Banking 101 – If you’re “using the bank’s money” it means you’ve borrowed it from the bank and you’re going to pay interest to “use” it. You don’t get to use it for free.
The United First Financial Money Merge Account supposedly uses “the bank’s money” to help you pay off your mortgage faster. After paying the $3,500 admission fee, you use Home Equity Loan (HELOC) funds to pay down your mortgage, and then you use your paycheck to pay down the HELOC. (Confused yet?)
The idea (sort of) is that instead of putting your paycheck into a checking account and letting the money sit there until you need it to pay bills, you can use the Money Merge system to “put your money to work for you”. Essentially, until you actually need that cash, it’s being used to reduce what you owe on your house. So you get a week or two of reducing your interest on your mortgage through this money shuffle.
That adds up to a whopping couple hundred dollars a year saved with the money shuffle that UFF promotes with the Money Merge account. (Your real savings is in prepaying your mortgage each month… That pays down your balance faster and saves you interest. But you can do that for free without the Money Merge account.)
But here’s where the lies get interesting. From some UFF training documents:
Do I really need a HELOC? Why can’t I use my savings account?
In order for the MMA program to function properly, you will need a HELOC because you are using more than just your money to satisfy your debt. The program also utilizes the bank’s money to pay down the debt.
That statement is completely misleading to the consumer. When the user of the MMA does the money shuffle, part of it involves using HELOC funds to pay down the first mortgage. Guess what? A HELOC almost always has a higher rate of interest than your first mortgage.
You’re not “using the bank’s money” to pay down the mortgage. You are borrowing funds from your HELOC (higher interest rate) to pay down your first mortgage (lower interest rate). At some point your paycheck gets deposited to the HELOC and the money shuffle is almost complete.
A UFF agent will tell you not to worry about this HELOC borrowing, because the time for which you’re borrowing the money is short, so the interest you’ll actually pay is low. That may be true, but who in their right mind would use more expensive borrowed funds to pay off less expensive borrowed funds? Even for one day?
It makes no sense, and the key to getting consumers past this kind of logic is by pretending that “you’re using the bank’s money.” Sure you are. And the bank is lending it to you at a higher interest rate than your first mortgage. That’s not helping the consumer. That’s hurting them.
Which is precisely why your agent won’t explain these details to you. Who is going to pay $3,500 to use a program that has you use higher interest debt to pay off lower interest debt? Who is going to pay $3,500 to do a silly money shuffle with your paycheck and HELOC that will (at most) offer you a couple hundred dollars a year in savings?
Keep your $3,500 and prepay your mortgage for free. Don’t get conned into this silly scam that uses a confusing money shuffle and outright lies to convince you it works.