A friend of mine told me I should look into a money merge account because it could do the same thing as power payments. Can somebody explain what that is and how it works?
I would be very wary of what your friend is telling you. A money merge account is a relatively recent development on the lending landscape. This type of program is sometimes referred to as a "mortgage accelearator" or "Australian mortgage" because that is where it originated. The concept is that you set up a new loan, such as a home equity line of credit (HELOC) and deposit your entire paycheck into the account. That theoretically reduces the amount of daily interest you are charge. Then you write checks out of the account to pay your monthly living expenses.
If you press the lenders who push this product they themselves admit that their plan is no more effective than simply paying an additional amount on your mortgage. However their plan usually requires a $3,500 set up fee and makes refinancing more difficult.
You would be better to use the $3,500 to pay down your mortgage than to take out a new loan. Plus you retain control of your plan instead of your lender. My advice is to avoid it.
