“But how is it possible, using your money more wisely and with no change in lifestyle, to pay down your mortgage ten to fifteen years faster than a typical 360-month principal and interest (P&I) mortgage?”

“Too Good to Be True?
We greeted this with skepticism.”

“We came away with two impressions:
1. Mortgage payment acceleration is a very viable strategy that should be understood by anyone who desires to build and secure personal assets, including home ownership.
2. …..”

“We found the Money Merge Account system from United First Financial as the leaders in this market. We believe our findings will complement your personal research and experience.”

United First Financial®, its agents and subsidiaries provide Internet web based software and support services. United First Financial does not provide accounting, tax, legal, real estate, mortgage, or investment advice. Interested parties should seek and consult with persons or entities licensed and qualified in those areas for advice relating to those matters. United First Financial is not liable or responsible for claims or representations made by any party which are not included in the Money Merge Account® Limited Guarantee.

United First Financial®, its agents and subsidiaries provide Internet web based software and support services. United First Financial does not provide accounting, tax, legal, real estate, mortgage, or investment advice. Interested parties should seek and consult with persons or entities licensed and qualified in those areas for advice relating to those matters. United First Financial is not liable or responsible for claims or representations made by any party which are not included in the Money Merge Account® Limited Guarantee.

The title really should be “does it make any significant difference whether the PMI is paid by the lender or the borrower?”. Firstly, what is PMI? It is the insurance required by lenders when a borrower does not put down 20% or more of the purchase price as a down payment. This insurance typically ranges between $50 and $300. I won’t go into the specific options and benefits of lender paid versus borrower paid insurance, such as available tax deductions; your mortgage originator is much more qualified to help you with all the details. My aim here is to highlight the starting point for considerations.

An example I read gave the following details:

Loan Example with borrower paid PMI:
$200,000 purchase price, 5% down payment ($10,000), 30 year fixed rate of 5.875%, Payment = $1247.42 (including PMI $123.50)

Loan Example with lender paid PMI:
$200,000 purchase price, 5% down payment ($10,000), 30 year fixed rate of 6.375%, Payment = $1185.35

The second example, where the lender pays the PMI, is at a higher interest rate but costs the borrower $62.07 less per month.

This might lead you to think that lender-paid PMI is the only way to go, but there are other consideration that you will need to consider, such as tax deductions as well as the important fact that borrower-paid PMI stops once the loan to value ratio drops below 80%, i.e. once you own a 20% equity stake in your home, whereas the higher interest rate of the lender-paid PMI continues.

If you’re already paying off your mortgage, it’s too late to change without refinancing, but, keep reading. What I describe below applies equally to you. If you are heading off to your mortgage broker for a new loan, this is one aspect that you will need to raise and make a decision on. Your broker will give you all the information and you’ll need to spend time working on all the different variables to determine which route is best. But what if your broker instead turned to you and said that for an additional closing fee of $3,500 you could cut almost $100,000 off your debt and reduce the time to pay it off by more than 11 years?

He will put figures in front of you relating to this alternative plan.

If you go with the borrower-paid PMI, you will save $92435.18 in interest and cut your term by 11.8 years
If you go with the lender-paid PMI, you will save $103,969.78 in interest and cut your term by 11.9 years.

He’ll tell you that these figures are based on the information he has and that they will change as he finds out more about your financial situation. But the figures likely won’t change dramatically.

He’ll tell you that, under normal loan conditions, it will take about 6-3/4 years to get to the point where you can stop paying borrower-paid PMI. Under the alternative he is suggesting, based on the borrower-paid PMI duration, he’ll tell you that after 7 years on the borrower-paid PMI route you will have paid down $52,931.12 in principal and on the alternative lender-paid plan, $51,961.25 in principal will have been paid. In both cases, with this alternative plan he is proposing, these amounts are more than double what you would have paid down using the normal method.

So, based on you not paying PMI after the 6-3/4 years, you will also accumulate a nominal amount of $34209.50. Add that to the $92435.18 and you will be saving $126,644.68. And then he’ll add to the pot when he tells you that under the recommended method, you will achieve the 20% equity stake, not after 6-3/4 years, but after 3-1/4 years, giving you another $5,187.00 dollars in PMI you won’t have to pay, bringing your total savings to $131.831.68

So, do you say, nah, I’ll just go with one of normal methods, or do you say, hell yes, I’ll go for the method that will save me $131,831 and 11.8 years off my original 30 year term. If you do, you’ll get a free analysis for you to see what the Money Merge Account system from United First Financial can do for you.

If you are already paying off a mortgage, you can can still take advantage of the Money Merge Account system, and no refinancing is needed. Saving time and money will help accelerate your mortgage and any other debts you might have.

Contact us now to receive your free evaluation and to see whether the Money Merge Account service can save you time and money.

Please note that the above figures are not necessarily exact and applicability to your situation will be determined by your specific details. We recommend that you take the results of your free evaluation into consideration with other factors and that you talk to applicable qualified persons during your decision making process.

United First Financial®, its agents and subsidiaries provide Internet web based software and support services. United First Financial does not provide accounting, tax, legal, real estate, mortgage, or investment advice. Interested parties should seek and consult with persons or entities licensed and qualified in those areas for advice relating to those matters. United First Financial is not liable or responsible for claims or representations made by any party which are not included in the Money Merge Account® Limited Guarantee.

Not able to refinance, or it’s not worth even trying to do so? What’s the reason? One or a combination of negative equity, excessive debt ratio, credit score. What to do? Maybe increasing your income is not under your control, though there’s nothing wrong with asking for a raise or increasing your selling efforts. But there are a few things you probably can control.

Rebuild Equity: If you’re in an upside-down loan, there’s not much point even trying to refinance so your immediate goal should be to build equity. Action is required, as the only foreseeable way home values are going to increase at a rate that will quickly recoup equity lost in the last couple of years is if all the government’s stimulus actions lead to a dramatic increase in inflation. For an example of this, read my blog, A life belt for underwater mortgages.

If this happens, it will come with a significant increase in loan rates, so, by the time you can refinance, it will no longer be worth doing so. Again, action is required, and that action is to pay down your loan as fast as possible so that you build an ownership stake that can be used to assist in your refinancing bid. Just following the standard options such as making additional equity payments or changing to a bi-weekly plan will not raise you up from an underwater mortgage in time to take advantage of the current low rates.

The only real option is to accelerate your mortgage using tried and proven software technology such as the Money Merge Account from UFirst, which uses banking technique and the banks’ money to put you in the driver’s seat. And this is a driver’s seat that includes a financial GPS system, ensuring you know where you are heading and putting you back on course when you experience financial hiccups.

Improve your credit score: Doing preventative maintenance on your credit report means being both proactive and reactive. React to anything that occurs or may occur that might damage your standing - in other words, don’t mess up by not making minimum payments or going further into debt. Being proactive means taking action to improve your score. This is not a lesson on what actions to take to do so as there are many available on the Internet. But it is one on how to rapidly make a difference.

Just following good practices has the same downside that the standard mortgage pay down techniques have; it will take too long. You need help and the best help comes in the form of a computer. Remember Gary Kasparov, the world renowned chess player. It took a computer to beat him! In the match series, Gary Kasparov did actually manage to win one of the matches and, likewise, there are some actions that you might be able to take that will move you towards a quicker payoff, but only if you are a mathematical geek who wants to replicate the 24 pages of algorithms encompassed in the Money Merge Account system every single time you make a payment, a deposit or a withdrawal.

Reduce your taxes: Do you have any idea what a difference it would make to your financial future if you could reduce your taxes by $2,500 to $11,000 per year? This is possible if you start a home based business (self employment triggers [AVG] $10,000+ in potential deductions = $2,500 at 25% tax rate) or, if you already own a business, check whether you are one of those who doesn’t claim sufficient deductions (the GAO estimates, in it’s latest year’s figures, that small business owners overpaid on average $11,000 in tax because they did not claim tax deductions that they validly could have). Taking that average, and applying it to a 30 year standard $200,000, 6% mortgage to reduce capital owed, would save 19 years, 3 months AND $160,199 in interest. Looking at the upfront years, where most of the standard monthly mortgage payment comprises mainly interest, you would gain a little less than $11,000 in equity just in the first year. United First Financial is releasing a new service, called BizpacK that not only offers a low cost entry business opportunity, but also is specifically aimed at home based and small businesses and, most importantly, includes the UDeduct system which guides business owners towards accurately recording their expenses, which helps them make as much use as applicable of the more than 100 tax deductions available to them.

Using the Money Merge Account system and the Bizpack opportunity together gives you a cohesive trinity of paying down debt fast, improving your credit score and, drum roll please… paying down your debt even faster! An additional drum roll!!! The mortgage acceleration possible with the Money Merge Account is available without the need for a line of credit or available credit card limits. United First Financial recognized that upside-down loans and reduced credit card limits would hamper your ability to utilize these vehicles, so they upgraded the system to work with just a checking and savings account.

United First Financial®, its agents and subsidiaries provide Internet web based software and support services. United First Financial does not provide accounting, tax, legal, real estate, mortgage, or investment advice. Interested parties should seek and consult with persons or entities licensed and qualified in those areas for advice relating to those matters. United First Financial is not liable or responsible for claims or representations made by any party which are not included in the Money Merge Account® Limited Guarantee.

You can use the Money Merge Account (MMA) service from United First Financial to reduce both the amount of interest you pay over the term of the loan as well as the length of the payback period. A combination of the saved interest and the cash accumulation after the loan is paid, will give you a buffer that will come close to, or even far exceed the drop in your home value that has occurred over the last year or two.

The best way to illustrate this is with an example. The table of data assumptions is shown below. In brief, I’ve taken a $600,000 home that has lost 25% of its value, resulting in a current value of $450,000. The 5% mortgage has been paid for 29 months of a 30 year term (to date: capital paid $22.174 & interest paid $71,233). The home owner has some money in checking and savings account and has a small credit card balance. After all monthly expenses, the home owner is left with $500.

To put the effect of this drop in value in perspective, at the original value, the total interest that will be paid during the standard life of the loan will be 93.3% of the original house value (i.e. of $600,000). With a reduced value of only $450,000, that interest will become 124.4% of the new value, which equates to an increase of approximately 1.4% on the interest rate being paid. Using the Money Merge Account (MMA) program will result in interest saving that will lower the interest, as a percentage of the value (the lower $450,000), to 87.3%. This equates to a reduction of approximately 0.3% in the interest rate being paid.

Extrapolating the interest paid and interest rate improvements, that the MMA program can help the home owner achieve, to actual dollar amounts, in this example, the homeowner is going to benefit to the tune of almost $380,000, more than double the loss in home value. The chart below shows the various aspects that lead to this conclusion.

1. Under the old arrangement, the homeowner is going to pay $488,342 in interest during the remaining term of the loan. With the MMA system, the interest still to be paid will be $321,560. These figures result in the final, total payments that will be made during the complete life of the loan to $1,159,576 (current plan) and $992,794 (with the MMA plan). A saving of $166,782.
2. If the homeowner does not choose to use the MMA service, $500 per month will be available to invest each month for 331 months, which is the life of the loan as it is currently structured. With the MMA system, the homeowner will be able to start investing that $500 only once the loan is paid off after 228 months, for a period of 103 months (331 – 228). But at that stage, all regular monthly payments, namely $3,330.93, that were being made to pay off the loan, will also be available to be invested. Using a nominal 3% return, under the current conditions, the home owner will accumulate $257,046 while, with the MMA program’s assistance, a much higher amount of $469,782 will be banked.

With the Money Merge Account system, the homeowner will realize $636,564. Without it, the end result will be only $257,046   -  

the MMA path is $379,518 more!

That increase in equity is more than twice the value of the loss in home value.

Considering that we give a free analysis to determine whether the MMA system from United First Financial can help those in debt, it is prudent for every homeowner to take the time for the evaluation. For a homeowner in an underwater mortgage situation, it is not only prudent, but critical as a first step in rebuilding equity.

(Notes: (a) I do not provide accounting, tax, legal, real estate, mortgage, or investment advice. Any information provided here is simply a statement of facts. (b) Some figures have been rounded up the nearest dollar. (c) The methods and figures used and calculated have been double checked; any remaining error/s will not be significant enough to alter the conclusion expressed herein.)