A HELOC is not for everybody it's for responsible borrower, it works in the same way of like paying your credit card debt off faster. Say your take-home pay is $5,000 a month, you deposit the whole $5,000 into the HELOC you take out $1,000 you only get charged interest on that 1,000. The larger the amount you borrow the interest could increase. The concept is you're making bigger payments to your line of credit and mortgage to pay the house off. Fixed payment $1,500.00 at 3% 30yr 250,000.00+interest 100,000.00 HELOC payment $1,500.00 deposit $5,000.00 on $250.000.00 + interest $30,000.00 6-8yrs paid off.
If the heloc gets frozen there is always a way around it so unless you believe all type of credit would be frozen there should not be much to worry about. Now if one is doing this I think the biggest drawback would be becoming financially irresponsible. As long as one can stay fiscally responsible this should work like a Swiss watch.
I've ran the numbers with some crazy interest rates and raising rates every year and the numbers have me ahead... Paying 200,000 in principle in about 11yrs. That's better than any other mortgage I've found.
Apparently the law was changed a couple of years ago, and now banks are required to give a 60 day notice before closing a HELOC or PLOC. I guess this was due to banks closing LOCs without notice in the past, and causing a lot of financial trouble for people. I think the concept should be used by more people and more people need to know that it's an option. Of course, like everyone else has said... this only works if you have excess income and are a responsible individual financially.
So you want to pay 600k for a 300k house? If you’re disciplined and have good cash flow this is an awesome strategy. I’ve paid off my primary and two rentals in the past 4 years using this strategy.
That's amazing, I think a lot of these people are thinking of 2nd position HELOCs. I'm very interested in this strategy, any tips or banks you'd recommend?
That doesn't work for everyone and you have zero liquidity in that strategy. The interest rate DOES NOT MATTER as long as you're cash flow positive and responsible. Run the numbers. A 10% variable with a .5% increase every year still has you ahead of a traditional mortgage and you remain liquid. The interest only payment will always be less and your cash flow positivity drives down the principle, changing your interest only payment. Rn I might pay 300+ to my principle... With this strategy I would pay 2.5k/ mo. To principle. Not to mention, this was the preferred method before the federal reserve came about in 1913.
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A HELOC is not for everybody it's for responsible borrower, it works in the same way of like paying your credit card debt off faster. Say your take-home pay is $5,000 a month, you deposit the whole $5,000 into the HELOC you take out $1,000 you only get charged interest on that 1,000. The larger the amount you borrow the interest could increase. The concept is you're making bigger payments to your line of credit and mortgage to pay the house off.
Fixed payment $1,500.00 at 3% 30yr 250,000.00+interest 100,000.00
HELOC payment $1,500.00 deposit $5,000.00 on $250.000.00 + interest $30,000.00 6-8yrs paid off.
If the heloc gets frozen there is always a way around it so unless you believe all type of credit would be frozen there should not be much to worry about. Now if one is doing this I think the biggest drawback would be becoming financially irresponsible. As long as one can stay fiscally responsible this should work like a Swiss watch.
I've ran the numbers with some crazy interest rates and raising rates every year and the numbers have me ahead... Paying 200,000 in principle in about 11yrs. That's better than any other mortgage I've found.
So you takeout a loan to pay off a loan? Yup, more like prolonging your agony. Pay off your mortgage and be debt free! Thats how it gets done.
For sure!
That's... Not at all how it works.. but sure 😂😂
You cannot borrow your way to prosperity.
THANK YOU SIR!
Apparently the law was changed a couple of years ago, and now banks are required to give a 60 day notice before closing a HELOC or PLOC. I guess this was due to banks closing LOCs without notice in the past, and causing a lot of financial trouble for people. I think the concept should be used by more people and more people need to know that it's an option. Of course, like everyone else has said... this only works if you have excess income and are a responsible individual financially.
Why would you use the heloc to pay for things that don’t have interest, such as utility bills etc?
So you want to pay 600k for a 300k house? If you’re disciplined and have good cash flow this is an awesome strategy. I’ve paid off my primary and two rentals in the past 4 years using this strategy.
That's amazing, I think a lot of these people are thinking of 2nd position HELOCs. I'm very interested in this strategy, any tips or banks you'd recommend?
I have been considering this strategy. Would love some insights, info or even financial models
So u pay for ur heloc and pay mortgage this makes no sense
Good shit brother
why would you even think about that, in this current rate inflation? Historically ARM's always go up...
Because if you do it correctly, you become rate immune.
I see no cons at all for an intelligent and responsible person 🤷🏻♂️
Too much risk... especially the interest rate. Most don't have the discipline. Just pay extra on your mortgage and pay off early.
That doesn't work for everyone and you have zero liquidity in that strategy. The interest rate DOES NOT MATTER as long as you're cash flow positive and responsible. Run the numbers. A 10% variable with a .5% increase every year still has you ahead of a traditional mortgage and you remain liquid. The interest only payment will always be less and your cash flow positivity drives down the principle, changing your interest only payment. Rn I might pay 300+ to my principle... With this strategy I would pay 2.5k/ mo. To principle. Not to mention, this was the preferred method before the federal reserve came about in 1913.
Heloc loan yes ! Stay away from helocs