 Dear
Dr. Don,
The company 1st Financial is offering me
an accelerated software package for $3,500 that
is supposed to wipe out years of interest with
a HELOC. Why not save $86,000 in interest and
be mortgage-free in 3.9 years versus 24 years
with a $3,500 investment? Is this software too
good to be true? Help!
-- George Gigabyte
 Dear
George,
Save your money. Think this through. To be mortgage-free
on a $160,000 mortgage, at a minimum you have
to pay down $160,000 in principal. Do you expect
to devote $160,000 plus interest over the next
four years toward paying down your mortgage? Then
skip paying someone $3,500 for software and you'll
be that much closer to your goal.
There's no magic in these mortgages.
These mortgage accelerator programs have you put
your entire paycheck against the home equity line
of credit, or HELOC, and then borrow against the
HELOC to meet your monthly living expenses. The
rapid pay-down of the HELOC assumes that every
penny that you don't need to live on is going
toward paying down your mortgage.
If you don't have a lot of money
at the end of the month with your conventional
mortgage, then you're not going to achieve a rapid
pay-down with an accelerator plan either. An earlier
Dr. Don column
has more about the type of mortgage this software
models.
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