Haven’t gotten enough of the cold hard reality that United First Financial’s MMA is inferior to a very simple (and free!) do-it-yourself prepayment of your mortgage (which only requires you to pay extra on your mortgage once a month)?
Joe Taxpayer did a five-part series on the UFF MMA, and here’s a summary:
Part One – Do you really want to pay off your mortgage early? There might be some really good alternatives to this mortgage acceleration, and Joe goes through several of them.
Part Two – It sounds good and responsible, but some people argue that you shouldn’t pay it off early, especially if you have a very low interest rate. You might be able to take your excess cash and invest it elsewhere to provide a greater benefit in the long run.
Part Three – A simple do-it-yourself will produce better results than the MMA money shuffle. Why? The program has you leverage a home equity loan (HELOC) to pay down your regular mortgage. HELOCs almost always have a higher interest rate, and in the example UFF uses, the regular mortgage is at 6% and the HELOC is at 8%. Using debt at 8% to pay down debt at 6%? That’s just foolish.
Part Four – The UFF MMA example assumes a consumer is netting $5,000 a month and has $1,000 extra cash each month to pay toward the mortgage. Joe examines just how realistic this is (not). Why don’t they use a more realistic example like $100 extra cash per month to pay toward your mortgage? That’s not as impressive.
Part Five – Joe demonstrates the MMA money shuffle. The company wants you to think it’s magic math. The truth is that it’s a simple shuffle that doesn’t get you as far ahead as if you just did a simple prepayment of your mortgage.