So you are getting closer to just $40K I hope.

Yes, the aggregate interest values are slightly different because of the discrepancy in effective vs. nominal yields for the 2 countries. The link below will show why Canadian mortgage payments are slightly lower than US ones.

In this case, the interest difference for the 2 countries over 30 years is

$3405.13 on a $200K loan.

http://www.canadamortgage.com/articles/learning.cfm?docid=29

Dan - forgive me, I've not gotten my head around Canadian math.

For US - the 200K/6% interest is $231,676 and after that one prepayment, $188,052. That's the savings.

Funny enough, if one sends $3500 to the mortgage, they save $16,657, the "true cost" of MMA. You need to give that $16K to the grandkids so they can use compound growth to get to the millions.

BTW, see http://www.joetaxpayer.com/money-merge-account-links/ to pull a copy of the spreadsheet. I wrote it in a weekend, and it's worth nothing, so I charge nothing. MMA is worth less than nothing, my sheet beats MMA every time.

No offense - How can $10K only save you under $12K over nearly 30 years? Even 5 years not compounded is $13K, $600/yr.

I was assuming from the post that the guy was using his line of credit to make a $10K paydown on a $200K mortgage principal. The difference in interest payments over the 30 years is ($228,270.87 - $216,855.75) = $11,415.12

Daniel -
Ok, pull out the fingers. Prepaying a mortgage at 6% is the same as buying a 6% cd. Right? Say Right. At 6% money doubles in 12 years, rule of 72. right?

So in 24 years, $10K turns to $40K it doubles twice. 6 more years is about 44% more (the square root of 2) so $57,600. But. The savings isn't $47K because the mortgage now ends early. The interest saved is $43625. This is the US way of calculating. Can't be too far off in Canada.

Daniel, check your inbox...

O.C.

Sorry, I still get the same number, $11,415.52. Why not forget the line of credit and it's associated interest and stick the $12K you save over the year and schedule lump sum mortgage payments with it? Or use the extra discretionary income to go from monthly payments to accelerated bi-weekly ones .....or whatever. Anything but HELOC.

Also gotta wonder about that BlueJay2000Fan. If he's an angel investor, why would he consider a HELOC for his offspring?

Joe Taxpayer

Just a quickie as my wife is about to pour me a fine Chardonnay to imbibe while we watch our Cardinals (booooo!) frolic in the birdbath :)

I am an angel investor, with a combined major in Commerce (Quant methods) and Geology, and 8 significant angel investments totaling about $12 million in current value. Most of my math is investment oriented and I was actually evaluating whether or not the MMA was suitable to buy as a gift for my daughter and her hubby, who have a large mortgage. Problem is/was they have no discipline, like to live the lifestyle, and keeps falling back. She has a mortgage with LOC attached, and it got them into trouble. This is a common problem and while the engineers all do well at paying off their mortgages, regular folks like my daughter and her hubby typically don't because they don't have a "system". MMA had a few flaws that I could see, but I could see how it would work for many by imposing a discipline they don't otherwise have.

Ken's comments (and reasonable approach) resonated when I was thread-hopping and found a familiar subject! While I haven't done the spreadsheet it will be an interesting exercise because I was struck by the logic when it was presented to me. I just thought $3,500 ($4,500 at that time as the dollar was lower) was too much and there had to be a better way.

Coincidentally, and not as a direct result, I am actually partially financing a better way, as one element of a larger financial services play involving a bank, a few million bucks and smart phones. You'll hear about it in about 6 months, but I won't be advertising it here :)

Wine's ready and so am I. Have a good one all.

Best

JF

BlueJays fan - I think I've done a decent job avoiding the personal attacks. So let me address you, if you are still reading. You are quant major? Ever hear of LTCM (Long Term Capital Management)? Maybe the people there were smarter than you, maybe not, but they blew up in way that can only be described as "spectacular." Billions lost.

I have a strong math background. Acing the math SATs (The college entrance exam in the States). A degree in Elecrical Engineering and then an MBA with concentration in finance. So what?

The math needed to pay one's mortgage is four function arithmetic. Yes, exponents are cool, but when I couldn't afford the scientific calculator, hitting 'equals' 360 times would suffice.

You came here and made an unsubstantiated claim regarding the HELOC shuffle. I challenge you, mr quant-man, to review the factors that impact the success and profit of said shuffle.

Keep in mind - I am on record as saying that (a) I understand its intent (b) can show that it 'can' work, and (c) that MMA does a great job of implementing it in a way that can only be described as #fail.

Are you for this discussion? And will you stay on topic?
BTW - I have a regular set of bluejays that visit my backyard, I am a fan too.

OK, personal insults and accusations, the first sign of the Spanish Inquisition - I'm outta here!

Is this site moderated? I admit I didn't read the rules, but I assume they frown on ad hominem stuff, certainly not my cuppa tea.

I'll still do the spreadsheet though...my interest is piqued.

JF