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Sunday April 21st 2019

Borrowing from Peter to Pay Paul with a Money Merge Account

Reduce mortgage repayment time by half or more! That’s an attention-getting message, isn’t it? Money Merge Accounts advertise that you can eliminate monthly mortgage payments sooner, saving thousands of dollars in interest. But these ventures do not provide their services for nothing. In the end, you’re probably better off just passing that offer by.

Money merge accounts or accelerated mortgage repayment systems originated in Australia and recently infiltrated the US. Despite rapidly growing in acceptance and admiration, many financial experts caution customers to tread slowly. Though the program effectively reduces mortgage repayment time, the concept is not without flaws or hazards. In effect, these accounts get you to borrow from Peter to pay Paul.

How Money Merge Accounts Work

Customers must first buy the accelerator software program. Expect to pay anywhere from $695 to well over $4,000 for the use of the technology. The tool regulates the cash flow between a high equity line of credit (HELOC), monthly wages, monthly living expenses and a regular fixed rate mortgage. Clients must monitor transactions closely to detect possible errors.

Then you must obtain an HELOC through the company or an affiliate. This is essentially a second loan based on a home’s equity value. The interest rates vary and more times than not, exceed the amount of the first mortgage. Consumers must then agree to deposit all wages into the account, which relinquishes control over spending. After the determination of monthly expenses, the client receives a credit card. The card is the only resource for paying bills. A dashboard allows clients to adjust the number of years until pay-off, the pay-off date and to visualize the amount of interest paid.

The software deposits the paychecks into the account in order to begin paying back the HELOC. The HELOC pays the mortgage payment, allows withdrawals from the credit card for living expenses and adds the excess to the mortgage loan principle. The more frequently money is applied to the principle, the faster the amount decreases. Money continuously flows from one area to another.

Fees and Pitfalls

Pitfalls with the system include the initial cost of the software, the accuracy and effectiveness to circulate funds without error and interest rates of the HELOC. In order to prevent negative balance occurrences, consumers must diligently track finances. The software’s first priority is to pay down the mortgage. Monies moving out of the account may or may not coincide with paycheck deposits or bill deductions.

Insufficient fund or late fees are the sole responsibility of the client. Subsequently, credit history becomes affected. In order for the program to operate properly, individuals must have substantial excess income after paying the mortgage and other monthly bills. In addition, customers may incur penalties after using the card for unnecessary expenses.

The software programs are available through financial and insurance advisors, mortgage brokers and realtors. Clients gain information from one on one meetings, networking systems or seminars. Experts suggest conferring with legal consultants prior to signing any documents. Examine the fine print for refund policies and warranties and receive thorough answers to all questions.

Do You Really Need a Bank?

Candice Choi, AP Personal Finance Writer, did an interesting piece on personal finance recently. Her October 4, 2010 article details her experiment in which she tried to live without a bank for one month. What did she find? Fees, fees and more fees.

Living without a Bank

Why would anyone live this way? Well, if you’ve got bad credit or a shady history of writing bad checks, banks won’t want to deal with you. Some people just don’t trust the Internet age and want to live off the radar. Maybe you just don’t speak the language.

If you’re one of these people, you may find yourself paying $28 every week to cash your paycheck. If you need to pay a bill, you’ll be charged $1.50 for a money order. You could try a pre-paid card, but those cost a dollar every time you use them. Ms. Choi racked up $93 in fees in just one month of living without a bank. Living anonymously isn’t cheap.

As it turns out 25% of American households don’t have bank accounts. Most of them make very little money, less than $30,000 annually. And the numbers don’t appear to be getting any better. The number of U.S. citizens living this way is expected to keep climbing. Ms Choi details the government push to get more of these people into banks, which may automatically make some suspicious. And when we look more closely at these fees, things don’t quite look right.

Check Cashing Fees

Look at Ms. Choi’s experiment and the fees she paid. She details $56 to cash two paychecks at a check-cashing store. Why didn’t she just go to the bank where each check was issued? There’s no fee for that. Wal-Mart advertises a $3 fee for check cashing, so paying so much makes little sense.

Cash Cards

The remaining fees were for cash cards, another expense that should be easy to minimize. Ms. Choi paid $4.95 for each of the cards she used. These cards came with various additional fees for each time you used the card, used a pin, got cash back or used an ATM. Again, these cards make little sense. Why not pay cash?

Money Orders

She has a point with money orders in that she had to get two of them because they are limited to $1,000 each. So, to pay her $1,300 rent, it cost $3.50 from Western Union. Not bad. At the post office, it would have been $2.60. So for every bill you pay, it’s another $1.50 or so out of your budget. How many utilities do you pay for in your home – five or six? Ten? Do the math.

The Cost of Your Time

Besides the fees, there is extra time involved when you have no bank. You have to wait in line to cash checks or get money orders to pay bills. Walking around with your cash can be unnerving. Plus, keeping a cash emergency fund is a big security risk. You’d have to pay for money orders to send funds to your retirement account, taking a chunk off your earnings before you even get to check how the account is doing. You can’t make hotel reservations or reserve a rental car without credit cards, so you’d have to pay cash in advance, hoping they have the room or car you need.


It looks like you don’t really NEED a bank, but life is a lot easier with one. Convenience, the ability to set up automatic savings and the security of having your money protected are all good reasons to have a bank account. Unless you can’t get one, you’re better off having one.

Watch Out for Capital Recovery and Private Recovery Fees

Amidst the debacle of mortgage financing that led to a financial meltdown, the recovering market in the US has brought its own controversies in this period. The resale market, valued in excess of USD 100 billion every year has paved way for a silent and smooth movement of money to builders and other construction corporations across the US.

The Purpose of the Fees

Imagine this – Every time a real-estate property is being sold, the original builders (not the landowners mind you) will be paid a fee proportional to the transacted amount involved in the sale. Even though it sounds like an intelligent way for maximizing the revenue for the construction conglomerates, a second look at the policy reveals the harm that it can cause to the entire market and the consumers involved in thousands of real estate transactions every year.

Every time a consumer invests in buying a home, they look at the appreciation value of the enterprise so that they are left with something that has grown in monetary value along with them. The builders these days are attempting to include a clause – a transfer fee that has to be paid to them, every time a real estate property that they developed is being sold, allowing them to capitalize on property sales, regardless of profit or loss on the part of the consumer. This transfer fee is regardless of the appreciation or depreciation of the value of the real estate being sold.

Almost 100 Years of Fees

If you are buying a $100,000 house and selling it for 105,000 to another party then you will end up paying $1050 to the developer of the project. If the party who buys from you sells it for $110,000 then he will end up paying $1100 to the same developer and the cycle continues for all resale transactions for a period of 99 years.

Who Gets the Money

This money needs to be paid to the investors who backed the real estate developers during the initial development of the project. Failure to pay the amount will make the reselling a legally invalid contract. The reasoning being given by the principal advocate of the transfer fee scheme – Freehold Capital partners of New York is that “private transfer fees represent an adaptation in how to pay for development costs” incurred by builders “at a time when funding is not available” to them on “reasonable terms.”

With a contract for 99 years on every piece of real estate that is being sold the developers stand to reap the benefits for decades to come.

The people looking to move their families for career changes will be hit the hardest – people working for the defense forces in particular. Every time they sell a property, not only do they have to pay a transfer fee but the buyer of the property has the right to claim a certain reduction in cost pricing to negate the amount that he will have to pay to the developers when he intends to sell the property a few years down the line.

The FHA’s Involvement

The FHA – Federal Housing Administration has raised their voice against this fee that is against the rules. If Fannie May and Freddie Mac also join the fray then it will effectively stop this scheme from being implemented. Similar transfer fee programs had been implemented in different areas at different times only to be met with opposition from the consumers leading to the scheme being removed by the developer.
With such a big segment of consumers being affected many coalitions have taken up arms against this scheme and to prevent it from being implemented.