HELOC Vs Extra Payments To Mortgage
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- เผยแพร่เมื่อ 11 ก.ย. 2024
- So what's the difference between using our HELOC Strategy (Accelerated Banking Strategy) Versus just making Extra Principal Payments against the Mortgage? Well... there's a MASSIVE difference. Don't get us wrong here... You CAN save money and time by making extra payments to the mortgage but this has serious drawbacks to our modern-day financial changes... So here it is... HELOC vs Extra Payments... ENJOY!
How to Pay Off Your Mortgage in 5-7 Years (on Average): • How to pay off a 30 ye...
If you watched our video on how to use a HELOC to pay off your mortgage, well... this is for you... ALL of YOU HATERS! JK... :)
But in all seriousness, I want to address this because this seems to be the #1 objection against our Accelerated Banking Strategy. Now, this strategy has many names depending on who is teaching it... Some call it the Velocity Banking, Mortgage Acceleration, Replace Your Mortgage, Pill Method, Debt Free Acceleration, Sweep Strategy, HELOC Strategy, etc...
So here's why I believe that the HELOC is a FAR superior method to paying off your mortgage than just making extra payments into the mortgage.
1. Liquidity Lock-up
Whenever you make an extra payment into the mortgage as principal payment, yes... you are saving money and time by reducing the principal balance in the back-end rather than the front end. BUT! when you do this, you lose liquidity. Liquidity basically means access to cash and free access to money. So in the future, if you absolutely need to use this extra money, you can't get the money back out from a mortgage unless you refinance. Now, some of you guys are saying that you have 6 months of savings... So that leads my rebuttal to....
2. Savings Vs. HELOC
My argument against 6 months of savings would be... Why not take the savings you have and dump it into the HELOC to reduce the daily balance WHILE still being able to access the cash when you need it. But while the cash is parked in your HELOC, you're essentially saving money and time... Think about it... You're probably earning 1-2% APY on your savings account... Which is VERY little... If you dump the same amount of money into the HELOC, you can potentially save 4-7% in interest that you're not having to pay because you're reducing the daily balance.
3. Access to Future Funds For Investments
With the HELOC, you now have accessible cash for future investment opportunities such as investment properties. My rule of thumb with debt is... Use it when you know with certainty that you could earn money. Especially an asset that creates a consistent flow of income every month. I do NOT condone using debt to buy a new boat or a vacation house that doesn't contribute to adding more income back into your life.
4. Double Income Utilization!
Double Income Utilization is a simple concept where you can use the entire amount of your income to reduce the balance of your HELOC... all the while you can access the same income to cover your expenses down the road!
Be sure to download our FREE HELOC Calculator to see for yourself... How much money you can potentially save using this strategy!
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The Kwak Brothers are millennial real estate investors who have acquired over 82 Units of Rental Units and have raised over $20,000,000 of capital for their real estate deals. They are based out of the Chicago-land area and they are dedicated to helping hard-working people become financially free real estate investor! They specialize in owner financing acquisition and raising capital. They are the creator of the FORCE Strategy (Find the deal, Owner Finance It, Raise the Capital, Cashflow It, and Expand your Financial Freedom)
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--DISCLAIMER-- The suggestions, advice, and/or opinions that are given by Sam Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold Sam Kwak, Novo Elite, Inc. and the Kwak Brothers brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based upon experience.
The heloc approach is more flexible. Putting money where it can reduce principle while also being available for an emergency.
Its psychological, but it allows the user to dedicate all his surplus income to his debts without fear of overreaching?
Regular loans are like a car without a reverse gear. You can always back out with a heloc.
Honestly, the BEST comment ever...
@@TheKwakBrothersdoes velocity banking help pay it faster and cheaper than just making extra principal only payments? Is the only reason to use velocity banking instead of extra payments just for peace of mind to access funds if necessary?
I really appreciate you guys in teaching me the biggest financial lesson of my life. I got a 1.4 % rate on HELOC for condo in Toronto and I am super excited. Thank you so much and keep up the good work!
i understand that a big majority of HELOC rates are variable. Now with intereses as high as it is now, how's it workign for you?
The quickest way to make your first millions is to invest directly with an expert that is trustworthy and has made a name and individual billionaires ... I'm surprised you know her too!!
Been watching, listening, and paying attention to all of predictions and forecasts since early Covid. He hasn't disappointed yet 👌
Well said! I am also here to learn how to invest after listening to a lady on tv talk about the importance of investing and how she made 7 figures in 3 months, somehow the video taught me nothing and left me even more confused, I'm a newbie and I'm open to ideas on how to invest for retirement
@@MarcelPhilips lookup MARTHA ALONSO HARA , this is her name online, she's the real investment prodigy since the crash and has helped me recover my loses
@@MarcusFred-wn3iv Despite the economic crisis and the rate of unemployment now is the best time to invest
@@MarcelPhilips Investment now will be wise but the truth is investing on your own will be high risk. I think it will be best to get a professional👌
@@MarcusFred-wn3iv Thank you, Going through her profile on her webpage out of curiosity, and surprisingly she seems proficient. I appreciate this.
Real life. My 2005 adjustable HELOC was from TD Bank. It’s prime -1%, so it’s been 2.24% for most of the last 15 years. They gave me a 10 year draw period on $236k, and another 10 years to pay it back. The principal being paid is steady, at $1933/ mo, so it pays the balance down way quicker than amortization. The interest changes every month and can be $125 or $400 depending on prime & how much I owe. If you add a credit card in this mix, give yourself a monthly spending limit, so you don’t just blow thru money. Love my HELOC!
Two major things i can see an issue with that was not discussed, first just because you make a large payment of $25K from the HELOC to your mortgage does not mean the mortgage payment goes down, its a fixed monthly amount you have to pay for the life of the loan. So you still have that monthly payment, plus now (assuming you made that large $25K HELOC payment to the mortgage) you now have another payment for the HELOC. Even if you use your monthly paychecks to pay down the HELOC say by $5K each month but you are using the full $5K for bills / expenses you now have a HELOC payment that is added to your expenses that will change from month to month. But if your expenses and your paycheck are the same you make no real change in the HELOC principal. So in this case you will owe a lot more in interest?
It only works if you have CASH FLOW. If you are pulling out 5K and your expenses are 5K it wont work. You have to have margin at the end of the month. IT works...I paid off my house in 3 years using velocity banking...but you have to have CASH FLOW.
The point is the 25k brings the principal on your mortgage down by 25k and you use the HELOC as your checking account. The point of using the HELOC instead of making extra payments is you can take the money back out when your bills are due. But ya it would only work if your paycheck is more than your expenses. This is not some magic pill if you can't pay your bills in the first place.
@@AnimeBeefRandoms it’s even worse now with interest rates so high. So now there is no way I can see this working. Super risky and complex enough that most end up owning money not saving money.
I missed the part where he explains how the HELOC actually pays your mortgage off faster.
The only way you save money is if the interest rate on one loan is cheaper than interest on another loan. Sounds reasonable right?
The method is basically to use the 0% grace period (about 30 days) on credit cards (0% is less than any mortgage interest) then pay off your credit card using the heloc (maybe 5% is less than 20%). Repeat this every month for the entire mortgage life.
Congratulations you have saved 1 month's interest compounded over the entire lifetime of the mortgage, might end up saving you only like 10,000 over 25 years or about 45 bucks every month for 25 years.
You pay simple interest on HELOC and compound interest on a mortgage.
@SherlockHolmes82 yup, now you will probably find other people who mention the same method and show you "the math" on how it saves so much more.
You will notice they only calculate interest on the mortgage not on the heloc. That is a huge mistake. Because imagine you pay the entire mortgage with a heloc. Do you suddenly not pay interest on the heloc? No, so why do it with small amounts.
But like he said in the video, a heloc can be used for emergency spending or investment deals. You can't do that making extra mortgage payments. Well you can but it becomes a hassle if you need the money right away and might end up paying additional fees.
P.S. idk who started saying helocs are simple interest vs mortgages are compound interest. A lot of ppl say this but it's not true. They are both compound interest.
The difference is in a heloc payments go straight to principal vs in a mortgage the banks like to cheat you and say your payment goes interest first principal second. You need to specifically instruct them to put the extra payments to principal only.
It's literally pointless to do a HELOC
@@Steve-og3cr pointless to do a heloc? How so? Makes sense for many people financially. Home equity means nothing if you don’t get to use it.
Here is how they prove it works the way they say it does.....for all the skeptics and believers alike. The one thing they do not provide you is an excel spreadsheet with all the breakdowns on how this plays out over 7 years....15 years ....30 years etc... . The proof is simply in the math so all the Kwak Brothers need to provide is a detailed spreadsheet ( Not the simple one you offer which gives a magic outcome ). It needs to show each month with variables and formulas that the average educated man or woman can grasp. If you can provide that, and the formulas in the sheet make sense, then I think you have shown a true best effort to be forthright and ethical.
Actually, they used to have a video (I can’t find it online anymore) with an Excel spreadsheet showing that this works very well IF you are disciplined in using the HELOC as your checking account. If you are disciplined, this strategy will get your house paid off very quickly. If you only splurge and spend it all then you get in deeper debt. This is the golden ticket for those who are disciplined.
Use your own spreadsheet.
This is a brilliant concept that will work if you know what you are doing and be disciplined. You do have extra funds available for an emergency. If you understand how much interest you're saving and how much you're cutting off of your mortgage term (in years), you're going to want to leave as much in there as possible, without being frivolous in your spending. It's not rocket science and I commend folks like these who try to get the word out and help folks like us. You can save tens of thousands of dollars. That's no bull. I took out a 15 year loan last year and now looking into a HELOC that will allow me to pay off the loan in 3 years. Your mileage will vary, highly dependent upon the mortgage balance and your monthly income.
Its all for views bro, it saves very little over paying the same amount straight to your mortgage and you dont have to put yourself into debt and use all your savings. Do more research i was obsessed for days trying to understand this program and once i finally got it, i was annoyed
@@marioeid930 Fine. Stay with your plan. The banks love you for that. I paid off my home about 2 months ago. Instead of paying nearly 60,000 in interest over 15 years, I paid about 6,000 in less than 3. Do your research. The way banks amortize their loans will make them a lotta money even though you just pay extra every month and stay with your traditional loan. In all fairness, this is not for the weak of heart. People sometimes are happier in their comfort zone...no matter how much it costs them.
@@jjpac2011 your right but me and you are talking about different things, i agre with you on that but putting your home at risk and blowing all your savings and calling basically credit card debt the same thing as savings is unnecessarily risky. The juice isnt worth the squeeze. Pay that same amount, all "extra" income to the loan and you'll only spend a few more months and maybe save money on interest, not much. Its litterally a few months difference and maybe a few thousand. But if things go wrong at some point you have to use debt to get out of the situation and it could back you up very easily. Not worth it imo. These guys are great salesman but compare apples to apples. Ive done it and you dont save much. Not even close to worth it imo. N to be honest if someone gets caught paying the heloc and home mortgage because something happens the banks love them much more
@@marioeid930 How is credit card debt considered savings? Yes, you are doing the right thing by staying away from this. These "guys" share very useful and helpful information and the exact plan they prescribed (I didn't buy anything) saved me tens of thousands without putting my home at any more risk than what it already was with the mortgage. One should never get into something this serious without knowing the benefits and more importantly, the risks. Nothing like owing zero on a 3 year old home in hawaii. I even purchased (and paid off) a brand new 2021 vehicle with the heloc check during that short period. At 1.75% interest, fricken no brainer. I share this only to show that this ABSOLUTELY works...for those who are disciplined and "qualify".
@@jjpac2011 congrats thats realy awesome you paid off your home, im not here to hate on you and their system works just not a noticeable amount than just paying your extra cash 2 to 3k a month towards your principal. Thats the main reason why it gets paid down so fast. Its not from anything else the intrest you save is negligible. The time you save is a few months vs paying the same amount in extra payments. Thats all im saying, do the math my friend you will see.
Also they said that if you run into an emergency to use your heloc that you have "savings" when you really dont. Thats why i refernced the credit card scenario
This method is completely backwards. Just have an emergency fund and continue to pay extra on your monthly mortgage. He doesnt mention that the heloc is a variable interest rate and the bank can call in the loan at any time. They can foreclose on you if you can't make the final ballon payment. Make sure to do your research before you decide to do this method.
Also, aren't there some restrictions on tax write-offs for HELOC interest? Especially if you are using it like a checking account...? Mortgage interest is still deducible and he doesn't put that advantage into his calculations. More data needed.
You're absolutely correct. It's not that complicated.
Also, there is one advantage to a 30 year loan, the amount owed is effectively less over time courtesy of inflation.
Right I though It was just me BUT he is Rambling about nothing. Just have your 6 months Emergency Fund and Make extra Payments. KEEP your HELOC option IF and when you might REALLY need it. WTF
I agree with you that method sound to complicated. It may work if we lived in certain times where jobloss, pandemics, and recession don't exist. I prefer to play it safe.
Two years ago, I sat down in a bank and talked with them about HELOC for one hour. The concept simply doesn't work. HELOC has a variable rate over which you have no control. I completely agree with Graham Stephen that this concept is just nonsense.
The banks want control of your money. They either dont understand velocity banking but even if they do they dont want you to use this product. They want you in a mortgage so they can kill you with interest! They know heloc gives you control. Mortgage gives them control.
Except the HELOC has a far lower balance than a mortgage so the interest rate doesn't matter nearly as much. You also have more control over a HELOC balance than a mortgage balance. Why do you think banks are able to offer such a low rate on a mortgage? They can lock you in for 15 or 30 years.
You can find a fixed rate . Discover has a fxed rate HELOC.
It does work because a heloc is just simple interest, unlike a mortgage which is amortized and you pay most of the interest up front in the early years. Your paying way less for interest with the heloc. Anyway, a banker is the wrong person to talk to about this strategy, they dont have your best interest at heart, the the banks.
Your exact issue.. you talked to a banker that wants as much profit as possible. They get less profit with the heloc and also not that many bankers are educated on a lot of financial things. Just because they are banker, most people just do it to make money not becaue they have the in depth knowledge. Usually they only know what the bank wants them to know and push
So a friend of mine who is an expert real estate investor pointed out a huge flaw in your theory. First, getting a HELOC is not an issue. Get one. You don't have to use it until you need it. You propose 1) using the HELOC to pay down mortgage principle 2) dump income into HELOC to pay down the principle 3) using a CC to pay bills and using the HELOC to pay down the CC. Effectively turning your HELOC into a checking account / credit card. Why not cut out the middle man? A) Get a HELOC but don't use it. B) Pay down your mortgage from your checking account. C) When you do have an emergency or payment you need to make or need money or want to invest, THEN access the HELOC. Why take the extra steps you're taking when all you have to do is pay down the principle and you still have liquid access to the HELOC?
When I used your calculator for like 2 minutes, I noticed the quickest way to pay it off was to reduce my outgoing expenses. Couldn’t I just focus on that and make extra payments, along with bi-weekly payments. Seems less stressful.
Theres a couple problems with that.
1. Most if the time we never make those extra payments. This helps us to control our flow of our money and put it to work for us.
2. You cannot reuse that money again with extra payments.
3. When you pay all income in, you chunk it down and save way more interest faster. Using that Credit Card also helps to keep that balance even lower then it actually is for each month because you wont pay interest on it.
I know I’m late. Simply follow Dave Ramsey and his baby steps. It’s simple to follow, gives you step by step on where your money should go and in what order.
1. Emergency fund of 1000$
2. Make a monthly budget for every dollar and Pay all debts smallest to largest without any investing. It’s the fastest way to become debt free (that is any debt excluding your house)
3. 3-6 months of expenses
3b. 20% down payment on house, which you already sound like you have.
4. Children’s college fund
5. 15% of your income into 401k
6. Pay off mortgage
7. Give and bless others with your money. You are going to be a millionaire if you follow these steps.
Now to pay off mortgage, biweekly doesn’t matter but if it makes you feel better go for it. You can calculate that one extra payment a year into you paying on the 1st every month. The mortgage company only recognizes payments once a month so personal preference. The key is low interest rate. Refinance to 15 yr and don’t add points if you plan on paying it off faster. It will wash out. Next would be to go to an amortization calculator and play around with extra payments what interest rate you have. I’m refinancing with a 2.5% rate and will have it paid off in 7-8 years easily. Pretty much taking what’s going to principal and paying that much extra a month. You can try and cheat the system like this guy, but this is the best and easiest, proven way.
Good luck
@@michaelpallen14 but what if we have a low-interest rate now, wouldn't we be risking a high-interest rate since most HELOCs are adjustable rates? or am I wrong about that
@@lindamay79 Yes, make extra principle payments. HELOC only works if you make extra payments and Bank can chane the rate or call the loan. There is a time limit on HELOC and have to refi at the current refi rates.
@@keithfreitas2983 and they are not free , there is a fee to take out a heloc plus the interest rate is always higher usually about 2% higher !
So ot cost you more and takes you longer to pay off mortgage using a heloc !
He usually starts lying aboot how interest is calculated on a mortgage but I think we have proven that is a lie too many times they try not to say it any more because it’s so easy to prove that they are lying !
Look everyone, Kwak is not a quack, this does work. I own 20+ properties (most with no mortgage) and it is a good concept and will help you to pay things off much quicker than traditional mortgages but there are some concerns. The primary concern is a variable interest rate. Understand how seeing your HELOC interest rate go from 4 to 6.5 or higher will affect your payments and then you understand your primary risk/flaw with this process.
Just for the record, I do this on some properties and it does work, cutting more than a decade of the normal time it would take to pay it off. Just make sure you understand it FULLY before you do it. Good luck everyone.
Awesomeeee!!!!
I wish someone would use a real life example of it being done and not just quick examples. If Kwak really believe in it I assume he has done it so it would be really helpful to use a real life example to demonstrate what he is saying. It all sounds good but Idk I don't even have a mortgage lol.
One main concern I see is that lets say you have a 5% mortgage on your house (lets say its 200k) and you get a HELOC for 50k for lets say 3% interest. Now aren't you paying 8% interest on technically the same amount of money since your just transferring the debt From one place to the other. I understand if you put all your income into the HELOC it would lower your total balance but how much money do you need to be making for it to make sense and how much of your total loan should you be applying towards your mortgage.
Goran Susnjar simple interest vs amortized. Quick example...$200,000 mortgage with a 6% amortization rate. That’s about $1,200 a month for principal and interest on a 30 year mortgage..(use an amortization calculator and schedule) Of the $1,200, according to the amortization schedule, you would pay roughly $1,000 a month towards interest, and $200 towards your principal. That means at the end of the year you paid just over $11,000 in interest (again check the schedule) and barely $2500 in principal. Let’s just call it an even $13,000 total. That same $13,000 taken out of a line of credit with a 23% simple interest rate..could cost you as little as 1,300 every 6 months....for those keeping score that’s paying $11,000 for a $2,500 reduction in your mortgage in a year vs paying $2,600 to pay off $26,000 of your mortgage in a year. it’s all about the type of interest and dedication. You have to put everything back into the line of credit to pay it off quick. I don’t recommend this if you’re barely scraping by living paycheck to paycheck with nothing going to savings. As a disclaimer to my example... You should have something of a cushion, and for the example above to work every 6 months..you would need an income of $5,000 (single or combined) with expenditures (including the $1,200 mortgage payment) of no more than $3,000. But again..this is an example of what’s possible. Really I recommend learning about the difference in the two types of interest though!
I have 2 questions:
1) If you're self-employed with an S-corp and all your expenses are placed on the business credit card, does this strategy still work?
2) Does placing your money in a HELOC instead of a saving account decrease your assets and make it harder to apply for a mortgage for an investment property?
The real problem with a HELOC is it is a line of credit. What you are really doing is transferring money from one loan to another and the bank can always cut the amount you can borrow from a credit card or HELOC for any reason (or no reason at all) because you do not own the line of credit. This is why this strategy can be very good during normal times, but can also be a very dangerous strategy if you fail to pay down your HELOC back down every month (which can happen if you lose your job). Remember, you always pay interest on any balance in the HELOC so if the HELOC is at a higher interest rate than your mortgage, it can be an issue, and if you are using the HELOC as an emergency fund, you could quickly find out that it really isn’t since the bank can always lower your line of credit as the economy deteriorates (just like they can do with a credit card). The _only_ real emergency fund in a deep recession/depression, such as we have right now, is cash. This is why you always establish a *cash* emergency fund *first* and then and only then do you start making extra payments on your mortgage. Then, if you want to use this strategy, you can do it but you need to quit as soon as you can no longer get your HELOC back to zero each month. Otherwise all you are doing is increasing your required mortgage payment and putting your house at risk if the line of credit is frozen or cut.
I think the biggest misconception here with the HELOC technique is people assume they are paying their mortgage faster due to a mathematical loophole. Which sadly the large majority of the people are less financially savvy, and so they fall for your headline marketing technique. The truth is pre-paying your mortgage is far superior in terms of savings on interest. The HELOC technique basically asks you to throw all of your savings into the HELOC and to be living paycheque to paycheque... and using debt to finance your life.
Please explain how using a HELOC (which accumulates interest) is 1) better than simply making additional payments and 2) saves money when it accumulates interest? In other words, using a HELOC is paying someone to use my own money. How does using a HELOC pay down principle better than simply using my own checking account to make additional payments?
HELOC does not help you pay down mortgages any faster than balloon principle payments.
Stop building the case for HELOC by comparing to using a savings account. It's misleading and disingenuous. If you compare velocity banking to stock investing at 6-12% a year (or even more) the analysis falls apart.
I do like that the HELOC makes your real estate equity more liquid. This is the only benefit in my mind. However this can be achieved with credit cards and PLOC.
Well you know there’s more than one way to skin cats.
@@One-Crazy-Cat you're right...and i don't have a problem with HELOCs...but this guy is being deceptive and he knows it. he's trying to sell you on his heloc products
People don't sell heloc products. The banks do.
@@michaelpallen14 people work for banks
I don’t have $50,000….. most Americans don’t. This will work for people who don’t even care what their mortgage costs bc they obviously have/ make plenty of money
HELOCs are a line of credit that gives the borrower up to 80% of the value of the property minus whatever is owed on that property. The mortgage debt continues to be whatever it was before the HELOC. If the above is correct, isn't that like having two debts now?
HELOC is typically variable rate interest, higher than 30 year fixed, so you’ll have a higher payment from the start. HELOC is a line of credit, borrowed against the equity in one’s home, where the house is used as collateral for the debt. They typically have 30-year terms, of which there’s a 10-year draw period, and a 20-year repayment period. Something isn’t right about this strategy. He should re-do this video and be more succinct.
Correct. You shouldn't do this unless you have enough leftover money to pay down the balance. You wouldn't get approved for the loan anyway.
Paying off a normal mortgage with a HELOC is not very wise advice since the HELOC lender at any time can raise the interest or even demand that you pay back what you owe in full or they will take your house.
That's not how it works
Most places offer fixed rates for at least a year.
I remember business owners daying banks called the loan and shut down the heloc during last economy.
Additionally if you have a hiccup and they periodically check your credit and can reduce your available credit further reducing your score
So im going to pay that money up front and then borrow it back with interest if I need it? Nehhhhhh. Don't gamble your most valuable asset.
I did 30 year loan paid in 7 years by making extra payments. Heloc has a repayment order by bank every year so they have the power to demand for payment in full when they please. It is Unlikely in the near future, but If interest also change/raises you're stuck with the new payment amount as the rate is adjustable. U want the American home ownership dream? U want to pay off your home quickly? Get a 15 year mortgage at no more than 25% of your monthly take home. Otherwise you can't afford it.
Don't let the home own you.
Great advice. Are HELOC more callable than regular mortgages? Technically all mortgages are callable
Has a ring of Dave Ramsey to it. I see you👀
How much was your payment and how much extra each month? Thanks.
Well when prices fall they can call a heloc. That’s how I was foreclosed on in last crisis. Then foreclosure went to 2008 bankruptcy. I’m a little cautious on heloc myself due to that. I’m finally doing OK. still owe mid 70’s on house I bought in 12 and all that 2008 is finally off my record.. I don’t think I have the guts for heloc again myself. Granted last time I used it stupid and built on for someone else to enjoy it was the first thing bank called due and payable now in the crunch. Funny part is my hose auctioned for half what I paid in 90’s in 2008. Couple years ago it was on auction again and they asked if I was interested in buying it back for around what I paid then. NOOOOOOOOOOOOOOOOOOOOOOOO NEVERRRRR. Lol. I’m well OK where I’m at. If I want an investment property that was not it. Haha.
Good advice. Wish someone told me that in 2005.
Why your service cost $3997 when people can find HELOC on there own. That money that can be applied to there current mortgage.
Can you please address the tax repercussions re: mortgage interest vs. HELOC interest? I think maybe HELOC interest isn't deductible...? That takes a little bit of the sting out of a mortgage, IMHO. Especially if paying extra principle. I'd love to see how this variable affects your method. Thanks.
I still don’t get why you would take out a HELOC to pay down principle or credit cards. Why take out debt to pay down debt? Why not just bypass the HELOC and pay off principle and credit cards with income, then draw from your HELOC in case of a rainy day that causes solvency problems?
Stephen Fraser this makes sense.
Using a HELOC actually does work to pay off your home faster, but it's very RISKY!! Most people don't like to take risks. The saying "No Risk, No reward, Big Risk, Big Reward" applies to this process. The risk is....you could lose your job during the process since there is no job security.
Well.. Quite the contrary, the HELOC can be a great security blanket IF you do lose the job. You can use the HELOC as your reserve fund until you find another job or secure other sources of income. But obviously, this is not meant to be a permanent solution
I still don’t get it. So now you have two payments to pay 1. Mortgage 2. Heloc when and how are you going to pay off the mortgage 🙄 ?
If HELOC isn't fixed, this seems crazy risky.
Helocs have a higher interest rate than a mortgage & you can "lock" a rate into your Heloc, but it will also be higher than a mortgage, as well as if you have a portion owed that's at a variable rate. Plus, most lenders will secure your HELOC with your property, so if you don't pay the HELOC, they can foreclose on your house. My suggestion is if your lender allows, recast your loan! That means making a large principal payment & reamortizing the remaining balance to the same maturity date, bringing your monthly payment down..Some lenders charge a fee for recasting, others might not let you do it at all. But, if you're able to, do so. When you do, continue to make the higher payment you were previous to the recast & the extra will go to your principal. You might even be allowed to recast again & again. This is better than a HELOC because you'll continue to have only your mortgage payment, instead of mortgage & HELOC. And instead of borrowing against the bank(heloc), you're borrowing against yourself(savings) & you can put your $ back into savings at your own pace instead of a demanded payment to the bank.
This is the best answer I have seen I am doing a Recast in the next few months
It still doesn’t make sense. If you decide to make an extra payment, $300 is gone either way, whether it’s put on the HELOC or directly to the principle. The difference is you wouldn’t owe interest on a direct payment as opposed to a HELOC you would.
Why not get a HELOC, but not use it unless there is a rainy day situations. AND put all your rainy day and extra payment funds in your regular mortgage? Can you do that math?
I love you two and appreciate how you share your insights about being successful
So the advice given in this video is:
1) Use HELOC as your emergency fund. It's certainly fine to rely on a HELOC to enhance your emergency fund, but advising someone to simply not have an emergency fund is terrible advice. Banks have the discretion to cut off access to any revolving credit lines you have open with them at any time, so if you can't access your funds in an emergency then they aren't an emergency fund.
2) Use your credit card to pay your expenses and then pay the statement balance in full every billing cycle. This is good advice, but there isn't any reason to put a HELOC in the middle. Simply pay the credit card off with your income. The only reason you'd need a HELOC would be if you spent more on your credit card than your income can cover come time to pay the statement. In that instance it would definitely be beneficial to transfer the 20+% APR Credit Card debt to HELOC at ~5%, but of course you shouldn't be spending more money than you make in the first place.
Imagine, instead of having $50,000 sitting in a savings account for emergencies, you make a payment on a HELOC and just borrow the emergency money at 5-6% when you have one. Even more so, borrow every dollar needed to pay all your expenses at 5-6% as well. Makes sense! Pray to god you don't lose your job and still have the ability to work until you get your self out of this craziness.
You might gain some liquidity and some credit card points if you're responsible enough not to bury yourself. But mortgages are simple interest loans, so you're not going to save anything more than you would by using your extra cash for principle payments each month. The math's been done many times on these strategies.
The only thing I don't get, is why would you want to pay something off with a fixed interest rate and exchange for something that has an adjustable interest rate?
I can't find HELOC that had no interest rate. If I get one with let's say 6% would I save money putting the money from the helox into the mortgage. Knowing that I will have to pay the interest on the helox?
Just wondering we avail of heloc , Then we paying interests for the mortgage and paying interests to the loaned amt. in the heloc.. So aren't we paying double and more interests ?
The heloc pays off the mortgage
You'd just pay the 5-7% on the HELOC
Getting a HELOC makes no sense if your 1st mortgage has an interest rate lower than 5%. Mine, for example, is 2.879. There's no way I'd pay that off with a loan that costs 5-7%. I think most people these days have mortgages in the 3-4% range, if not lower.
Ok so when I used your calculator paying an extra 10k per month it showed me paying 15k in interest. When I used my mortgage websites calculator inputting the same extra payment it said I will pay 9k in interest. Who is giving me false information here?
Difference in interest rates my secured line of credit is prime plus one putting it at 4.5% and my mortgage is 2.39%. Which is far more better
When did be better just to have a HELOC say for investment properties. Pay your bills without using a credit card. Even if you are using a credit card and you're paying your credit card off with your lock there's still interest on the HELOC. Just pay your bills with your income. You cannot borrow your way out of debt. It just doesn't make sense to me while you're going to want to use something that has interest and adjustable rate at that to pay your normal everyday regular monthly bills.
What is the logic at 4:26? If I do not have a HELOC in the first place, I do not have to pay interest for a HELOC account. How could I then "park my money in a HELOC" to save that 5 - 7% interest? Aren't you putting the cart before the horse?
You say you would reuse the money you pay into the HELOC to pay for groceries and dippers etc but you forget to mention the biggest two monthly bills we still have to pay: the monthly mortgage and the HELOC payments. I assume that would be borrowed from the HELOC loan. How does that affect the whole concept you explain here? Thanks.
Hello, when you put your income into your heloc each month, that counts as your payment. When you set up your banking tool (heloc) there is a checking account that is attached to it so you can move your money out and make that mortgage payment if you can't do it with your credit card.
He wants your HELOC to pay off your mortgage. If it only pays down a small part, then yes, you have two payments to make each month. Paying down a part of your mortgage does not lower your payment, but it does shorten the time til your principal payment is higher.
Still think Paying Extra Is better??? Go ahead and use our calculator to see how much you can potentially save: debtfreeaccelerator.com
The Kwak Brothers the heloc has a nice teaser rate for 12 months at my bank, but after that it will go back up and is floating. Now if my 30 fixed was 3.25% would I still benefit if I moved a portion to a heloc after the first year ......?
Paying extra principal to my loan is significantly less interest for my situation. I would suggest you show people how to compare total interest costs using an amortization calculator on bankrate with increased principal payments so that they are comparing apples to apples.
The Kwak Brothers i still don’t see how it is better to use a HELOc when the interested rate of a HELOc is about 6.5% and the mortgage is only 3.5%?
I'm really trying to understand this... I get that we aren't gaining anything by having our money in checking/savings, but we also aren't paying daily interest on it like in a heloc. How is having an account that charges daily income better than leaving money in accounts that don't charge daily interest?
The REAL difference is compounding interest in an amortization schedule (mortgage) vs simple interest w a (HELOC). Don’t take my or the Kwak Bros’ word for it but input your numbers in a calculator. The numbers & math don’t lie!
Why don’t you demonstrate this on Excel? Just get straight to the math and it’ll be easier for all to understand.
Thank you for updating your video I watched the 5 to 7 years to pay off your loan from you. But you're right we do have questions we want to pay it off but we don't want it to be too confusing and we need it to be simplified specially for older people like myself
Just stick to extra payments. Why complicate things?
Simplest way to pay off mortgage is to pay extra on your mortgage each month as much as you can ! It’s the safest and cheapest and fastest way to pay off mortgages
it took me a little time but I got the theory of paying borrowed money from Jack by borrowing from Jill; The difference is the daily interest rate vs amortized monthly interest. Feel like I can handle this easier via my credit cards & checking account (which I already do); I would rather allocate HELOC money for emergency use only instead of keeping 50K cash in bank for rainy day
What's the difference in the two types of interest? Like how does it all play out? Still struggling to understand. :(
Throw all this money to lower your Heloc daily balance to save money on the Heloc interest ? I don’t get it. If you don’t take a Heloc then you save even more because you have 0 Heloc daily balance. And the interest rate on your Heloc is much higher than on your mortgage. For 99% of the people out there this is a gimmick that will end up costing you ... not saving you. Just pay down your existing mortgage and don’t go into deeper debt.
I'm still learning this but why not just get the HLOC or PLOC and not use it and have it there for emergencies while paying the extra payments?
There are fees for keeping these LOCs open.
So the biggest issue here is that you have to draw on your HELOC twice a month. You can't use your credit card to pay all bills, especially ones such as your mortgage but the money will be available to access whenever you need a very short loan for yourself. I agree with one of the comments that it may take several videos and articles to understand this better but the greatest part is that you can.access your equity for immediate need or good profit generating investment as opposed to locking down more principle payment on your mortgage
Is this classic "Robbing Peter to pay Paul?"
Have to be very disciplined to do this
9 out of 10 will screw it up for the 1 person out of ten congrats👏👏👏🥂🍾🎉
Why would you pay interest on money you’ve saved?
Lol just make extra payments man lol don’t do this unless you like the risk. I prefer the safer method.
@@Josh-py9rq yeah... Pay your house off in 7 years Vs 15/30... sounds like you are taking more risk.
I never saw how it actually pays off a mortgage early.
You basically throw all your income at the mortgage while remaining liquid in case of emergencies and if you do it right you will avoid daily interest on the HELOC for your normal expeses
I spoke to the mortgage specialist at Wellsfargo and he said there is a annual fees of $150 plus it is prime + 2.5% as interest rate and this could change based on prime rate. As of yesterday the rate was 6.5%. So, I am scratching my head to figure out, how this is an advantage.. My current mortgage is 3.5%, if I do Heloc it is 6.5%... am I missing something?
The interest in your mortgage is paid up front for years. This way it goes into the principal... but pay it off quickly. That's why all the extra money you have left over each month helps pay it down. You really need to be making a lot extra to pay off in 7 years. One thing that would personally help me is that I can get rid of the $150 a month that goes into the B.S. mortgage protection. This isn't as cut and dry a simple solution. Credit cards and lines of credit are a slippery slope.
Yes you are missing the concept of simple vs amortizing interest
@@briandeluca6908 I think the traditional mortgage loan interest also works the same as amortized interest rate because the amount of monthly mortgage payment slowly increases going into the principal
@@briandeluca6908 Mortgage interest is simple interest. How do so many people not know that?
It sounds very good but what about when the interest goes up? Say hypothetically you get 2% interest rate when you apply for the HELOC and then a year later interest goes to upwards of 4.5%
Also, ain't HELOC usually higher than the mortage rate itself?
Do more research Sam goes into this in other videos. Basically when paying a mortgage its front loaded so your beginning payments the first 5-7 years is mostly interest & less principle. He is saying using a HELOC allows you to pay the principle down faster because it calculates interest differently than a mortgage. The conditions are is you want to shop around for a fixed rate HELOC not an adjustable rate. While the interest rate can be higher the more you pay down the principle then consequently the interest goes down. Again this is just my short understanding but it seems to be something like that. It's not for everyone & you have opportunity cost plus your own financial savy.
The ONLY advantage of heloc here is... you have access to a borrowed money (for say, emergencies). And the whole idea is to use the heloc make chunk payments. If i have $50k in savings and i make $7k monthly, i'll avoid heloc. Pay $20k chunk one time (save $30k balance for emergencies), save my monthly income towards the next $20k (maybe for 5 months), then make another $20k chunk. Repeat process. Advantage here is .. (1). I'm not exposing myself to more debt (in which case if economy drops alot, my property value reduces drastically, and heloc bank's issues come). (2). I can chunk at anytime i want and at any amount without paying no one any interests. CHUNKING is what helps pay off mortgage faster (I agree monthly payment of a couple hundreds won't save much in years of mortgage payments).
What difference is it if you paid $20k in one chunk vs. paying that amount evenly over time (say $4k over 5 mos)? You say chunking is what helps pay mortgage faster??
@@JimmyDevere 4k over 5 months is fine. My last statements referred to a couple hundreds. If u pay say $300 additional per month, ur total months left are still much and each comes with the high interest u have to pay. Chunking large sums every 4-5 months drastically reduces those months.
These guys are the Quack Brothers.
Hi Sam and Daniel,
I’m an educator, a Christian Professor of New Testament, and I love your videos. I have a technical question. When you guys are writing on a pad with a stylus, and that’s then displayed on the screen, what hardware are you using? Is it an ipad and ipencil? I use these in a live class w/ my students, but I haven’t used it the way you are and I’m wondering what you’re using.
Blessings,
Eric Lowdermilk,
I don’t quite understand how you can put your $50k into a HELOC. What would your total HELOC be in that case? At least $60k? And how much of that would you use to pay down your mortgage? Surely you don’t want to use all $60k because then you don’t have access to that $50k anymore. If you make another video that addresses these questions, I think it would be more illustrative and helpful to your audience.
You're risk is if your home goes down on value. Also you're better off putting the money in the stock market
I get the concept but don't understand how to apply it... Watched many of these Heloc videos but still confused..
The least 2-3 years, I have been paying $200-$250 a month extra into principle... But just this year, fortunate enough to pay $600 extra a month into principle...
I believe the basic concept is that you use your heloc like a checking/savings account. Your money direct deposits into it and sits there till you have to use it for bills. Even with a slightly higher interest rate, it can be more beneficial b/c you get credit for having more days with the balance at almost full (since your income is replenishing the heloc). Does that make sense?
it's because there is no additional benefit vs simply paying down your mortgage principle....it's a bit of smoke and mirrors. It is true the HELOC provides more emergency liquidity than mortgage equity, but you can get the same liquidity with simple credit cards. plus if you can get 6-12% in the stock market it's a moot issue. let your cash appreciate in the market instead of paying down cheap interest.
THe only way this makes sense to me is to get a HELOC for the entire amount owing and be rid of your mortgage all together. HELOC only requires at minimum an interest only payment each month...
@the Kwak Brothers, I don't get it. Is paying via HELOC just getting a single large chunk sum earlier while your paychecks pay off the balance? Just seems like musical chairs. If I pay $300 extra towards principal today I will save the interest that amount of principal would have accrued over the life of the loan.
If I pay with a HELOC, I can pay a larger sum right now, but then every day I'm paying more interest on that amount until my pay checks come back to pay it off.
You have a fixed debt that accrues interest every day. You will pay interest either way. 4% on the original large mortgage balance, or switch out a larger portion for a HELOC and pay a higher interest rate (5-7%) on that equivalent sum that transferred from the HELOC toward the principal of the original large debt (e.g. mortgage)
Am i missing something?
I'm a little lost too but I thought that, like a credit card, with the HELOC if you pay before the due date you accrue no interest. That's probably the difference between simple interest vs amortization. I sent them an email asking the same thing. Still, it feels like the HELOC is a second debt.
@Richard Rossini I search, "is mortgage simple interest", and I confirmed it is. So they're both simple interest. I'm not seeing the benefit.
I also searched for the definition of amortization: "the action or process of reducing or paying off a debt with regular payments."
I cannot see any benefit to what they're proposing unless you want to transfer a chunk of debt accruing 3% interest on principal for one that will accrue 15-20%
Accomplish the same idea by getting a credit card with a large limit. And then just throwing a ton of extra principal at the payment every month.
I thought the channel name was a pun...maybe it's just ironic
Love what you're doing for the Velocity Banking Community. Keep it up!
Would you recommed using your own money like a Heloc and paying off your mortgage in cycles in the meantime paying back yourself rather than a HELOC?
So since heloc you only paying interest, how did you pay heloc off
See recession 2008.
I know it's 2 yrs. late for this particular question but here it goes...after having viewed various videos dealing with HELOC ( and finding this information very helpful BTW) I was wondering what the consensus is concerning a full mortgage payment ( a 13th payment)and having it applied to principal only. I bring this up because this manner or "method" takes off 7 years off the mortgage. I was very surprised to hear this when shopping for home 10 years ago. After finally achieving my first mortgage 5 years later , this was brought up and was also confirmed by the lender, realtor and the short sale attorney I had been working with to purchase my home. It's something I would like to do but haven't seen or heard anything about this way to pay off a mortgage aside from the $300 extra payment example. Does particular payment strategy,in fact, work? If not, why not? If so, why is there little information on it? Thanks 👍
It's a great strategy that is not complicated or introduce significant new risk. Ideally, paying more on your mortgage makes sense in general and is a great alternative to the HELOC.
Just make the extra payments. You can do a refinance calculator and figure how much the principle and interest payment would be to pay your house off in 15 years and just pay the difference in a principle payment every month (if you can afford it). Pay off all consumer debt before looking into any strategy for paying off your mortgage faster.
Far more better?
☝️
You're doing a way more contribution...?
My EXACT reaction!
Let’s just say a person has three option ( A make a monthly payment or more) (B regular payments plus additional Principal/additional escrow) (C Additional Principal/ Additional Escrow). Where is the best interest for a person to put the HELOC into from those choices?
It's great that you're looking into different options for managing your payments. However, it’s important to clarify that our strategy at Accelerated Banking doesn't directly involve making choices between making monthly payments, additional principal, or additional escrow contributions.
Our approach involves using a banking product to optimize your cash flow and minimize interest payments over time, but without focusing on traditional methods of mortgage paydown like additional principal payments. The details of how this works are best explained in our educational materials.
To get a clear and comprehensive understanding of our methodology, I would recommend joining our webinar, which will provide you with a more detailed explanation: Webinar Registration
By attending the webinar, you’ll gain insight into how our strategy can work and whether it's suitable for your financial situation.
Quick question guys. Going back to your favorite approach, so if I use the HELOC money to pay off the mortgage and then use all my income to start paying the Heloc, then how I'm I going to have enough money in the HELOC to pay of the credit card every month?
if you put all ur money in the heloc, you should have enough to pay ur credit card. Like any other income, don't abuse anything that you can't pay for responsibly. You can benefit from the Heloc if used properly according to your income.
@@matthewbermudez009 Ahh yes, the American way, NOT abusing credit! It's so simple! Why doesn't everyone just think of that?
In a bad real estate market, the banks like to trim credit lines on HELOCS. They are considering the fact that less equity, means less equity to borrow. Sometimes, they cut the available balance to zero.
Yeah and your point?? You still have the equity in the home because you paid more of it off. If you need the cash you sell it or just go to a different bank and ask for a heloc
@@briandeluca6908 You may still have equity, just not as much as before. Or there’s more chance of downside risk for the bank than upside risk. Otherwise, the bank wouldn’t want to trim your credit line. It’s done to protect their interests. I hope this helps you Brian.
@@ettin05162 hope that helps me?? You didnt tell me anything....
@@briandeluca6908 Brian, selling your home today is different (more difficult) than just one year ago. At least selling for those crazy prices. Today, the buyer is taking the reigns. If the bank closes your HELOC, it’s not a good thing. I hope you learned something.
@@briandeluca6908 Equity on paper is a whole lot different than cash in hand my man. Bawhahhahahha! Sounds like someone doesn't want to believe in a housing dip? We can give you some pointers in that case. Have a great day.
Watched tons of such videos. Simply couldn't get any mathematical sense of it. Pure math is straightforward. This is not.
Its All BS,.. It all boils down how much you put on your Mortgage principal
@@Fredflinstone23 yeah.... you have no idea what you are talking about.
@@mr.fluffy770 So your genius? Basically it will expose you to another debt while utilizing all your income for the mortgage.. Too risky tsk tsk tsk
@@Fredflinstone23like i said, you have no idea what your talking about.... This strategy has allowed me to increase the cash available to me...
If Corona wouldn’t have hit , i would only have my mortgage left to pay.. however it did hit and now i have a large emergency fund sitting in the bank.
By July 2021(barring any world wide calamity) I will only have my mortgage left to pay.
But hey what do I know... I’ll have a fully paid home in 5 years. Or I can decide to buy some cheaper properties for cash before that and let the rental incomes pay for my Primary property
@@mr.fluffy770 so when he says put your whole savings into the heloc cuz it's better, what happens to the savings once your done paying your mortgage? Do you still have a savings or do you have to build up again? Really trying to understand how it works cuz I love taking trips and use my savings for it but if I have non cuz it all went to my heloc then how would I still enjoy life? Or does this mean for 10 years I have to choose not to have a life? Sorry I'm being serious would really love to know from someone who has actually done it
Yeah dude how are you going to pay off the HELOC at the end of the month at 7%🤦♂️🤔🤔🤔🤔‼‼‼‼
you are depositing your income in it every month so that handles the payment as per this author...
@Moojan Namsechi EXACTLY
So I think I get what he's saying, but I think you really only see a difference the first payment you make. Because the very first week, you can pay $7000 and lower the balance which is great while you put all expenses on credit card. Lets say you pay credit card 30 days later with no interest then you actually lowered your balance for the first 30 days because you bought youself time with the credit card; however going forward now when you put in the next paycheck it will have to cover those expenses from the cc and then whatever is left over goes to reducing balance. So now let's go to your next paycheck doing this after your initial first time, lets say your expenses are $6000 now you pay $7000 but only $1000 is going to actually lower the balance because the $6000 goes to paying back credit card expenses. So after the first week doing this, all the future payments would be the same effect as just putting an extra $1000 towards principal on your mortgage to lower daily balanace. I'm assuming that after 30days the cc needs to be paid in full so you do that with the heloc but then with your paycheck you pay the heloc immediately back so in effect you still only have $1000 that will actually be going to principal. What am I not understanding? Please help!
Hey! I see where you're coming from. The idea is that by depositing your paycheck into the HELOC, you're lowering the balance and reducing interest daily. Yes, initially, it feels like you're making a big impact, but ongoing, the key is that your balance is consistently lower every day due to the paycheck deposits, which keeps reducing the interest you owe over time.
As for covering expenses, using your credit card buys you time, and yes, when you pay it off with the HELOC, you're back to using your paycheck to reduce the HELOC balance. Even a small difference in daily balance can lead to significant interest savings over time. For a deeper dive, check out our webinar: acceleratedbanking.com/webinar-registration-515174331635781964831sl=youtube.
Travel for free on the cash back and then do a couple real estate related things at the destination. And then write off the business expense.
I agree with you 100%!!
Sam you mentioned in your video collecting daily expenses in a credit card and paying it off at the end of the month via HELCO payment. You also mentioned using the credit card points earned to purchase a trip for you and Daniel. I just doubled down by saying this could also be a business travel expense that is deductible if you pay with the CC cash back. Assuming you do some business related work at the trip destination. This is kind of a double money score.
@@jonweber98 yes absolutely! 100%
@@TheKwakBrothers Credit Tom Wheelwright and Garrett Sutton. I am just a newbie in this stuff. BUT trying to learn fast.
@@TheKwakBrothers hello Kwak team I been watching your videos for a week or so do you offer service for someone to personally walk someone through all this process?
I am just paying an extra 600 dollars a month and when I kill off one debt I take the monthly payment im used to paying and toss it into my super payment and put it all towards the next debt. plus im lucky enough to be a union member so I know every raise I have coming from now to july 2022 so I have guaranteed raises and there is no guess work with what my finances will be years down the road.
I have a heloc right now with a balance of $63,000 and the current interest that changes all the time is at 8%. I have also a mortgage with a balance of $48,000 at 3.25 interest rate. Which one should I pay off first to save money and interest or the best move to make. Thank you
I just obtained a $15K HELOC, and was told that I could get a debit card with this, and now I find out they do not issue a debit card. Do I then just use checks to pay my bills out of the HELOC? I'm a little confused here, I also have about $4K in savings account. Will this work for me? Thank you.
I work in mortgage servicing, also on HELOC accounts. I've talked to several customers who've had issues with writing checks out of their HELOC account. There are some banks that don't accept or won't cash them. Banks used to issue debit cards with HELOCs but there was so much theft or fraud, they decided against using them at some point. My advice is to just do a transfer of funds from your HELOC to your regular checking account & just write a check from there, or use your debit card. Keep the $4k in savings as a backup for emergencies. And if you're charged an annual fee, ask how you can pay it. My bank's payment hierarchy won't apply the $ to the annual fee, but it will to principal, so there are people who've been trying to pay off the fee for 6 mos or more & wind up lowering their principal balance owed. The reason is because it's a 1 time per year fee, so no real need to add it into our payment hierarchy system. Also, hoping they didn't sign you up for interest only payments during the draw period. Once the draw period is up, your monthly payment could double or triple based on the principal amount owed. If you are on interest only payments, add something to knock down your principal balance!
You did an excellent job explaining HELOC. Thanks for the invaluable information
You should give a number example. It's not clear.
Is this still a good idea if you are paying 2% on your mortgage and the HELOC is Prime (3.5%)+1?
No.
SHould I pay off my mortgage with heloc before investing in real estate?
I used a HELOC to buy rentals, thereby increasing my income now.
Okay, I am so lost. Don’t you have to pay interest on your HELOC? Also most bills companies will not let you pay your bills with credit card because it cost them money processing your credit card.
This was my question as well. I have not found a clear answer. The only thing I can think of is that perhaps even paying interest on the HELOC, it's still money saved OVERALL as you're saving from all of the interest on the mortgage principal you would have been paying..by paying it off much sooner. So is that the whole premise here?
I like guidance... but this suggestion ignores that Cash is better than a line of credit... what if the heloc is no longer there when you need it?? Like, in a financial crisis? Cash, deposits are qualitatively better than a heloc, which is credit
I though It was just me BUT he is Rambling about nothing. Just have your 6 months Emergency Fund and Make extra Payments. KEEP your HELOC option IF and when you might REALLY need it. WTF
Isn’t there a point at which this doesn’t work as well when you have a low-interest-rate mortgage (in the 2% range)? How high would a HELOC interest rate have to be to have the math cancel out?
Ot does not work on any level ot will always cost more and take longer to pay off mortgage using heloc over making extra payments on the mortgage!
The heloc will still cost you more interest each month than what he claims it saves you ! He is either an ear math or he is a liar and a fraud ! I hate to be racist or stereotype but I’m guessing he is just lying
You describe a couple of the basics but what happens to the mortgage? Where do you pay that off? OK the original $7,000 goes to the mortgage. If you spend $6,700 on your expenses including your credit card. your wages of $7,000 go first to pay off your HELOC which paid off the credit card and then $300 to your mortgage?
This must be the 8th video I've watched about this method, and I still don't understand it. Not even slightly. It has not clicked for me. I'm not saying it's not legit. Just sharing how clueless I am
I didn't get this strategy for almost 2 months... Let it sizzle in your head and watch this webclass: debtfreeaccelerator.com/webinar
Your not alone. After I learned about using a HELOC I dismissed it for almost a year. Than I revisited the information and I “literally” studied the strategy for 3 straight days and it finally clicked. I just closed on my HELOC couple months ago and am in line to pay off in 39 months and not changing how I live. Research and study until it clicks!!
This doesn't make sense. Just pay everything you can into the mortgage and you'll be able to pay it off just as fast instead of only paying $300 per month extra.
@@TheDRam3 read what Papis408 wrote...
@@TheDRam3 I understand it but you are right. You could just have a large credit line as an emergency fund while you wipe out your debt eg mortgage.
Either way different strokes for different folks.
I thought HELOC interest is no longer deductible, so technically leaving it in a regular mortgage gives you a 30% return on any interest paid. Is this right? If so it's not only risky but equal or more expensive to keep a balance at all in HELOC.
We have a heloc but use it as an extra emergency fund. If you want lower payments I feel it's better to refincnace after paying extra payments for a while. But remember, keep your payment at 25% of your income, preferably 15 year payments to calculate this but still get a 30 year.
About the HELOC not being tax-deductible, it's completely untrue. Ask your tax professional... (the right kind)
I personally don't think mortgage interest is a great deduction. If your house is paid off and your expenses are super low, the IRS still gives you a standard deduction. That's free money.
It also depends if you qualify for deductions or just take the standard. If you don't expense more then 24k for Married filling joint then you won't deduct interest anyway
Wow, such great information! What pen to tablet to display system are you using?
Just found it on Amazon lol with an app called zoom
The Kwak Brothers yes, but which pen to tablet app is this. I see you’re using the zoom whiteboard, but are you just using a stylus??
Velocity banking . . . it works.
US mortgages use simple interest, so there is no difference between how interest is determined between a conventional fixed rate mortgage and using a HELOC (also simple interest). The only difference would have to do with your interest rate on a HELOC is variable, changes over time, and can be call by the bank at any time.
But I have a VA loan at 2.25 %. ... my husband wants to switch but I'm wondering if in our case, this would be worth it. I can't even rent a 1 bed apartment for my mortgage payment, which escrow is rolled into
Id put that 50,000 into a ETF or mutual fund. Not savings account. Earning 10-12% annually
Sam, correct me if I'm wrong but your heloc can be cancelled and any money in there will be locked in like payment directly to principal right? If so please make another video explaining that. Please give pros and cons.
Yes please let me know if this is correct. This is what I assume is true.
The bank has to have a reason for freezing or shutting down the HELOC. Usually in an event of a default. A default doesn't necessarily mean that you stopped paying. There are other ways for you to be in default according to the mortgage agreement. Here's a video further explaining that: th-cam.com/video/xaqcNUgc1T8/w-d-xo.html
Thats not true about not getting extra payments back. We use one of the big banks and we pay extra payments. We can get ALL our extra payments back. Our bank calls it Drawbacks.
Would it be worth it to use a HELOC at much smaller increments? I'm helping my mom with her mortgage payments and can give her an extra 1k a month. Would it be worth it to have her get a HELOC and use just 12k, put it onto the principle, and then use my money to pay that off for a year (or however long with interest), paying it off completely, then doing it again? Or would it just be better to have her use the 1k a month of am extra principle payment each month?
Thanks for the video, I have a HELOC I use it to remodel the house to be hable to live in, so. Do you recommend to get another HELOC to start making the loan payments?