MMA http://www.wisebread.com/taxonomy/term/5755/all en-US Speeding through your mortgage http://www.wisebread.com/speeding-through-your-mortgage-0 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/speeding-through-your-mortgage-0" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/speedingby_cesarstudillo.jpg" alt="car speeding" title="car speeding" class="imagecache imagecache-250w" width="250" height="377" /></a> </div> </div> </div> <p>Now that many of you have crunched the numbers for accelerating your mortgage payoff, I think you are ready for a quick lesson on speeding through your mortgage. Now, I am not saying you <em>should </em>speed through your mortgage <strong>but </strong>there is a program available that helps you pay off your mortgage very quickly (approximately 10 years) so let&rsquo;s see how it works.</p> <p>I thought it would be fun to review the MMA (Money Merge Account) program from <a href="http://www.u1stfinancial.com/" target="_blank"><font color="#800080">United First Financial (UFirst)</font></a>. The company has a website with content that includes the <a href="http://www.u1stfinancial.com/Portals/0/media/mma100.html" target="_blank"><font color="#800080">MMA Intro 101 video</font></a> (note: this video has been removed from the UFirst website) and an <a href="http://www.u1stfinancial.com/Default.aspx?tabid=118" target="_blank"><font color="#800080">FAQ section</font></a>&nbsp;(note: the FAQ section has been updated from an <a href="http://web.archive.org/web/20070110235159/http://www.u1stfinancial.com/Default.aspx?tabid=118">earlier version</a>).</p> <p>Very briefly, the UFirst program involves obtaining an ALOC (advanced line of credit aka HELOC or home equity line of credit) and running all your financial transactions (checking, savings) through the ALOC. That is, you write checks from the ALOC account and designate that account for the direct deposit of your paycheck. You record all of your transactions in the MMA software and then the MMA does its calculations and tells you what actions to take in regard to the timing of payments.</p> <p><span style="font-size: 10pt; font-family: Verdana;">So, let&rsquo;s consider the following question and answer on UFirst&rsquo;s FAQ: </span></p> <p><font face="Times New Roman" size="3">Q. </font><a href="javascript:__doPostBack('dnn$ctr471$FAQs$lstFAQs$_ctl1$Q','')"><em><span style="font-size: 10pt; color: windowtext; font-family: Verdana;">Why can&rsquo;t I make extra principal payments to my primary mortgage and achieve the same results?</span></em></a><font face="Times New Roman" size="3"> </font><span class="subhead1"><em><span style="font-size: 10pt; font-family: Verdana;"><strong><font color="#003366">A.</font></strong></span></em></span><font face="Times New Roman" size="3"> </font><span class="normal1"><em><span style="font-size: 10pt; font-family: Verdana;">Simply put, the mathematics behind MMA present a sophisticated process that has a substantial financial benefit over increasing your monthly payments&hellip; </span></em></span></p> <p><span style="font-size: 10pt; font-family: Verdana;">Here are the assumptions for the Jones (the couple in the video illustration), who have developed a budget with their UFirst agent and discovered that they have $1,000 per month in discretionary income (typically defined as money left over after essentials such as housing, food, and transportation): </span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">Primary mortgage of $200,000</span></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">30-year fixed rate mortgage </span></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">6% interest rate</span></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">Monthly mortgage payment of $1,199.10</span></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">Extra monthly payment on principal of $1,000</span></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in;" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana;">Program cost of $3,500.00</span></div> </li> </ul> <p>According the video (approximately 20 minutes in), the Jones&rsquo;s can pay off their mortgage loan in 10.417 years.</p> <p><span style="font-size: 10pt; font-family: Verdana;">However, if you speed through your mortgage Julie&rsquo;s way (apply the MMA program fees to the principal payment in the first month and then apply the $1,000 to the principal every month), you can pay off the loan balance in 9.917 years. </span></p> <p><span style="font-size: 10pt; font-family: Verdana;">Check out the attached <a href="/files/fruganomics/Speedy%20Mortgage.xls" title="http://www.wisebread.com/files/fruganomics/Speedy Mortgage.xls">amortization schedule</a> (enhanced based on recommendations from reader Jim). </span></p> <p><em><span style="font-size: 10pt; font-family: Verdana;">Edited December 27, 2008 to reflect changes in UFirst website.</span></em><span style="font-size: 10pt; font-family: Verdana;"><br /> </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/speeding-through-your-mortgage-0">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-your-own-amortization-schedule-0">How to Build Your Own Amortization Schedule</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/diy-mortgage-acceleration">DIY Mortgage Acceleration</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-keep-the-low-teaser-rate-for-your-mortgage">How to keep the low teaser rate for your mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-steps-to-finding-your-mortgage-lender">4 Steps to Finding Your Mortgage Lender</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing finance MMA Money Merge Account mortgage mortgage acceleration mortgage loan Fri, 08 Jun 2007 05:56:29 +0000 Julie Rains 713 at http://www.wisebread.com DIY Mortgage Acceleration http://www.wisebread.com/diy-mortgage-acceleration <p><img alt="woman pausing from paint project" title="woman pausing from paint project" width="225" height="337" align="absbottom" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/womanpainting.jpg" /></p> <p><span style="font-size: 10pt; font-family: Verdana">Do-it-yourselfers who are weary of yet another trip to the home improvement store may like this DIY project. It has the possibilities of increasing home equity just as quickly as a bath remodel or new deck. </span></p> <!--break--><!--break--><p><span style="font-size: 10pt; font-family: Verdana"> </span><span style="font-size: 10pt; font-family: Verdana">You may have already built your own amortization schedule using a <a title="guide" href="/how-to-build-your-own-amortization-schedule-0">guide</a> I posted earlier. And, you may have been figuring out how to accelerate your mortgage payoff by entering amounts in the monthly payment column that are higher than the standard payment. </span><span style="font-size: 10pt; font-family: Verdana">Just to make DIY mortgage acceleration really easy, I&rsquo;ve created three schedules in <a title="one file" href="/files/fruganomics/DIY_acceleration.xls">one file</a>: </span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Original Amortization Schedule</div> </li> <li> <div class="sub-heading" style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">$100-a-month Accelerated Amortization Schedule (for disciplined DIYers who have committed to paying an extra $100 per month beginning with the very first payment)</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Real-life Accelerated Amortization Schedule (with semi-random extra-payment amounts based on financial life events such as 1) having extra $600 per month for 2 years between car loans from year 5 to year 7; 2) using $300 of a yearly tax refund 3) applying year-end bonuses, ranging from $100 to $2,100).</div> </li> </ul> <p><span style="font-size: 10pt; font-family: Verdana">The mortgage-loan givens or assumptions for all three scenarios are: </span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">$200,000 <a href="http://www.wisebread.com/redir/mortgagerates">mortgage loan</a></div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">30-year fixed rate loan</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">6% interest rate</div> </li> </ul> <p><span style="font-size: 10pt; font-family: Verdana">Here are the results of paying according to the Original, $100-a-month Accelerated, and Real-Life Accelerated Amortization Schedules: </span><span style="font-size: 10pt; font-family: Verdana"> </span></p> <p><span style="font-size: 10pt; font-family: Verdana"><strong>Original</strong> (Use &ldquo;edit,&rdquo; &ldquo;go to,&rdquo; &ldquo;ORIGINAL&rdquo;)</span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Number of Years for Payoff: 30 years</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Total Interest Paid: $231,676.38</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Total Payments Made: $431,676.38</div> </li> </ul> <p><span style="font-size: 10pt; font-family: Verdana"><strong>$100-a-month Accelerated</strong> (Use &ldquo;edit,&rdquo; &ldquo;go to,&rdquo; &ldquo;ACC&rdquo;)</span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Number of Years for Payoff: 24 years, 7 months</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Total Interest Paid: $182,537.97</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Total Payments Made: $383,234.81 (payments will be slightly less as last payment will not be a full payment)</div> </li> </ul> <p><span style="font-size: 10pt; font-family: Verdana"><strong>Real-Life Accelerated</strong> (Use &ldquo;edit,&rdquo; &ldquo;go to,&rdquo; &ldquo;<span style="text-transform: uppercase">Random</span>&rdquo;)</span></p> <ul> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Number of Years for Payoff: 21 years</div> </li> <li> <div style="margin: 0in 0in 0pt 0.25in; font-size: 10pt; text-indent: -0.25in; font-family: Verdana">Total Interest Paid: $152,555.51</div> </li> <li> <div class="MsoNormal" style="margin: 0in 0in 0pt 0.25in; text-indent: -0.25in"><span style="font-size: 10pt; font-family: Verdana">Total Payments Made:</span><strong style="font-size: 10pt; font-family: Verdana"> </strong><span style="font-size: 10pt; font-family: Verdana">$353,173.46 (payments will be slightly less but I didn&rsquo;t want to change the flow of the amortization schedule)</span></div> </li> </ul> <p><span style="font-size: 10pt; font-family: Verdana">You can download the file and enter information from your own life: your mortgage amount, your term, and your interest rate. Then, have fun figuring out how fast you can accelerate your mortgage payoff. </span><span style="font-size: 10pt; font-family: Verdana"> </span><span style="font-size: 10pt; font-family: Verdana">If you decide to accelerate, make sure that your mortgage servicing company knows that the extra amounts you are paying each month are to reduce the principal.</span><span style="font-size: 10pt; font-family: Verdana"> </span><span style="font-size: 10pt; font-family: Verdana"> </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/diy-mortgage-acceleration">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-your-own-amortization-schedule-0">How to Build Your Own Amortization Schedule</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/speeding-through-your-mortgage-0">Speeding through your mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-keep-the-low-teaser-rate-for-your-mortgage">How to keep the low teaser rate for your mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-steps-to-finding-your-mortgage-lender">4 Steps to Finding Your Mortgage Lender</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing amortization schedule MMA mortgage mortgage acceleration mortgage loan Wed, 30 May 2007 19:03:47 +0000 Julie Rains 685 at http://www.wisebread.com How to Build Your Own Amortization Schedule http://www.wisebread.com/how-to-build-your-own-amortization-schedule-0 <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/couplereadyforproject.jpg" alt="project-ready couple" title="project-ready couple" width="225" height="336" align="top" /></p> <p>Looking for a dull, but financially eye-opening home project? Great! Today, we&#39;re going to build an amortization schedule. All the tools you need are: 1) an electronic spreadsheet with PMT (payment calculation), addition, subtraction, division, and multiplication capabilities (I use Excel) and 2) this guide. </p> <p>Let me go ahead and answer the questions you may have after reading this guide and completing your project:</p> <p>Hey, I have a 30-year fixed rate (6%) mortgage loan of $200,000, but why is my payment so much higher? <br />This schedule does not include amounts paid to escrow, such as homeowner&#39;s insurance and property taxes.</p> <p>Won&#39;t I have more equity built up over time?<br />For the purposes of this demonstration, equity is based on principal paid down; in real life, equity is calculated as the value of your home less the amount of outstanding loans (payoff amounts). </p> <p>Can I put my numbers (mortgage loan amount, interest rate, etc). in this spreadsheet and figure out my own mortgage amortization? <br />Yes, though you will need to make adjustments if you do not have a fixed rate loan. </p> <p>Where the heck is the PMT function? <br />In Excel, go to &quot;Insert,&quot; click on &quot;Function,&quot; select &quot;Financial&quot; from the categories, and then click on &quot;PMT.&quot; You can also click on that E-looking key on your tool bar. </p> <p>Why bother? <br />This guide is the first step in a series to show you how to pay down your mortgage faster than the original schedule (with a discussion of whether you should pay it down to follow in a subsequent post). It also mirrors an explanation given by UFirst in regard to its MMA (Money Merge Account) program (again, with further explanations in subsequent, equally intriguing posts), which a reader has asked about.</p> <p>So.... (the following information is also in the attached spreadsheet, which has the full schedule to Year 30, Month 360 -- <a href="/files/fruganomics/How_to_Build_Amortization_Schedule.xls">http://www.wisebread.com/files/fruganomics/How_to_Build_Amortization_Schedule.xls</a>)</p> <p><a href="/files/fruganomics/How_to_Build_Amoritization_Schedule.xls"></a> <p>Given the following: <br />Primary Mortgage $200,000 <br />Term in Years 30 (360 months) <br />Annual Interest Rate 6.00% (.50%/month or .005/month) </p> <p>Payment $1,199.10 PMT(6%/12,360,-200000,0,0) <br />Annual Interest Rate/Number of Months in a Year, Number of Payments, Mortgage Balance (note: don&#39;t use commas to separate thousands) <br />Value at the End of the Term, Payments Are Made at the End of the Month </p> <p>Build the Spreadsheet </p> <p>Enter Formulas into Spreadsheet in this Order</p> <p>Month 1 </p> <ul> <li> Balance= Primary Mortgage...1</li> <li> Payment= Payment (PMT)...2 </li> <li> Principal= Payment - Interest...4</li> <li> Interest= Balance x (Annual Interest Rate / Number of Months in a Year)...3</li> <li> Equity= Principal...5</li> <li> Total Interest= Interest...6</li> <li> Total Payments= Payment...7</li> </ul> <p> Months 2-360</p> <ul> <li> Balance= Prior Month&#39;s Balance - Principal...1</li> <li> Payment= Payment (PMT)...2</li> <li> Principal= Payment - Interest...4</li> <li> Interest= Balance x (Annual Interest Rate / Number of Months in a Year)...3</li> <li> Equity= Principal...5</li> <li> Total Interest= Total Interest from Prior Month + Interest from Current Month...6</li> <li> Total Payments= Total Payments from Prior Month + Payment from Current Month...7 </li> </ul> <p>Month Balance Payment Principal Interest Equity Total Int. Total Pmt<br />1 200,000.00 1,199.10 199.10 1,000.00 199.10 1,000.00 1,199.10<br />2 199,800.90 1,199.10 200.10 999.00 399.20 1,999.00 2,398.20<br />3 199,600.80 1,199.10 201.10 998.00 600.29 2,997.01 3,597.30<br />4 199,399.71 1,199.10 202.10 997.00 802.40 3,994.01 4,796.40<br />5 199,197.60 1,199.10 203.11 995.99 1,005.51 4,990.00 5,995.51<br />6 198,994.49 1,199.10 204.13 994.97 1,209.64 5,984.97 7,194.61<br />7 198,790.36 1,199.10 205.15 993.95 1,414.79 6,978.92 8,393.71<br />8 198,585.21 1,199.10 206.17 992.93 1,620.96 7,971.85 9,592.81<br />9 198,379.04 1,199.10 207.21 991.90 1,828.17 8,963.74 10,791.91<br />10 198,171.83 1,199.10 208.24 990.86 2,036.41 9,954.60 11,991.01<br />11 197,963.59 1,199.10 209.28 989.82 2,245.69 10,944.42 13,190.11<br />12 197,754.31 1,199.10 210.33 988.77 2,456.02 11,933.19 14,389.21</p> <p>13 197,543.98 1,199.10 211.38 987.72 2,667.40 12,920.91 15,588.31<br />14 197,332.60 1,199.10 212.44 986.66 2,879.84 13,907.57 16,787.41<br />15 197,120.16 1,199.10 213.50 985.60 3,093.34 14,893.17 17,986.52<br />16 196,906.66 1,199.10 214.57 984.53 3,307.91 15,877.71 19,185.62<br />17 196,692.09 1,199.10 215.64 983.46 3,523.55 16,861.17 20,384.72<br />18 196,476.45 1,199.10 216.72 982.38 3,740.27 17,843.55 21,583.82<br />19 196,259.73 1,199.10 217.80 981.30 3,958.07 18,824.85 22,782.92<br />20 196,041.93 1,199.10 218.89 980.21 4,176.96 19,805.06 23,982.02<br />21 195,823.04 1,199.10 219.99 979.12 4,396.95 20,784.17 25,181.12<br />22 195,603.05 1,199.10 221.09 978.02 4,618.04 21,762.19 26,380.22<br />23 195,381.96 1,199.10 222.19 976.91 4,840.23 22,739.10 27,579.32<br />24 195,159.77 1,199.10 223.30 975.80 5,063.53 23,714.90 28,778.43 </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/how-to-build-your-own-amortization-schedule-0">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/diy-mortgage-acceleration">DIY Mortgage Acceleration</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/speeding-through-your-mortgage-0">Speeding through your mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-keep-the-low-teaser-rate-for-your-mortgage">How to keep the low teaser rate for your mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-steps-to-finding-your-mortgage-lender">4 Steps to Finding Your Mortgage Lender</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing amortization amortization schedule interest MMA mortgage mortgage acceleration mortgage loan Sat, 26 May 2007 18:05:06 +0000 Julie Rains 683 at http://www.wisebread.com