With the national drop in home values and foreclosure epidemic the economic potential of losing your home is at its highest since the Great Depression. Taking advantage of this fear, companies are springing up with big-promise products and services to help homeowners get out of debt and pay off their mortgages early. While the marketing hype sounds attractive, homeowners should be cautious, says Drew Sygit, a Certified Mortgage and Equity Planning Specialist with The Lending Edge Team at Allied Mortgage in Rochester Hills, Michigan.
“Companies are playing to the fears of homeowners, making false or misleading promises and charging thousands of dollars,” Sygit says. “They claim their software will help you pay off a 30-year mortgage in as little as ten years. The truth is, if you have a good handle on your finances and can stick to a budget, you can do it yourself. There is no magic, and if there was, it certainly wouldn’t be a fancy computer program.”
Sygit, who was the first person to earn the Certified Advanced Loan Originator (CALO) & Certified Master Loan Originator (CMLO) designations from the Michigan Mortgage Brokers Association, says the programs generally instruct you to open an equity line of credit – a second mortgage – against your home. You then transfer your paychecks and pay your bills into and through the line of credit. The software supposedly informs you of the optimum time to borrow funds from the line of credit to pay down your first mortgage, and when to repeat the process.
Testing one of the systems currently on the market himself, Sygit ran an amortized schedule using a homeowner with approximately $500 in discretionary income as his model against the software product offered to homeowners. His comparison example showed the homeowner would pay off the mortgage in about the same time whether using the software or just paying the $500 of discretionary income towards the mortgage each month. Sygit notes that a homeowner would actually beat the software if they put the initial cost of the software towards paying off their mortgage instead!
Sygit warns that some companies aren’t just targeting homeowners – they’re paying referral fees to Realtors, loan officers, financial & insurance professionals and attorneys to sell homeowners on buying their software.
“The numbers just don’t add up,” says Sygit, who has over 14 years of industry experience. “Apparently the program’s only benefit to the consumer is in helping them see the impact of their spending decisions. Some people may need this type of discipline, but these products come with a hefty fee. The question is, are they worth it?”
Sygit says there are strategies to build wealth without paying off your mortgage. He recommends speaking with a Certified Mortgage Planner or certified financial professional, andgathering the facts before investing thousands of dollars in a mortgage acceleration program.
For more information on The Lending Edge Team, or to schedule an interview, contact Drew Sygit at 248-356-3739, or visit http://www.TheLendingEdge.com
