Insider Tips
Money Merge Accounts part II
By Dan Smith

Money Merged Account (Part 2)

            Last month I wrote about this new early pay-off system called a Money Merge Account, and I must confess that I was a bit flippant in my review. Maybe sarcastic would be a better word. But to you the readers I must apologize for making the statement, “I am not sure why the HELOC (Home Equity Line of Credit) is needed, other than to create the need to use their on-line software”. I do in fact understand the math and the fact that the HELOC is an important ingredient to this methodology’s performance. My bad!

After my article was published I was visited by three different representatives who in fact work on behalf of United First selling this software product. The affect of which was to make me feel a little like Jacob Marley in a Christmas Carol. All three were very upset by my assessment of their product and it was obvious that they hoped to convert me into the fold. All three were likewise passionate and sincere about their cause. So let me make a few points clear:

            I like the method. I think it is a great idea even. I may even use it myself one day. If you have already spent the $3500 to join up, I think that is just fine. You are well on your way to owning your home ahead of schedule and saving thousands of dollars in interest. The software they offer to track the use of this method of early payment is excellent, and a great tool for the average Joe. I like everything about this idea, except the $3500 cost for their software.

            Why is that an issue for me you ask? If I can save tens of thousands of dollars in interest, $3500 seems like a good investment doesn’t it? Well for one thing, I believe there will be competing software to track this method available in the next 2 years (on the outside) for somewhere between free and $200.00.  There is already a competitor by the name of 1^st Option Mortgage, that offers something similar (though not as thorough I grant you) for free when you refinance your loan. However, I don’t like that version because it puts the whole 1^st mortgage into a HELOC at a higher rate to start with. Then of course there is the simple fact that you could successfully use this method without every using the software, though you would admittedly have a hard time tracking the benefits. But that does not diminish the benefits you would gain, assuming you want to own your home free and clear some day.

            Why am I so certain that every bank and mortgage company will offer this in the next 2 years? They will because it is in their interest to do so. People think that banks do not want you to pay down your mortgage early, but that is incorrect. The lower the average loan-to-value the portfolio of loans a bank has, the more valuable that portfolio is. That’s because it will have a far smaller rate of foreclosure. In addition every bank wants to have multiple products being used by its’ customer base. It has a tendency to tie customers into the bank for all their financial needs. So this scheme is a perfect one for any bank, because they would potentially have your checking account, HELOC and first mortgage all in one place. Then you would have to use their version of this software, to interact with those products once or twice a month. You would also be far more likely to use on-line banking, which banks likewise love because it drives their costs down.

            So let me finish by saying that I was not the first guy to have a cell phone either. They used to cost thousands of dollars and take up half your trunk when they first came out. I don’t even have a flat screen HDTV yet either, though I think my price point will hit in early 2008 (Honey are you listening?). I shop at Costco and I buy used cars rather than new when I need one. So you could safely say I am cheap or tight with my money when at all possible. So this is just my opinion about the cost of a piece of software. It is as simple as that.

For professional advice on this or any other aspect of home finance, call the expert. Dan Smith can be reached at 303-674-0201 or visit him on the web at www.ColoradoHomeLoans.com anytime!