Q: Recently, I received a phone call from a coworker stating that he went to a seminar that was pushing a new financial product – money merge account (MMA).

He explained to me how this product would accelerate your mortgage payoff and help you save thousands of dollars. He goes on stating that this MMA will require you to open a HELOC, draw upon it to pay your (primary) mortgage, and have any income that you make, be deposited in this HELOC.

To me, this sounds so complicated. However, the real catch is that the agent who is pushing this product is charging a $3,500.00 setup fee.

After I did some research on this new product, I mentioned to him that there are other alternative ways to accelerate your mortgage payoff without taking out more debt – i.e. additional principle payments and/or extra monthly payment at end of the year, etc.

I don’t think this is a scam but wanted to let you and your readers know that there are agents trying to push this product, especially in this recent credit crunch we are in.

Thank you.

A: I’m glad you wrote. While some people don’t consider the MMAs to be scams, I do consider them to be somewhat scam-like.

The idea has been around for a number of years. I first heard about it when a book was published on it by a guy from New Zealand or Australia. Basically, the book claims that if you put all of your income into a home equity line of credit account, and pay all your bills from the same account, you’ll pay off your home loan in a few years instead of 30 years.

The way it works is that when the income comes in, it pays down your loan much more quickly, so you’re technically borrowing less money for that month. When you draw checks on the account, you’ve had the benefit of the “float” of your money.

The only way I can see this working is if you spend a lot less than you earn. But if that’s the case, you could easily pay off your loan quite quickly — without spending $3,500. In fact, almost anyone can achieve nearly the same benefits by putting every spare cent toward a debt each month, be it a home equity line of credit, or a credit card, or a regular 30-year fixed rate mortgage. Certainly, $3,500 would go a long way towards reducing the debt on most home mortgages.

I’m glad you thought it through and took a pass.