Submitted by Steve (not verified) on Mon, 2007-11-12 16:16.
I gave some thought to the claims made about the Money Merge Account process and arrived at the following observations. Can you payoff your primary mortgage in 8 to 11 years? Probably. You are taking out a HELOC and making a lump sum payment against your primary mortgage. What is not stated by the Money Merge Account proponents is that you are left with the balance of your HELOC. Here's an actual example using my existing 30 year mortgage at 5.625% and assuming that the paychecks you direct deposit into your HELOC match your bills, meaning your HELOC balance is stable. My principal and interest payment is $828.99 a month with the primary mortgage loan paid off after the 2/1/2034 payment. If I take out a HELOC for $90,000(with a current variable interest rate of 6.74%) and make a lump sum of $90,000 on my primary mortgage balance, my new loan payoff date is 6/1/2013. However, you are still left with the $90,000 balance on your HELOC and(assuming the rate remains at 6.74% for the next 6 years)you have paid $33,363 in interest on your HELOC ($505.50 a month for the remaining 66 months of the primary mortgage)– a total of $123,363. The $33,363 in interest is over and above your primary mortgage payment because that remains the same whether you're using MMA or not. If I did not use MMA, my mortgage balance after the 6/1/2013 payment would be $122,037. If I made an additional monthly payment $505.50(my monthly HELOC interest payment) my primary mortgage balance after the 6/1/2013 payment would be $82,426 which is less than what I would owe on the HELOC - $90,000.
This example does use a stable average daily balance for the HELOC and it also assumes that the variable rate will not increase over the life of this example. After working out an actual example, I have decided to save $3,500 and continue my 30 year mortgage. While this is not a perfect example it gave me enough information to make my decision.
Money Merge Account
I gave some thought to the claims made about the Money Merge Account process and arrived at the following observations. Can you payoff your primary mortgage in 8 to 11 years? Probably. You are taking out a HELOC and making a lump sum payment against your primary mortgage. What is not stated by the Money Merge Account proponents is that you are left with the balance of your HELOC. Here's an actual example using my existing 30 year mortgage at 5.625% and assuming that the paychecks you direct deposit into your HELOC match your bills, meaning your HELOC balance is stable. My principal and interest payment is $828.99 a month with the primary mortgage loan paid off after the 2/1/2034 payment. If I take out a HELOC for $90,000(with a current variable interest rate of 6.74%) and make a lump sum of $90,000 on my primary mortgage balance, my new loan payoff date is 6/1/2013. However, you are still left with the $90,000 balance on your HELOC and(assuming the rate remains at 6.74% for the next 6 years)you have paid $33,363 in interest on your HELOC ($505.50 a month for the remaining 66 months of the primary mortgage)– a total of $123,363. The $33,363 in interest is over and above your primary mortgage payment because that remains the same whether you're using MMA or not. If I did not use MMA, my mortgage balance after the 6/1/2013 payment would be $122,037. If I made an additional monthly payment $505.50(my monthly HELOC interest payment) my primary mortgage balance after the 6/1/2013 payment would be $82,426 which is less than what I would owe on the HELOC - $90,000.
This example does use a stable average daily balance for the HELOC and it also assumes that the variable rate will not increase over the life of this example. After working out an actual example, I have decided to save $3,500 and continue my 30 year mortgage. While this is not a perfect example it gave me enough information to make my decision.