Home > Finance > Payoff your mortgage years sooner and save big $$$$?

Payoff your mortgage years sooner and save big $$$$?

A while back ago I was introduced by a friend to a few systems(software) that can help you to pay off your mortgage much sooner and save you $$$$ on interests. One company is called U1stFinancial and another one is Sydney Financial. Later I found out that there are many similar products of this kind out there.

How it works is that you need to get a qualified Home Equity Line of Credit (HELOC), then use that as your checking account. You should deposit everything (including your paycheck) to that account and spend from that account (by writing checks and using debit card). You should keep balance in that account (actually borrow money from it) to pay your monthly mortgage interests. The online software, which costs $3500 one time fee (same with both companies), will tell you how much you should pay for this month’s mortgage depending on your current HELOC balance and your future spending needs. The sales rep showed me very good results based on my cash flow and I can pay off my mortgage 13+ years earlier and save $400K+ in interests. What a great deal for merely $3500!!

The next natural question is what’s the difference if I just pay extra principle every month with my extra money? I was told (by the sales rep and the their website) that this system takes advantage of the HELOC’s daily computed interests, while mortgage is monthly. By borrowing from HELOC, I will “beat” the mortgage system. I didn’t really understand it but it sounds very smart.

As soon as I got an estimate report with real numbers, I went ahead to compare it with the old “extra principle payment” method. I used 2 online calculators (here and here) and found there isn’t much difference.

I have to admit that there is still certain value in this software/system:

  • Since you will keep a HELOC account, you can make best use of your free money in hand. Otherwise, every month you will have difficult time balancing the emergency fund left in the bank and the extra principle you should pay.
  • For those who aren’t good at managing money and lack self-discipline, following instruction of this software will be much easier. Hard to image for typical Chinese, many people in Western culture just do not save and tend to spend every penny in hand.

U1stFinancial operates in a multi-level marketing structure. That kind of explains why it charges this ripping off price. Interestingly, I came across the website of the alleged “inventor” of this “borrowing from HELOC” method (he’s from Australia) and he just sells it for $199! (Update on 12/18/07: this is the site that offered $199 (http://www.speedequity.com/website/controller.php?pg=affiliate. However it’s no longer there when I checked today. The price is not listed but it should be more than $500 now since it’s offering $500 commission. Hey if you find out please tell me. Overall, if you don’t invest in other places with better return than your mortgage rate, paying it off is a good choice. )

Once I was very excited about this. Now this is just another example for the old saying “If it looks too good to be true, it really is”.

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  1. Jim Mac
    December 18, 2007 at 11:18 am

    Calvin
    Do you have a link to the website that sells the software for $199?

    I was thinking about the U1st one and was hesitant to buy it.

    Thanks

  2. calvin998
    December 18, 2007 at 1:28 pm

    Jim,

    This is the site that offered $199: http://www.speedequity.com/website/controller.php?pg=affiliate. However it’s no longer there when I checked today. The price is not listed but it should be more than $500 now since it’s offering $500 commission. Hey if you find out please tell me. I think I should buy that when it’s still $199. Overall, if you don’t invest in other places with better return than your mortgage rate, paying it off is a good choice.

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