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Paying off mortgage early by using a credit card?!

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whitedragon:
So, one of my friends directed me to this video, and is fully on board:

https://www.youtube.com/watch?v=4GonTct2WMk

Apparently there are many videos like this, and they all seem to be working off the idea that paying your mortgage as early as you can up to the balance of your credit card can assist you to pay off the mortgage note faster.  The idea is that because you are paying more interest per payment up front (in the early amoritization schedule), it's misleading how much interest you are actually paying.

Maybe I'm not really understanding the concept, but this doesn't seem like doing anything other than using your credit card as a middle man at best, and potentially skyrocketing your high interest debt at worse.

Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

ysette9:
My husband stumbled score a video like this and got my wondering as well. Then I heard about this https://truthinequity.com in some otherwise reputable podcast today. The idea is the same except you use a HLOC instead of a credit card. I can figure out how it is any different than just paying extra on a mortgage, but then maybe it is too complicated for my little brain. If someone can actually figure out how it works and whether it is nonsense as it feels, I’d appreciate the education.

ysette9:
http://www.wallstreetphysician.com/debunking-mortgage-accelerator-program/

I still don’t really get it, but I think in part because there is nothing to get. You are paying off your mortgage early by putting extra money on it. You can do that in a complicated manner using HLOCs or credit cards or you can do it the simple way by just paying extra on it directly. The end result is the same and there is no free lunch.

I’ll stick with my 30-year and invest my extra $ instead, thankyouverymuch.

Timmm:
This sounds a lot like mortgage/heloc payoff scams that I heard about around 10 years ago. There was a lot of online marketing and some of them put details up. It was a total fraud, they'd put "errors" in their comparisons like 13 monthly payments per year using their system. The core of the pitch seemed to be about how "mortgage interest is different" because early payments are mostly interest. Of course, there's nothing unusual or tricky about that, but it seems to confuse a lot of people.

At the time, there were opportunities to make a small profit, but it depended on continued access to a HELOC with interest and other fees no higher than your fixed mortgage interest. You'd draw your HELOC limit, put that all toward the mortage, and have your income directly deposited as payments on the heloc. As expenses came up, you'd pay with checks from the HELOC. The idea is your income is immediately reducing your debt, only coming back as needed. But at typical numbers, the potential gain was in the neighborhood of $10 per month, which is certainly not what the scammers were advertising.

They were charging a lot for software to manage the system, and also had referrals for helocs.

Telecaster:

--- Quote from: whitedragon on September 20, 2018, 09:36:08 PM ---Is this idea worthy of ridicule?  My gut tells me so, but maybe I'm wrong and my friend found the "secret"!

How do you refute an idea like that?

--- End quote ---

You refute it by using math and common sense.

Here is the part where people get confused:     The scammers are correct.  If you borrow a bunch of money and put it on your mortgage right now, you in fact will cut years off the payment schedule.  But credit cards, HELOCs, and mortgages all calculate interest in the exact same way.  The difference is how the payment is calculated.  You only save money if the credit card or HELOC interest is less than the mortgage interest--which is almost never the case.

You can do the same thing as described in the video even faster by simply paying extra principle on the mortgage. 

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