200K the home owner is making $60K/yr and making additional payments of
>> $12K/yr. This represents 20% of net income (assuming all taxes have been
>> withheld). For overextended homeowners who find that they owe the bank
>> more than their home is worth and have no disposable income the UFF
>> software will not be able to work any magic. And as for examples of
>> homeowners paying off an additional $33.2K/year on their mortgage,
>> certainly this will not be the average 45 year old homeowner with an
>> income of $65k/yr without some severe cutbacks in spending!>> Great idea Dave... smart and lots of people do that.
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