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Of MMAs and HELOCs

A couple weeks back in a post titled Money Merge Hyperbole, I discussed the Money Merge product offered by UFF, and focused on the fact that in their published example, it’s clear that the use of a HELOC doesn’t provide any incremental savings. A kind reader points out on his web site, My Debt Elimination Calculator (Edit – Greg has since stopped selling this software), that HELOC can provide some savings depending on a number of factors. Among them, the time of the month that income comes in, when bills are due, and the relative differences in HELOC interest rate, mortgage rate, and checking account interest. I agree with this. I’m from the “numbers don’t lie” camp and Greg offers numbers to back up his comments on that post. In his examples, the HELOC system saves $2550 more than the prepaying method on a $100K mortgage. (This is for the more realistic example where the borrower doesn’t have the (unrealistic) extra $1000/mo, but a more reasonable amount which will reduce the mortgage to 24 years from 30. In this case, Greg’s software is capturing over $100/yr in extra savings by using the HELOC. I certainly can’t knock a system that beats what I saw on official MMA sites but only costs $30. Take a look through the link above.
One point I must concede is this: It’s easier to make a purchase (waste money) when it’s from cash in the bank than when you are taking that money as a HELOC withdrawal. Maybe that’s what the MMA people are trying to say, but that message is lost to me among all the hyperbole.

I will close with this question and thought. If UFF, with the chance to put their product in the best light, cannot provide an example with real numbers which shows any savings beyond that of the prepaying (which I can illustrate with a free spreadsheet) yet create this illusion of ‘sophisticated algorithms’ taking millions of dollars to develop, how do they justify a $3500 price tag? On the flip side, you have been introduced to Greg, (whom I just met via my blog) a Computer Scientist who was able to write code providing a solution that actually impressed me looking at his example. I’m sure this debate isn’t over.


  • John B Geer October 23, 2008, 1:33 am

    Joe, all the MMA articles on here are great! Thanks.

    The (title alone of the) Money Merge Innumeracy article makes me smile 🙂
    I was at a UFF presentation tonight (it’s new in Canada) where folks were offered a whirlwind presentation and video with matrix-movie-like numbers streaming across the screen and wads of cash flying up in the air, followed by a confusing example of the live software, and then an open question: “Is there anyone here who does NOT want a free assessment?”. At that point, I was the only person with my hand in the air.

    I found you from [http://www.christianpf.com/money-merge-accounts/] after googling for sites that had side-by-side comparisons of MMA projections and base-case schedules (from, say, a simple amortization calculator or spreadsheet) for realistic scenarios. I figured there would be *some* benefit to the line of credit shuffle, so I wanted to quantify it. I enjoyed your comment in the quoted link about engineers and controlled variables, so thanks for providing spreadsheets and pointing at others with hard numbers.

    As a “software engineer” (now there’s an oxymoron!), I took exception to some of the presenter’s claims and his use of obfuscating phrases like “sophisticated algorithms based on factorial math”. I was going to simply write an MMA free-software equivalent this weekend, but the link in this article saves me having to do that. Anyone willing to spend $3500 should spend $30 as part of their due diligence on that investment, so thanks to Greg for making his program available.

    In this article (and in Money Merge Account Analysis Pt 3) I find lacking a quick explanation of “open vs. closed” loans, and “average daily balance” — pieces on which the HELOC (open) shuffle to your mortgage (closed) is based to make it a win, albeit a marginal one. Or maybe there is another article I’ve just missed that explains it.

    Anyway, kudos to you for clear, lucid writing and numbers that don’t lie. (I’ll peek at your spreadsheets if you like; maybe you could publish an excel-based MMA for folks? 🙂

  • JOE October 23, 2008, 9:27 pm

    First, John, I thank you for the kind words. It’s great to get feedback, good or bad, and to see what articles are hitting the target audience.
    Also, knowing where my readers first became aware of my blog is always interesting.
    To the question regarding the difference between the open-ended vs closed loans, mt Pt 3 does not address this. Nor do upcoming Parts 8,9, or 10. I will give this exact issue some further thought, and it will be Part 11, pub date Nov 20. Since this is the basis for MMA, I think a good explanation is in order.
    As I continue to write this series, there are some points that I find I need to expand upon, and new twists that come up as I read the claims of the MMA agents. The nature of the blog is that I really shouldn’t re-write any posts as it might leave a trail of bad links from other bloggers kind enough to link to me.
    I’ll sent you the sheet. I think that on one hand I’ve made it clear that the HELOC shuffle can’t even save as much as MMA costs so why bother? Then I became aware of Greg’s program, and he was honest in his discussions, pointing out that HELOC shuffle has some value and his program helped capture it at a cost that’s reasonable. So I’ve been happy to refer readers his way.

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