Bi-Weekly Employees and the United First Financial Money Merge Account

In my last post about John Doe and his Financial Planner/CPA telling him to invest his discretionary income instead of paying off his mortgage early, we saw that John Doe would payoff a $200K First Mortgage at 6% Fixed Interest for 30 Years in about 10.4 years or 125 months. When I did this example I input John Doe's income as bi-weekly. Believe it or not, if you are an employee who gets paid bi-weekly, you will payoff your loan faster with the Money Merge Account from United First Financial then if you applied your discretionary income yourself to your mortgage. Don't believe me? Let's run some numbers:

Bankrate.com has a easy to use mortgage amortization schedule which allows you to see how fast you can payoff your mortgage if you applied more to principal. You can view it here: Bank Rate Mortgage Amortization Calculator

Now, let's input John Doe's scenario: $200,000 Loan, 30 year Fixed at 6% and we get a payment of $1,199.10. Now lets input $500 in the box for adding additional monthly funds to your mortgage. The calculator tells us that John Doe would payoff his mortgage in 14 years and 11 months.

But wait!!! Charles, you are wrong!!! John Doe gets paid bi-weekly, so that $500 in discretionary income is more! You are right, John Doe actually gets paid 26 paychecks a year, not 24. In case you don't understand, there are 52 weeks in a year, so a bi-weekly person gets a check every other week or 26 total paychecks. So, his monthly discretionary income is really $500 x 13 = 6500 / 12 = $541.

So, if we put $541 in the calculator, we see that John Doe will payoff his mortgage in 13 years and 10 months. Still, it doesn't beat the Money Merge Account of 10.4 years.

Why is that? The answer to your question is cash flow and interest cancelation. Because the Money Merge Account Software knows the customer gets paid more frequently it will apply more from the HELOC to the first mortgage to pay it off faster and take more advantage of the interest cancelation.

So, let's see. John Doe and make the principal payments himself and will pay more then 3 full years of mortgage payments or $43,164+ OR he can use the Money Merge Account software, pay $3500 and save $39,000+. Which one do you think he should do???

Truth of the matter is anyone who gets paid bi-weekly from their employer needs to have a Money Merge Account and use the Software. Numbers don't lie.