Ken, sorry, your light bulb is still burnt out. You can figure out of the system is optimal (for this approach) or not by answering one simple question....does the HELOC balance get to exactly zero each and every month? No? Then it isn't optimal. Now I know it isn't optimal because I've seen the actual software in action. Sure it gives you a number to the penny, but so what? Doesn't mean it's optimal. You believe it's optimal, but it just means that it is giving you a meaningless number .... to the penny.

Think of it this way..... a $500 loan at 7% APR is the same as two $250 loans at 7% APR put together just like it's the same as one $400 loan at 7% together with a $100 loan at 7%. Same amount of interest paid, same total payment, etc. So, say your HELOC has a minimum balance during the month of $1000, maxing out at $5000 during the month. You can treat that loan as one $1000 loan and one loan ranging from $0 to $4000. Now, that $1000 loan has the same balance over the course of the month, and if your HELOC rate is more than your mortgage rate, then you would have saved $1000*(HELOC rate - mortgage rate) in interest if you transferred $1000 less.

Will you understand that? Don't know....but it's true. Play around with some numbers if you don't believe me. Your MMA software isn't calculating crap in terms of optimal interest cancellation. And you telling your customers that it is doing so is absolutely 100% false advertising.

Whether you mean well or not, you're a crook. You might not like that, but you are absolutely misrepresenting what the crapware does. You were lied to as well, but ultimately, you are responsible for what comes out of your mouth. My advice to every MMA agent (or any salesman of any product) is to stop and understand what it is you are selling.

A good woman, Ken. Keep her.

I am not focused on the $10K, per se.
I am focused on the fact that if you'd just produce a running view of the HELOC balance over the prior 12 months, I am 100% certain you will find there are average monthly balances which are too high compared to the optimum amount.

Given the Mort rate, HELOC rate, monthly income, and monthly expense, I can tell you the break even, where MMA provides no help by using the HELOC. Any more and it's a loss.

I'm not going to go down the agree/disagree path, I find it pretty annoying. But I will ask you this - We agree that the HELOC shuffle can work. Fact. And this alone is pretty counter intuitive. You might also agree that when the HELOC rate is higher than the mortgage rate, there are specific conditions that make it a gain, I believe I've given examples which are pretty clear. But my examples are contrived, and they show that if you "turn the dial" just a bit, withthe otherwise average checking balance being too low, that HELOC cannot be used effectively.

I am certain (as are my brethren here) that a quarterly cycling cannot be the most efficient method for the shuffle.

My wife tells me that I am very stubborn and dense sometimes.

A light bulb has just turned on in my thick head...I think I have just figured out the reason you feel the MMA software is flawed. You feel the MMA software is flawed, because you think MMA's process is to prompt the client to transfer $10,000.00 from his HELOC to his mortgage on a regular basis.

Sending $10,000.00 to debt is not at all how the Money Merge Account system works. On the contrary, the MMA system determines the optimum account transfer, at the optimum time, from the optimum account, to send to the optimum debt! In some cases, particularly when discretionary income is very low, funds transfers will be very low, if not completely nonexistent in the first several months. In other cases, when a client can afford it, the MMA system may prompt a more substantial funds transfer. Either way, the funds transfer is figured to the penny. For example, I am being prompted by my own personal MMA system to send a funds transfer of EXACTLY $6,078.48. The system has determined that $6,078.47 would not cancel the maximum amount of interest, and a transfer of $6,078.49 would cost too much in mortgage interest.

The only reason I was using the $10,000.00 HELOC example was to demonstrate the viability of borrowing from a higher APR account in order to send money to a lower APR debt, keeping the interest cost (not the interest rate) in mind. If I have misled you in any way, I sincerely apologize.

"The bad news is that the above-mentioned person is the rule nowadays, not the exception. In other words, we can debate this forever and nothing will change unless people take steps to learn new financial habits and actually take action to change their circumstances. For this person, United First Financial offers ongoing financial monitoring and unlimited financial mentoring for life."

Addressing this point.....your problem is the "above-mentioned person" doesn't seem to be changed by this program on average. Only 25% of MMA customers are logging into their accounts (ie, using the software). It would seem for the vast majority, the $3500 software was just another instance in a long line of bad financial decisions.

The main people that benefited from this software were those selling it. Those buying it were merely flushing money down the drain.

And heaven help you if you need a refund. Outside of any government mandated rights of refusal in the first few days, getting a refund is impossible. "Interesting" (read: pathetic) given all the "satisfaction guaranteed" claims the agents plastered all over the internet.

Thanks for the concessions, Ken, but you're still missing some key points like 8 and 9 that Calvin pointed out below (and I addressed at RedFlagDeals) and your conclusion:

"In conclusion, I assert that MMA is not a perfect system, and it is certainly not for everyone, but it may be a viable solution for people who, for whatever reason, will not aggressively pay off debt without the aid of a very good financial monitoring and mentoring system."

So, tell them to buy a copy of Quicken, which has a debt reduction component that is more efficient than the MMA, can download transaction information from your bank, and has budgeting tools that run circles around the MMA. All that for a cost that is ~$3400 less than the MMA.

Certainly a good start.

"8) Sending your own discretionary income to your debt as much as possible will pay off your debt just as fast, and possibly even faster than the MMA system."

There is no possibly about it.

"9) There have been some serious misrepresentations of payoff results coming out of Australia; thus the lawsuits, etc."

The more appropriate statement is:

There have been some serious misrepresentations of payoff results coming out of hundreds, possibly thousands, of agents all over the US, Australia, and Canada. Inaccurate payoff statements are norm while the initially accurate ones are the exceptions.

Your biggest problem is still your interest statements. You are not using APR rates, which governments require SPECIFICALLY to stop people like you. Until you understand this and actually practice it, you are still wading in murky water.

Ken, well done.
You've avoided much if not all of the hyperbole of nearly all other agents we've encountered.

Now, if you want more lessons on HELOC shuffle so you really understand that MMA blew it on how they implemented, I'm your guy.

You can read any of my explanations to see the theory, and how the optimal draw is a monthly move.

Allow me to beat a dead horse - If one is paid on the 1th of the month and all bills due on the 25th, the HELOC draw of $4K on the 25th, and then paid in full on the 1st is the cycle one should see. It precisely fills the gap from average balance to keep sending funds to the mortgage. Note, on the first day of the plan the $5K earned all goes to the mortgage.
Given the flow in this example, I've just shown the optimum draw. While real life flow can get more complex, it never points to a $10K draw, or floating a greater than $5K HELOC balance month to month. This is the systemic failure of the system.

Those who are in the "shuffle can work, but not this way" camp should agree 100% with my description. It purposely assumes an original average (checking) balance high enough to capture the few dollars the shuffle can save. chansen or C&H will actually find this to be obvious, as they've made it clear their math skills are at or above my level.

To JoeTaxpayer, calvinandhobbes, chansen, etc.

Please allow me to say, "You win!" on a few points. I concede that...

1) The Money Merge Account system is not for everyone - If someone has been successful prepaying debt without the MMA system, I admit that this person should simply continue doing so until all debt is paid in full.
2) United First Financial has been guilty of exaggeration when it comes to saying things like, "Pay off your debt in record time..." etc.
3) Many MMA agents really do not care about their client's financial situation anywhere close to as much as they care about their own commission cheque, and some salespeople are downright crooks.
4) The fact that UFirst has adopted a network marketing type of business structure has been, at best, distracting and, at worst, extremely damaging, due to the reticence of many Canadians to want to be anywhere close to the next "business opportunity".
5) Some people just do not like the idea of going into debt to pay off debt (either by purchasing the MMA system and/or using a line of credit in this manner).
6) $3,500.00 is a lot of money.
7) Deciding to simply take whatever discretionary income you have and send it to your debt as much as possible is really not a complicated concept; therefore, our society really should not need a monitoring and mentoring system that UFirst includes with each MMA system sold.
8) Sending your own discretionary income to your debt as much as possible will pay off your debt just as fast, and possibly even faster than the MMA system.
9) There have been some serious misrepresentations of payoff results coming out of Australia; thus the lawsuits, etc.
10) There is really no "magic pill"; it is a fantasy.
11) There is a possibility that United First Financial may be sold or go out of business altogether.

Having said all this, please allow me to clearly state what I feel the main benefit of the Money Merge Account system is, having personally used my own system since October, 2008, and have been personally responsible for the vast majority of the 102 MMA system sales that have been made in my corner of the province since that time...

In my opinion, the MMA system may be a reasonable option for the individual who has clearly demonstrated that he is unable and/or unwilling to get out of debt on his own. For example, I just met with an individual who has multiple debts of great variety, and he is about to arrange yet another refinance in order to pay additional interest on top of his existing interest and lengthen his amortization period considerably in order to retain an affordable payment. This person has absolutely no regard for informed financial management, and is very unlikely to ever make prepayments to debt on his own.

The bad news is that the above-mentioned person is the rule nowadays, not the exception. In other words, we can debate this forever and nothing will change unless people take steps to learn new financial habits and actually take action to change their circumstances. For this person, United First Financial offers ongoing financial monitoring and unlimited financial mentoring for life.

My experience with the majority of our local MMA clients has been that the MMA system is an effective money management tool, as long as I, the agent, stay in touch with the client on a consistent basis to provide hand-holding, encouragement, schedule coaching sessions with the UFirst support team, meet with clients at my kitchen table so that my wife and I can help these individuals develop a spending plan, etc...

Contributors to this and other forums, as a rule, understand finances and debt and/or have a strong desire to make intelligent financial decisions; otherwise they would not be here. On the other hand, most of my MMA clients do not go anywhere near a financial website, because they really don't care. It is these people that I take under my wing, teach them how their amortization schedule works, offer the MMA option, and stay in touch with on a long term basis.

Why do I go to such trouble? I do so for my own selfish reasons. After 19.5 years in the automotive industry, I have learned a lot about how not to satisfy a customer and a little about how to increase client satisfaction. In the past three years since I have left the car business (I don't miss it!!!), I have learned quite a bit - and I still have lots to learn - about how money works. I have come to the conclusion, however, that the best way for me to be successful in business and achieve long term wealth for my family is to treat every single one of my customers as if he/she were my own adult daughter. In other words, I genuinely care about their long term benefit; because in doing so, I am receiving many more client referrals and repeat business than if I was merely taking a short term approach to my UFirst business. What does this look like in real life? Well in addition to normal sales activities, I invest a significant part of my day in contacting existing MMA customers in order to see how they are doing and offer ongoing personal support. I actually meet with these people on my own time - at no additional cost to the client - in order to go through the account verification process in person, physically help them with their program executions, meet with them and their banker to set up accounts, contact UFirst support team, etc. I do this for selfish reasons, because my best investment in my future is a 100% completely satisfied customer!

In conclusion, I assert that MMA is not a perfect system, and it is certainly not for everyone, but it may be a viable solution for people who, for whatever reason, will not aggressively pay off debt without the aid of a very good financial monitoring and mentoring system.

Daniel -

I see the difference now.
When you take out a $200K mortgage and pay over full 30 years you get a total interest paid. We agree on this (with Canada having a slight difference in this result.)

The interest saved (from 10K prepayment) I show is calculated from the fact that the remaining mortgage of 190K is not 30 years, it's just over 315 months total. So the interest paid changes.

If Canada banks adjust so you still have 30yrs left with lower payment, that's ok, but the assumption we all make, both MMA agents, and we naysayers, is that the payment is steady, and all prepayments of principal pull in the final payment.

On this, the agents and I agree - When you send $10k as a prepayment you calculate the return by looking at how many months just got clipped off the back end. Since Ken and I both cite the $40K+ saved by that one payment, we agree. (Of course, Ken ignores other factors such as the interest the $10K accrues, here, I am talking about the interest impact as though you had the $10K actually available)

By the way, Daniel, if in month 2 you found another $10K, it would only save you $33K, as the remaining mortgage gets clipped to 277 months. The impact of prepaying is less and less as the time remaining drops.

I implore you to peek at the spreadsheet I linked to below, it's US math, but makes clear how these calculation work. I am sorry, but I haven't the time or inclination to adjust it for Canadian calculations. One day, I might.

Sorry for not getting back to you; I think I got a mild case of food poisoning from chicken or maybe grapes. Grapes?

Yes, the future value of $10K over 30 years is $57,439.91, but when you borrow it, you are paying interest on the declining balance of that amount. Obviously, the payments on a $190K mortgage will be 19/20 as much as a $200K, if the principal size is the only difference.

For a $200K mortgage over 30 years at 6%, you'll pay out a total of

$200,000.00 principal + $228,270.87 interest = $428,270.87; and for the $190K one, you'll pay out a total of $10,000.00 lump sum + $190,000.00 principal + $216,855.75 interest = $416,855.75 - a difference of $11,415.12.

Is it better then to use the $10K to pay down the mortgage or stick with the original $200K amount? That depends on a lot of unknowns like what will the value of the investment be in 30 years. Yes, you are paying out a 6% mortgage, but the breakeven point would be if the property is worth more than $416,855.75 in 2040. Real estate generally increases because the land buildings sit on is a scarce economic commodity, The improvements always depreciate, but the land invariably appreciates (unless you live near Chernobyl).

In this case, the implicit rate of return on the original $200,000 investment must be 2.57% to break even. If you invest $200K @2.57% for 30 years, you will just get back what the property is worth in 2040. If the real estate were to appreciate at 6% per year for 30 years, then it would be valued at $1,148,698.00. That would be quite a profit; but to assume a 6% increase every year for 30 years is an improbable scenario.

Of course, the opportunity cost of capital has to be factored in too. If the person could make 6% on the $10K he was going to pay down his mortgage with, he probably should keep it, because after 30 years, he would have the aforementioned $57,434.91 in cash as well. No point in sinking unnecessary money in an investment that appreciates at less than 3% per year if he can make 6%.

If we use an accelerated weekly payment schedule, we'll pay the $200K mortgage off in 24.4 years as per the RBC calculator, during which time we'll pay an extra $98.17 per month to save $51,102.05 in interest. Thus we pay a total of only $377,168.82 over 24.4 years. But this still has an implicit rate of return of only 2.64% per year. And so if you can make 6% somewhere else, go for it. However, with most other investments, we have to deal with the after tax yield, unlike principal residence investments.

https://www.rbcroyalbank.com/cgi-bin/mortgage/mpc/start.cgi