More on Money Merge Account

Following on from Mackie’s (sp) question and discussion in Nov/Dec, I’m trying to stay close to the point and not wandering in to pros and cons of whether to try to build wealth by paying off mortgage early versus other investments.

  1. I’m not an agent for UFF or user, but close to being both.
  2. That means I like mechanics of MMA.
  3. Looking for direct arguments against theory (not so much the software).
  4. This is what I did not see in early research and is rarely addressed by either the proponents or naysayers. Namely, we all agree extra sent to principal (Mirriam-Webster dictionary) reduces total interest paid. Now even if we do have extra let’s still borrow it from a new or existing HELOC. Amount of reduced interest in primary mortgage is much greater than the interest cost in HELOC (even if a slightly higher interest rate) because we deposit paychecks into HELOC, acting as our monthly payment, thereby minimizing the average daily balance on which the HELOC interest bill is calculated.
    OR Somebody gives you $1000 (the HELOC); you have to pay them $1050 (HELOC interest cost); you can make the $1000 turn into $5000 for you by reducing total interest paid on primary mortgage.

Anybody disagree with the theory? (MMA software discussions later)


I like your post structure, to the point as I know this was a contentious topic when previously posted. Here is my view on the MMA: the HELOC by its nature will typically have a higher interest cost than your primary mortgage loan, it will also have a variable interest rate which exposes you to interest rate risk in a rising rate environment. However, the MMA process gives you the flexibility to apply ‘all’ available funds each month to reduce your housing debt and therefore your overall interest expense. These excess funds would normally sit in a savings or checking account not doing you much good. The benefit of the MMA process is not that the HELOC is cheaper than your mortgage debt because it usually isn’t. The benefit comes from the process of using all available funds to reduce debt rather than spending or sitting in a low-yielding account. The key is controlling your expenses each month so that more and more funds can be allocated to debt reduction.

I’m not an advocate or detractor of the program. It has its place and for some individuals can be a financial savior. For other individuals, myself included, excess funds are better utilized in other investements so long as they generate a higher return than my mortgage loan.

Hi 71tr

You remember the strong current last time!

So, help me. My favoring this approach is because I [/u]do[u] see the interest cost in HELOC less than that in mortgage - but [/u]only[u] because we are canceling interest due (read lowering average daily balance) in the HELOC by depositing paychecks.

A side point, similarly we could use HELOC funds, cheaply by interest cancelation, and invest them elsewhere, stocks etc to enjoy a return. Not a lot different than the famous investing on margin.

Thanks for staying focused on interest cancelation theory of HELOCs. Is it sound or not?

I do remember the strong current in the last thread. Yes, I agree the MMA process saves you money by reducing your outstanding debt because all available funds are devoted to the effort.

But rather than talk in terms of interest cancellation or such I think in terms of opportunity cost. If I chose to do A then what is the cost to me of having made that decision and not doing B? I can put my extra cash in a checking acct earning 1% or I can pay down my mortgage/Heloc costing me 7% or I can invest those funds in the stock market earning 12%. Taking into consideration the risk involved with each decision, my personal tolerance for risk and my objectives I will make the decision that works best for me.

The MMA program is a sound choice but you must be diciplined. Imagine you payoff your 7% fixed rate mortgage with an 8% variable HELOC. You never implement the program, you spend more than you save and in three years the HELOC is costing you 12% due to rising rates and you owe more on the houes than before the program started.

71tr, great way to spend our first snow day in Virginia

I think we are nearly there. I was trying to keep away from the opportunity cost issue because that 's really what was behind the discontent last time - there are a variety of different things to do with our money. And even if we had found ‘the best’, the ultimate advice is to never put all your eggs in one basket.

I tried to address it also when referenced investing on margin to see if you feel use of a HELOC in this way is actually somebody lending you money with which you can then earn more than it costs you, whatever the plusses and minusses might be of those other opportunities.

I’m hooked on the fact that it is the interest cancelation really quite well described in the MMA presentation found on different sites, namely

     7,000 draw  (living expenses and mortgage with some exta to principal)

less 5,000 paycheck(s) deposited
= 2,000 simplified average daily balance on which interest due is calculated. Thus canceling the interest due on 5,000. Simplified because draws and deposits will be staggered. Even if I have the extra available for principal (read or extra that could be invested elsewhere) I’m getting even more to work with at less than face value.

Stay with me. I won’t bother you too much longer. Maybe we’ll get some other comments.


I’m with you, it’s all about what you want to do with your money and where your priorities are. I’m glad you recognize the importance of diversification, some folks get blinders and forget other opportunities. It’s an intriguing and novel program but again isn’t for everyone. If you believe in the process, understand the concepts and recognize the potential pitfalls then it sounds like you are ready to go.

As an aside where in VA are you, I used to live in Charlottesville?

Thanks, Woodbridge

I’m not really sure I follow the basis of this thread. I believe from what I’m reading that some things sound a little backward.

The basic premise in finance is that to reduce your debt the quickest, you pay off the loans with the highest interest rates first. That usually means you pay off the HELOC first, not the primary.

The easiest way to figure this out is to just do a spreadsheet based on a year’s worth of payments and see how much you owe at the end of the year. For example, say you have a 200k 30 year loan at 6% and you pay an extra $100 a month for 12 months. At the end of 12 months, your principle balance is $196,310.42. Without that $100 a month it would be $197,543.98. Applying that same $100 to a HELOC, say 40k at 9% interest your loan balance after a year would be $38,475.96. Without that payment, it’s then $39,726.72.

Puting that money on the first mortgage saves you $1233.56. Putting that money on the heloc saves you $1250.76.

The focus should not be on the reduced interest paid, the focus should be on the amount of debt left.

You could of course always borrow money on a Heloc at 8%, invest it and hope you make enough on the spread. Over the last year, the S&P 500 returned about 15%, over the last 3 years, 10.44%, over the last 5, 6.09%, over 10 years 8.42%. Borrowing money to invest will magnify your gains, but will also magnify your losses.


I think we all agree that paying off the higher costing debt first is the prudent thing to do, no one is challenging that theory. The context of our discussion incorporates the use of the higher costing HELOC because of its flexibility. By converting your primary mortgage to a HELOC you can then allocate all of your extra cash each month to paying down the HELOC (reduce debt). But should you need some extra cash the HELOC can be drawn against unlike your mortgage loan. So even if the HELOC is more expensive rate wise if you are paying it down faster then you are likely winning the debt game. It’s a dicipline process in my opinion. I’m starting to sound like a proponent of the MMA process.

I don’t see how that makes any sense unless you have a prepayment penalty. Most primary mortgages don’t have any penalty if you a little extra per month, I think the prepayment penalty kicks in if you make a large payment against principle and I don’t think you’re talking about that.

With that said, there’s no reason to convert a primary to a Heloc. If you need extra cash, you just get a Heloc.

Again you just pay down the primary.

The whole problem with the original theory was that they were looking at the total amount of interest saved over the period, however they’re looking at different periods so it’s not an apples to apples comparison, it’s an apples to oranges so of course one looks right. The organge in this case is the time period, the original mortage is probably based on 30 years while a heloc is typically 5 or 10 or 15 years. Of course it’s going to look like you’re saving more but if the same calculations were done on a heloc over 30 years, you’d see that this theory makes no sense at all. Looking at the debt left after a year is the real apples to apples comparison.

So if you actually need money for something you have to borrow from your self using the HELOC at the higher rate?

Didn’t we already beat this horse nearly dead already?;action=display;threadid=20328;start=msg103596#msg103596

Why are we back to the same damn topic again. ???

I am not a proponent of the MMA process, more of a neutral novelty interest. That being said I’ll share my limited knowledge.

Yes, that is exactly right. The HELOC is of course a line of credit that you can draw upon should you need the cash. Your mortgage loan does not offer this flexibility. So the gist of the process as I understand it; convert your primary mortgage to a HELOC, pay all of your available cash each month towards the HELOC thus reducing the debt / average daily balance more quickly and over time reducing your overall interest expense and likely the term of the loan.

With a typical mortgage setup you make a monthly payment and maybe some extra principal each month and put the remainder of your paycheck into your checking account etc. With the HELOC you put that extra cash against the HELOC and if by chance you need some emergency cash you can just write a check against the HELOC. The HELOC just provides the flexibility to do this whereas you might be hesitant to contribute every last penny towards your mortgage payment because you know once you write the check its gone.

In my opinion this process can work if you are very diciplined. But you have to keep a tight budget each month because without all those extra dollars going towards the debt reduction this becomes nothing more than refinancing your mortgage loan into a higher rate HELOC with it’s associated interest rate risk.

Oh, sorry for keeping this going. I stopped reading the first thread after the first few messages made it sound like a scam. I read the rest of the thread and I think there’s better things to spend $3500 on.

I think the whole basis of this is similiar to going on a diet. There’s lots of different diets around and they all have their supporters. The reason why all those fad diets work is because at the end, the total amount of calories consumed is less. A calorie is a calorie.

The reason why MMA would work on paper is because if people follow it, they end up putting more money into their mortgage instead of just using it as disposable income. They can do the same thing without it, just not very likely in general as only 30% of the population out there pays off their credit card bills every month. A dollar saved is still a dollar earned.

You can spend your money on a diet book, lose weight and say it’s successful. Or you can just cut down on calories without any book. You can also be more careful in allocating your money and do without MMA or you can spend the money on it.

Most people have initial success with diets because the see the immediate results and results are usually the best with the greatest weight loss. Over time, people tend to drift back to their old eating habits. I think the same mentality may apply in this case. The program gives immediate feedback making people more likely to follow the plan. Setting up your own automatic payment plan can also achieve the same results.


Seems like a waste of money when you figure in software cost, and closing costs on the refi. Seems a bit excessive to pay $3500 to know what affect my going with the venti cappucino vs the grande latte at Starbucks is going to have on my mortgage in 8 years. LOL.


You are absolutely correct. This topic was run into the ground awhile back with the “pro” MMA backers (meaning people actually selling the product) finally realizing that they were getting nowhere fast with the “anti” MMA people in the topic.

One more time, I am not a proponent of the MMA. If you read the first post to this thread you will see the author was very specific in his question and we kept the discussion limited to that question.

Please don’t interject the details or emotions of the last thread into this discussion ie… $3,500 software costs, spending money on latte’s etc. If you read the original thread closely you will see I too was a detractor; not of the concept but of the companies charging excessive fees for the service.

Now that we’ve reached the point of pro vs con I think I will recuse myself of this topic.


I meant no disrespect. I apologize if I gave you that impression. I was just offering an opinion, and trying to get a laugh.

christopher w;

No offense taken but thanks for the thoughtful response. One of the drawbacks about forums, our written words might imply something unintended. Anyway, laughs are always good here and I get your point.

Hello and welcome back old and new. Don’t recuse yourself yet 71tr!

I started this thread because I wanted more discussion on the central theme to MMA. Namely, what I try to specify in message on 1/22 about $7,000, 5,000 and 2,000. Interest cancelation. I’m pretty hooked that there is a sound strategy involved, but not yet an agent of MMA or a user.

For those who want to stay focused with me on this concept, at this juncture I’m not planning to talk about benefits of any software whatever the cost, nor to discuss opportunity cost of whether it is ‘best’ to pay down a loan (typically a mortgage) with our extra $200 (eg) monthly or to invest it in say stock mutual funds, nor to discuss if we should invest that spare cash in a tax deductible vehicle of IRA or 401k. It is not about paying off more expensive loans first. It is not about optimal consequential net asset growth. None of those discussions for those who are truly on board with the intent of this thread.

OK - some other basics to keep us on track. It is not refinancing. Again this does not propose refinancing into any mortgage or any giant heloc. Dispel that thought. Have I got your attention. That is very clear from watching the homeoffice (United First Financial) presentation. A must watch (30-40mins) if you are going to grasp and participate on task.

It does assume that we have some money left at the end of the month. No surprise there. A new or existing relatively small heloc is required; so current position is some equity needed. WHY this heloc thing? THE central point. Only a line of credit (just to be clear for some this is different than a home equity loan) has the facility of the outstanding balance immediately reduced by a posted payment any number of times during the month. The balance will then rise if draws are made, no surprise. Result is a monthly average daily balance which is used to calculate our interest due.

First stage then is draw some cash out from the heloc. (Comments on what we do with that money later). Interest is accruing. Now, for a moment, take us over to our regular checking account in which most of us have our paychecks (direct) deposited. That earns us typically from 0% to 2%. Second stage is make a deposit to your heloc in the amount of your full paycheck. All the days that that money is sitting there, albeit a short time before we need to use a heloc checkwriting feature to send in our car payment or daycare, etc, etc., it has reduced the balance on the heloc and consequently the average daily balance on which the interest is calculated. Please accept for a moment that this amount of interest saved is greater than the interest earned, if any, on our high street checking accounts. If so we have used the lenders money for less their planned cost to us by no change in our spending habits, just a redirection of our money. Or what I can relate to is, we are floating their money from the beginning of the first month and canceling interest due on it during the month as paychecks are deposited. Of course there are a number of in and outs to & from the heloc. Month after month this becomes powerful.

I’m looking for somebody to counter that theory or else I’m going to operate that way very soon. Probably starting without any MMA software, just to see if it fits the family lifestyle.

Obviously then, what’s the point unless we are doing something with this float or with this loan we have got at an interest cost less than it would normally appear should be paid each month (read interest cancelation). The things we could do is invest it in one or two of a number of choices that take monthly contributions (dollar cost averaging). I relate this to investing on margin. OR, to close this loop on this MMA story, we could …wait for it…you know what I’m going to say…yes, that’s it… you’ve got it…come on somebody jump in, I know Jamie would if he was reading this, 71tr you commented you were almost a proponent, christopher w I know you were trying to joke but I’m serious on seeing that people get the theory, that I think I’ve grasped fully, in order to discuss it…here it is…use it to pay extra to principal and save interest by a much larger amount than the heloc with its now partially canceled interest costs us.

So help me on the use of heloc theory. Remember, secondary is how we use the float but a non-sophisticated use would be to accelerate the paydown of primary mortgage. Hence, the MMA claims, which nobody is disputing, that 18 years or more could come off a 30 year note.

Canceled interest means it should not matter that the heloc might be at a higher quoted rate than the primary mortgage.
UFF independent agents sell the $3500 software to help guide best timing and amounts to draw from the heloc and pay to principal.
A self done spreadsheet presumably could guide someone in a similar fashion.
Running an agents analysis will do nothing for comprehending the concept but only to see results of chopping off years and resultant interest saved on mortgage.
First draw from heloc is the $3500 to be sent with application to UFF to get access to training and support of MMA web based program.
Observation - unlikely that selfdone spreadsheet can incorporate as many variables of life’s financial picture that MMA software can and confidently get recommendations on timing.

Later, Markvernon

I guess the people who were advocates in the last thread didn’t make enough money…soooo…let’s keep on digging the hole on this one unless we can lock the thread.