I recently visited my own website, and saw this Google Ad:

Mortgage pay off

Invest or Pay Off Your Mortgage? Do Both on your current budget!

So I clicked through and found myself looking at the website for the “Sydney Financial Group”. I watched their little video, and decided to test their claims.

Here is their plan:
Instead of writing checks as normal, they give you a home equity line of credit, from which you pay your bills. The idea is that the money sitting around in your checking account can be used to bring down the daily interest on your mortgage.

Here are their claims:
A person has a $4000 monthly income with a mortgage payment of $1350 and monthly expenses of $1700. The other assumption is that the person will put 100% of their expenses on their credit card, and not pay until the last day of the grace period. After 65 days, that person will have $8000 in equity, will be “gaining equity fast”, paying less interest. Then they mention that normally it would take 3.5 years to get that much equity and you would have paid $48,000 in interest.

Here is a summary of the figures with their plan:

Hey what do you know, there is almost $8000 in equity! Wow, of course there is almost $2000 of credit card debt that wasn’t there before. And what would happen if we had just paid the mortgage the normal way?

Ooo, only $210 in equity. How bad. But wait what is all that cash in the checking account?

That is right, go back and look at the stats. $4000 income – $1350 house payment – $1700 credit card bill = $950 left over. Well let’s just go back and put an extra $950 on the mortgage every month.

This is a little weird, since the 65th day is a payday (in their example), and the mortgage won’t be paid until day 75. So let’s say that instead of waiting until the due date, let’s pay the mortgage on payday, and make some money by paying sooner.

Ok, so that is as good as we could do without their program. So how much money did their plan save us?

Let’s see: $192,142.41 (house debt) + $1983.33 (CC debt) = 194,125,74 vs. $195,568.63 (house debt) – $3400 (checking) + $1983.33 = $194,151,96. Wow they saved us $26.22 over a period of 2 months.

The question is then, is saving $13 per month worth what they charge? I have no idea how much their program costs, but I bet it is more than $13/month.

For me, I am not playing their game. I like this game better.