Debt Cures: Does Kevin Trudeau Make Money or Sense? Part 9: Homeownership
By Karen Oakes, Southern Oregon Mortgage Law Attorney on Apr 27, 2009 in Mortgage Issues, Predatory Lending
Part 9 of my review of Kevin Trudeau’s book, “Debt Cures “They” Don’t Want You to Know” examines Chapter 14: Home is Where the Start Is. The purpose of the review is to examine whether Trudeau, who has had extensive involvement with credit card fraud and the Federal Trade Commission for some of his previous books, makes any sense in this latest self-help promotion or is he making money selling empty promises.
Trudeau suggests that those consumers who want to pay off their mortgages sooner use any of a variety of techniques. His first two suggestions have merit: splitting the payment into smaller amounts (weekly, semi-monthly or bi-weekly payments) or paying extra on the principal each month.
The next series of suggestions involve borrowing from a family member, paying the loan “points” upfront at the time of the mortgage loan; borrowing money from a 401(k) to pay down the mortgage; make regular additional payments and specify the payment is to go to principal, pre-pay a year’s worth of mortgage payments.
This reviewer cannot endorse any of the above paragraph’s recommendations: borrowing from a family member is problematic; paying the loan points upfront is 20/20 hindsight; a person should always avoid borrowing from their 401(k) and who EVER has the money to pay a year’s worth of mortgage at a time??? (even a modest $600/month mortgage x 12 months = $7200???).
Trudeau goes on to explain that “Prepay is the way”. He recommends a “mortgage accelerator” loan, which is set up to be directly paid from a bank account. Trudeau suggests that the borrower then have paychecks deposited into that account. Any money not used for bills is then transferred to the mortgage loan at the end of the month. He thinks it is a terrific idea.
His next recommendation is the Money Merge Account. It combines your checking/savings with a line of credit. It uses a similar technique as the one above.
Trudeau returns to the importance of the credit score when applying for mortgages. The credit score of the consumer determines the interest rate and even a .5% difference can add up to alot of money over a 30-year loan.
Trudeau next turns to Private Mortgage Insurance (PMI) and avoiding it at all costs. PMI is an insurance policy for the mortgage company to require from borrowers who have low down payments (typically less than 20% of the loan). He suggests a borrower should do anything/everthing possible to keep the requirement of PMI off their loan. Trudeau also suggests that as equity builds up over the life of the loan, that the borrower stay vigilant and ask for property appraisals, so that when the borrower achieves that 20% equity to loan ratio, the PMI can be dropped.
Don Taylor, one of the editors at bankrate.com, advises against the mortgage accelerator loan for those who are not financially disciplined, since you are, in fact, using the line of credit to pay bills (and therefore could increase the amount of debt owed each month, rather than decrease the mortgage).
Part 9 of my review of Kevin Trudeau’s book, “Debt Cures “They” Don’t Want You to Know” examines Chapter 14: Home is Where the Start Is. The purpose of the review is to examine whether Trudeau, who has had extensive involvement with credit card fraud and the Federal Trade Commission for some of his previous books, makes any sense in this latest self-help promotion or is he making money selling empty promises.
Trudeau suggests that those consumers who want to pay off their mortgages sooner use any of a variety of techniques. His first two suggestions have merit: splitting the payment into smaller amounts (weekly, semi-monthly or bi-weekly payments) or paying extra on the principal each month.
The next series of suggestions involve borrowing from a family member, paying the loan “points” upfront at the time of the mortgage loan; borrowing money from a 401(k) to pay down the mortgage; make regular additional payments and specify the payment is to go to principal, pre-pay a year’s worth of mortgage payments.
This reviewer cannot endorse any of the above paragraph’s recommendations: borrowing from a family member is problematic; paying the loan points upfront is 20/20 hindsight; a person should always avoid borrowing from their 401(k) and who EVER has the money to pay a year’s worth of mortgage at a time??? (even a modest $600/month mortgage x 12 months = $7200???).
Trudeau goes on to explain that “Prepay is the way”. He recommends a “mortgage accelerator” loan, which is set up to be directly paid from a bank account. Trudeau suggests that the borrower then have paychecks deposited into that account. Any money not used for bills is then transferred to the mortgage loan at the end of the month. He thinks it is a terrific idea.
His next recommendation is the Money Merge Account. It combines your checking/savings with a line of credit. It uses a similar technique as the one above.
Trudeau returns to the importance of the credit score when applying for mortgages. The credit score of the consumer determines the interest rate and even a .5% difference can add up to alot of money over a 30-year loan.
Trudeau next turns to Private Mortgage Insurance (PMI) and avoiding it at all costs. PMI is an insurance policy for the mortgage company to require from borrowers who have low down payments (typically less than 20% of the loan). He suggests a borrower should do anything/everthing possible to keep the requirement of PMI off their loan. Trudeau also suggests that as equity builds up over the life of the loan, that the borrower stay vigilant and ask for property appraisals, so that when the borrower achieves that 20% equity to loan ratio, the PMI can be dropped.
Don Taylor, one of the editors at bankrate.com, advises against the mortgage accelerator loan for those who are not financially disciplined, since you are, in fact, using the line of credit to pay bills (and therefore could increase the amount of debt owed each month, rather than decrease the mortgage). Dan Melson at Searchlight Crusade calls the mortgage accelerator/money merge account a “shell game” and advises that the fees charged for this kind of manuveur outweigh any benefits. Mr. Melson provides a more specific explanation of what these kinds of payment plans actually cost.
Overall Grade – D-
- Part 1 of my review examines the first three chapters of Kevin Trudeau’s book, “Debt Cures “They” Don’t Want You to Know. (gets an “okay” rating)
- Part 2 of my review dissects Chapter 4 of the book (gets a warning of “Get legal advice from a lawyer in your own state”).
- Part 3 of my review deals with Chapter 5 of the book (gets a warning of “Get legal advice before following Trudeau’s advice”)
- Part 4 of my review examines Chapter 6 over at our sister site, Credit Law Network, as Trudeau discusses how to “cut” your credit card rate. (gets a “doesn’t hurt to try it; don’t expect it”).
- Part 5 of my review examines Chapter 7: Fighting Back. (gets an okay rating).
- Part 6 of my review examines Chapters 8-11: Credit Score (gets “good information”)
- Part 7 of my review discusses Chapter 12: Credit Reporting Errors (gets mixed review as he repeats bad information (discussed earlier in Part 3) but generally good information).
- Part 8 of my review examines Chapter 13: Student Loans (gets generally good review)
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