Money Merge Accounts: More Misleading Information

It is hard to believe that I have been talking about these programs for more than two years now,  bringing to light the misleading, even false, information presented by the Money Merge Account sellers.  Don’t get me wrong, these bits of misinformation spread out on occasion to other mortgage acceleration product sellers, but the United First Financial (UFF) agents are the worst offenders from what I have seen thus far.  The company even encouraged the presentation of skewed realities at the beginning, and I suspect they still do in a “non-public” fashion as they allow agents to continue spreading the crap, such as that from the Asher Institute report including claims that a 30-year fixed rate is really an adjustable rate mortgage (ARM).

One of the more subtle and persuasive statements is that paying off your mortgage is the same as investing at the same interest rate.  This comparison is very successful for them as they can show that an investment account with the same interest rate will have accrued the amount needed to pay off one’s mortgage at the same time as if one was paying monthly toward their mortgage.  What’s even more powerful for their persuading clients into buying the Money Merge Account (MMA) is the phrase “where are you going to get that kind of return, especially in a savings account.”  The problem is that they again leave out a lot of facts, facts that could very well change your mind.

Let’s go ahead and assume that your mortgage is 6% and you can get a 6% rate of return on your investments.  That puts the mortgage payoff date at the exact same time, regardless of how much money you add monthly.  However, the truth of the matter is that you are much better off investing than paying off your mortgage.  You see, once you send money to the bank to payoff your mortgage, you will not be able to access it again, at least not without refinancing.  Your investments, on the other hand, can be “tapped” if the situation arises.  This is called liquidity, aka money readily available.  When a financial crisis occurs, many whom have gone the mortgage acceleration route are finding themselves trapped and struggling to make ends meet, with no cash available.  Some have even headed to foreclosure.

Another fact is that when the mortgage payoff time arrives, guess what?  If you have sent all of your money to the bank, congratulations, you now have a free and clear home, but no cash in the bank.  You cannot tap into your home’s equity without refinancing again.  With the investment account, you have financial freedom in essence.  You have options!!!  You can choose to pay off the mortgage in its entirety, pay off part of it as you deem capable, or let the investments keep working for you and reap more rewards.  Also, keeping the money in investments keeps that liquidity that we all need, and most lack.  Remember that $100,000 readily available can pay a lot of bills during a financial crisis, such as job loss.  Try getting a refinance done without a job.

Now, we haven’t even talked about the tax benefits that carrying a mortgage can provide.  Even if you are taking the standard deduction, you may be able to gain tax advantages.  Another point being argued these days is where can you get an interest rate that is greater than your mortgage interest rate?  I do not think I can legally specify any one stock, bond, etc., but I can tell you that it is not hard to do with a little bit of research and education.  One of my investments is yielding over 17% in dividends and that yield does not look to be in jeopardy any time for the foreseeable future.  Since dividends are only taxed at 15% maximum, there is a greater ability to grow your wealth on the “spread”.  Of course, Obama will probably destroy this 15% cap, but remember that he won’t “raise taxes”.  Speaking of higher taxes, when they come, you will want every deduction you can get.

Another point I would like to mention that the “other side” won’t is that you do not need to earn the same interest rate as you pay on your mortgage in order to come out ahead in your investments.  That’s right, you could earn less than your mortgage, even taking out the tax benefits, and still come out ahead in some cases.  I show these type of facts in my presentations, which I may turn into videos to be released across the internet.

So, don’t buy into the simple facts or even listen to just one side of the story when trying to decide which mortgage strategy is best for your situation.  I encourage you to research thoroughly and make sure you have seen genuine side-by-side comparisons of various strategies, as well as working with a mortgage professional whom understands and can teach both sides’ advantages and disadvantages.  Of course, if you have any questions, feel free to contact me.