Money Merge Accounts: More Disadvantages Than They're Worth
By Matthew Paulson, published Sep 17, 2007
Published Content: 977 Total Views: 460,886 Favorited By: 20 CPs
These products have taken a lot of different forms. With some of the accounts, you keep your existing mortgage and get a home equity line of credit, others you do a refinance and get a different type of loan. The fees vary from company to company, as does the type of loan you'll receive. None of these plans are a great idea to put in your financial life. They're certainly not scams, and some are a lot worse deals for the consumer than others.
The real problem with this account is that it makes paying off your mortgage the number one and sole priority in your financial life. All of your extra money goes onto your mortgage. You don't choose to send some of your money to a Roth IRA account, some more of it to help your aging parents, some to plan for your children's college, it just all goes to the mortgage by default. It seems to make a lot more sense to keep the money in your possession rather than send it all to the mortgage company and then borrow money on a home equity loan to pay for your expenses.
There are a number of other problems associated with money merge accounts. Often the mortgages that you will be refinanced into will have higher interest rates and variable interest rates. If you're in a good fixed rate mortgage at 5% or 6%, you'll end up paying a higher interest rate in the new mortgage that you are given.
Money Merge Accounts: More Disadvantages Than They're Worth
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