I am sure that many of you have seen the advertisements that promise to help you pay off your 30 Mortgage in 8-11 Years. Since there seems to be a little bit of confusion on this program, I thought I would address it briefly.
The programs are generally called Money Merge Accounts. This product basically is a complex line of credit on your home/property. The account works like a checking account and has a relatively simple open interest calculator built in. The account determines the interest based upon the outstanding balance on the account. Every month, the account automatically adjusts the principal and the interest due on the loan.
What happens is that you deposit all of your income into the account on a monthly basis. The account automatically adjusts based upon the total deposit. So you are agressively paying down your mortgage. But, since it is a line of credit, you have the ability to write checks like you normally would to pay your other bills. It is the net deposit that counts toward decreasing the total due.
If you are contemplating this type of account, keep in mind that much like an option arm, it requires a bit of discipline to manage properly. You could have interesting situations develop depending on how you use the account. Your interest deduction could increase or decrease and you could theoretically alter taxable gains.
I encourage anyone selling this service to contact me because I believe that there are a few exciting things that could be merged with this product, especially when considering asset protection and estate planning. But like everything in life, don’t jump without first looking, doing your homework, honestly assessing whether you are disciplined, and also thinking about all financial options that are available.
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