Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Catherine Morrison Evans comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.
I paid off my mortgage in 8 years. Was paid off the year before Covid. Best decision I ever made. I have no CC debt either. Everyone talks about inflation and high interest rates but i haven't noticed. I created my own personal economy so I don't need to worry about interest and inflation. 🙂🙂
@@Izzy267NZ I did huge prepayments (took on extra work for few years) and was lucky enough to lock into a really low interest rate at the time. The big monthly prepayments ($1500+ my regular payment) really made it go down fast. I was super focused on it though. Now I'm focused on retirement savings because I'm not quite where I want to be. I don't want to live on Ramen noodles when I retire, but I also don't want to travel the world or anything either. Lol
Why didn’t you put that money in stock market? You would have some profit. During the Covid the rates were super low, people were getting refinancing. It was basically free money with 2.2 - 2.5% interest rate.
@@julget3648 It is a far better rate of return to pay off a 25 year amortization with current interest rates rising fast. Plus, the value of my house has now risen to almost 3 times what I paid for it, and I now have no mortgage. Way more profitable than a 2% return on higher risk stocks. I also wanted to semi retire sooner by paying off my mortgage.
@@purplenaturellc733 this is incorrect due to the trading fees it would cost per investment transaction as I'm not from the US. I do have some investments in equity growth funds which are doing well. I believe in balance and security so I'm personally more comfortable with a paid off mortgage and investments on the side.
Despite the naysayers posting in here, we did this circa 2006 and, while we didn't pay in 5-7 years, we did kill it pretty much in 10 (instead of 30). It does work.
I can see how this strategy would be incomplete without using your new found equity increase to investment opportunity and therefore pay down your increased debt! Crazy but i think it woukd work. @klk538
I wasn't financial free until my 40's and I'm still in my 40's, bought my third house already, earn on a monthly through passive income, and got 4 out of 5 goals, just hope it encourages someone that it doesn't matter if you don't have any of them right now, you can start today regardless your age invest and change your future! Investing in the financial market is a grand choice I made.
I understand that tomorrow isn't promised to anyone, but investing today is hard for me now because I have no idea of how and where to invest in. I would be happy if you could advise me based on how you went about yours, as am ready to go the passive income path.
@@obodoaghahenry9297 Even with the right technique and assets some investors would still make more than others, as an investor, you should've known that by now, nothing beats experience and that's final, personally I had to reach out to a stock expert for guidance which is how I was able to grow my account close to a million, withdraw my profit right before the correction and now I'm buying again.
@@Manuelcliford Sure, My advisor I'm in touch with is "Julie Anne Hoover" , she works with Smith incorporated and interviewed on CNBC Television. You can use something else, for me her strategy works hence my result. he provides entry and exit point for the securities I focus on.
@@marcelrobert9569 I just looked up this person out of curiosity on the Google internet; surprisingly, she seems proficient. I thought this was just some overrated BS, appreciate this.
Great video. I’m making my last mortgage payment this month. It took me 7 years to pay off my house after paying off $200k in student loans. Discipline and living within your means was key.
@@ToOpen6seven I make $370k per year and my total mortgage was for $360k. But I pay $70k for my children’s schooling per year while saving $150k in their 529s.
Year-over-year inflation stood at 6.5% in December 2022-the lowest that figure has been in more than a year. Inflation was in line with what economists expected and gave many of them a reason to believe that the peak of inflation may be behind us. I have approximately $150k stagnant in my port_folio that needs growth. What is the best way to take advantage of this downturn?
Fr Fr! I would have loved to learn in high school that I can get a HELOC against the value of my home. Who needs equity in a home “equity” line of credit? Not me!
*Creditlord* literally gave me a fresh start. Before, I was stressed out and exhausted from being turned down from lender to lender. As of now, I'm currently in the phase of purchasing a home. I'm more confident and I feel more secure.
I finally paid off my whole mortgage in 5 1/2 years. This has been quite an achievement for me. Thank goodness I did well in saving money for many years since I was a teen.
Great video, my wife and I have been rounding up our payments to pay down the principal balance. It may not be much over our mortgage payments, but it shortened our loan by a few payments earlier. $25 now is $1000 later . We just refinanced and shortened our loan by 3 years and received a lower interest rate, it's going to save us about $50k overall
You can also call your bank and see if they would allow you to pay your monthly mortgage payment via bi-weekly. You gain one extra payment at the end of the year.
@@brianesbaugh6897 my heloc rate has gone up a ton. I’m in year 11 of 3.25% and haven’t paid a dime extra. I’m buying up as much as I can in stocks. Owe $225k on the house and invested $40k last year in the bear market. Hope to do that much or more this year. We make $220k (Dual income) before taxes but live on about $10k a month.
I have been thinking with current technology of online banking, why couldn't I do DAILY payments and save a ton, especially if I can increase the amount paid over the monthly mortgage amount. I just refinanced and was told I can make extra payments without penalty. Why not just schedule daily payments? Has anyone ever done this? I couldn't find much by Googling it but when I did it with a mortgage calculator it seems to make a big difference, I can pay off a 30 year loan in just over 10 years by adding a few bucks a day.
I did this two times. The first time was when I got divorced. I paid off a 50k mortgage in 3 years as a single mom. Then, I did it again , mostly .B. As a single Mom. I paidas an extra $600.00 a month. I am thanking God above for leading me in that direction. I should have had a custom built home (expensive home) paid off in 2016. What I couldn't anticipate was my future. I had to have a back surgery that didn't pan out! I became disabled. I thank God everyday that I did this. It made the difference between losing my home or almost paying it off. Listen to this guy. He is right 👍
Just want to say that I'm Canadian, so the bank rules might be different in your country. First mortgage was paid off in 5 years with an interest of 9.4% (back in 1994). Saved up and purchased a rental home and paid that off in 3 years (4.3%). There are many ways how to achieve this. Check with your bank and find out the rules on your mortgage. With a fix mortgage, most bank will allow you to make one extra payment per year (either calendar year, or anniversary year). So basically, just save as much as possible and deposit as much as you can (to the limit....some bank will allow you up to 20% of your initial value of the mortgage borrow....so $200K, you would be allow a max of $40K per year at 20%). If you're your income is weekly, you would get 26 pay check per year, and not 24....meaning change your mortgage payment to weekly...by doing so a 25 year mortgage will drop to about 20 years....and you would not even feel any pain. Always remember it's not what you do in the last few years of the mortgage, but the first few. Just use something online and see how much interest you're paying vs the principal. Example, let's say your mortgage ($300k) payment is $1,700/month, about $1200 is in interest, while $500 goes toward principal. I know this will be hard, but for easy math, you were to find a way to save $1K/month, that's $12K you can deposit toward the mortgage. By doing this, your mortgage had just dropped by 20 months....20 months of interest, so about $10k in savings (not to mentioned that you paid off your mortgage faster, meaning more time to save for retirement). IF your mortgage is on calendar year, you got a few months to deposit some money towards your mortgage...even it's just $500 (using the example above)...just that alone will take one month payment off you total mortgage...saving you $1200. Can't stress my method works, the only problem is that everything is on paper....meaning you don't see the vacation, or the brand new flat screen tv....you have to wait, and when your mortgage is paid off....you can sit back and enjoy....retired at the age of 40.
I just turned 25 and I’m buying a house soon. As you said, I did all the calculations on paper and probably won’t be able to get a brand new car or travel every year but it will feel great to cut the debt from 30 years to maybe 10-15 and be debt free in my late 30s/early 40s
@@miguelbernal1435 way to go! Im 6 year in my journey to pay my house im 14 years. Puttin more than asked to pay principle faster. Still investing moneu eslewhere too cause life made me learn not to put all my eggs in the same basket !
The bank already fix your monthly payments for 360 months. You can pay them off in 30 years or shorter but it won’t change your total interest. You just save your current money to pay your future bills. And always future money is cheaper than current money.
It’s very simple, so basically this mortgage vs heloc is like life term insurance and whole life insurance. Having whole life is like having a bank account, the money you take out you eventually put back in and the interest you have also goes back into the account so it’s almost like paying yourself and going in debt with yourself. Very simple but also dumb because what happens when you owe yourself and can’t pay yourself back??
@@Christorment5 The people who benefit most from whole life are the agents who sell it. The commissions are some of the highest of any insurance or investment product.
@@jaspreetbuttar332 Most single home mortgages have no prepayment penalty. FHA and VA loans can't include them and if mortgage company does include them they can't last for more than 3 years. Mine is with Rocket and I've paid extra principle for more than a decade. Just $60 extra a month took almost a year off the term of a 10 year refi.
This was a great informational video. Hoever, you forgot to emntion an important fact that you need to have more equity, in fact more 80 to 90 percent of equity than the balance your current mortgage debt to pay off and close your mortgage. Most people may not have built enough equity in 7-10 years to be able to pull a HELOC out and pay the 30 year mortgage balance off. Plus, we are talking 7-10 years into the mortgage and then just starting to pay off the mortgage and start the HELOC with another 5-7 years, whioch will be som ewhere around 20 years. Yes it will reduce 10 years off of 30 yr mortgage, but isn't that also possible by just putting more toward principal in that initial 7-10 years (front loaded period). What's your idea folks?
Right, this entire presentation is bogus. He goes from bemoaning front-loaded interest, which yes, sucks. But then jumps to an example where he borrows 90% of a magical $300K in equity to create a $270K HELOC. Newsflash - there is no $300K equity in almost any mortgage that is still in the year 1-7 age (some coastal & crazy markets excluded). A point to be clear on - a HELOC is borrowed against EQUITY, not against VALUE. Consider a 30 year, 5% mortgage with 10% down on a $300K house. End of year 7, loan principle is $237K. To grab a 90% HELOC to cover that, you would need $263K in EQUITY, which means a home VALUE of $500K. Maybe the home appreciated 67% in 7 years? That's 8% a year, with no corrections, so a very big maybe, but even then you're already 7 years into the front loaded mortgage interest! You've already missed the big payoff he is selling! There is basically zero scenario where this HELOC strategy could possibly work any earlier than year 7, and even then only in a perfect world of ever-increasing home values. And, that leaves out the very real chance the bank could call your HELOC. He downplays that, but it creates a 30 day window where you come up with $237K cash, or you're on the street. Do you really want to run that risk? Misery loves company, so a market downturn + housing downturn + job losses all ride together, so the circumstances in which your loan WOULD be called are all during the worst possible time. Also, the cash swap to credit card strategy requires so much discipline and timing, it's essentially impossible in the real world to repeat month after month for years, and leaves you so illiquid for other emergencies, it's just terrible, terrible advice. Also, many HELOCs are variable rate. Also, many have pre-payment penalties, unlike mortgages. This advice has so many landmines, that the cash-strapped people this advice is targeting are almost guaranteed to get sideways on it. The only good news is that almost no bank is going to engage in it, because you'll never have enough equity early enough in your loan to come anywhere close to the savings he is selling. So this is really just a 20 minute smokescreen. Just pay more towards your principle if you really hate mortgage interest. Or better yet, invest the difference in a Roth IRA wit superior tax advantages or a brokerage index fund that will likely return more than your mortgage rate over time.
Agree, that’s what I was thinking too. I’m like did I miss something here, where did this guy get 270k from? Just like 💨 out of nowhere says his home gained a value of 270k. Shady stuff
FINALLY! I've been telling people about the way amortization charts are scheduled ever since I figured it out. It's NOT common knowledge, and the banks don't want you to know about it either. THANK you, sir, for bringing this to light!!
I have a Heloc from BOFA with a variable rate. When I locked in the rate I was told it can easily convert to a fixed rate after usage. Now that I’m ready “fix the rate” they claim the only way is to get a mortgage and amortize… make sure to pursue the fixed rate option up front. That is what I’m working to resolve now… good luck all.
This doesn't work for me, but it may be fine for someone else. There is a cost to opening a HELOC. Even if you use a HELOC to pay off your mortgage, you still owe that money as a HELOC. Having the interest accrue daily on the HELOC works best for the lender. That limit of 90% value, assuming you can get more than 80% value, is also constrained by what you owe on your mortgage. So in the example, you only have access to $70K calculated as $270K - $200K. Assuming you already have a HELOC, paying off an initial credit card balance with a HELOC is fine. The reason is that you'd be paying off a high interest loan with a low interest loan (essentially a balance transfer). However, once the credit card is paid off, you should be able to pay off any future charges to the card at the end of each month without using the HELOC. If not, you are in for a world of hurt. It doesn't matter if you directly pay your credit card bill with your paycheck, or indirectly pay it using a HELOC. If you can't pay off the credit card and must carry a balance, then it is better to carry the balance on the HELOC than the credit card since the card will have a higher interest rate. However, you need to bring in enough to pay off the credit card and pay back the HELOC. If your credit card is being paid off each month but the amount you borrow from the HELOC keeps increasing, you are still losing. Your goal should be to pay off your debt fast. It doesnt matter if that debt is a mortgage or a HELOC. The HELOC allows you to borrow the equity in your home, but doing so will simply increase your debt. There is also a high probability that the interest rate on your HELOC is worse than the interest rate for your mortgage. The best way to pay down the mortgage faster is to pay more money towards the principal. Replacing a high interest debt with a low interest debt (a reason to refinance) will help, but you still have to pay off the debt.
exactly. When I look at the title of this video "Paying off mortgage in 5-7 Years", I was like "Woah, it's must be some secret hack, let's see what's going on here". But after spending 25 min listening to this, I realized that the core solution (at least in his case) is to put $6000 into paying off the debt (doesn't matter HELOC or mortgage). If I had $6000 every month to do that, I might as well use $1000 to pay the mortgage and $5000 to pay the principal, then I'd pay off my $200,000 mortgage in just 3 years. If I misunderstood the video, please explain it to me.
@@QuanNguyen-og6pq You didn't misunderstand, the video is garbage. If you owe $200K, that's $5,555/month for 36 months, no interest. There is no magic here, just smoke and mirrors while simultaneously putting folks into a seriously illiquid position in life, while also putting them at the mercy of a bank call on the HELOC, a catastrophic position for almost anyone. Good times! And if your mortgage rate is below 4 or 5, you're even better off putting that extra $5k into a Vanguard fund!
easier done if you have a certain income etc. As well depending on the interest rate it may not be better to pay off the mortgage as quick and better to actually invest money in more income producing opportunities that pay far more than what your mortgage costs. Also yes you can put yourself in a 15 year but I prefer 30 and treat it like 15 this way if something happens financially in your life then at least you are not obligated to a higher monthly payment !
@@paulmasonmiller then you're doing something wrong!! If you make one payment extra a year on a 30-year mortgage you will cut off 7 years right off the bat!! You need to call Sam Kwak I know him personally he's awesome and so intelligent with money
You clearly missed the point there are no extra payments being made you're paying the same amount just threw a different Source instead of dropping it into your checking account you're dropping into your HELOC account. You are not understanding what was just demonstrated
Duh, no kidding. I used my mortgage as my saving account. Meaning that I was getting 4 38% interest on every payment I made. I kept a few thousand dollars as an emergency fund and ALL the other money I had went towards my mortgage. I was making 6-7 additional principle payments per month. If I got a bonus from work, it all went to the mortgage payment. All my tax return money went directly towards the mortgage. I found a Heloc at 2% and took that. I paid off the remaining balance in 1 year. I paid everything off in 6 years. I didn't have much in savings then but I sure do now.
You spoke correctly at 17:00 check to mortgage at $200k, but at 19:00, balance should be $194k after applying $6k income to pay down heloc. Concept not lost, but details are important when dealing with finances.
My wife and I bought our home in Dec. 1989, and paid it off in mid 1994. It was only $29,500, but we were only making $23k a year, together. It's just a matter of denying yourself some luxuries for awhile. Our house is worth $110k, now, and we're debt free today. We are far from being rich, so anyone can do it if they really want to.
Thanks for posting, all I could say has already been said here in different ways. I just called my credit union to open my HELOC. You've made a subscriber out of me.
Sam I was a Loan Manager for a bank and NEVER saw a fixed HELOC and most of them can cap at 18%. They are priced according to prime plus 0.00% and sometimes there is add on.
I started doing this and at first I would send a $5000 to $7500 check with my HELOC, then one month I sent $15000 and to my surprise my payment had dropped $400 a month, I called the loan company to ask why and I was informed that anytime I send a payment of over $10.000 over the mortgage amount they reamertize the loan.
I actually love how clever this is. The biggest downsides I can see are 1) Finding a low interest, fixed rate HELOC, and 2) Making sure you have some control over when the lender turns off your draw period on the HELOC. I know you're saying you've got lenders who haven't shut down the draw period during economic downturns but those types of lenders are few and far between. Anyways-- great info and video!
@@TheKwakBrothers The math works out, I ran an 84 month model. Exactly what Dan said, without those conditions it's pretty risky potentially having to come up with the balance unless the terms are concrete. Was about a 35% deduction for interest paid even compared to a 15 year.
Its not about the interest rate on the HELOC or the 30yr Mgt. Its about time to pay off your Mgt and using lazy money accumulating in one's checking account.
Excellent & right on time for me! Just talking to my Loan Officer about a HELOC! And recently made the decision to 'Payoff' my home. Thanks for the education!
This is not a calculated financing advise but a lifestyle advice in my opinion. With this method: -you don’t put any money away -your heloc available balance is what you can use for emergency -pay off as much mortgage principal as possible for 5-7 years -get credit card points You can technically achieve the same result by paying extra principle. For example if your mortgage is 200,000 at 30 years at 3% your payment is $843. If you make extra $1800 per month ($2,600) you would pay off that mortgage in 7 years. Your literally saving maybe $4 in interest per month with the extra $1800 balance reduced on the first month (1800 x 3% =54 /12 = $4.5) With the interest rate being so low for a fixed mortgage this makes 0 sense. Get a 30 year fixed mortgage and dedicate yourself to paying extra each month. Your interest/principal for the following month is AUTOMATICALLY ADJUSTED from you paying extra $1800 the first month so your not paying interest on the previous months balance. *coming from a retired loan officer
Correction if your income is about $10,000/month then by putting everything into heloc each month you would save $9,200x3%=$276/12=~$22/month and then following month the difference in interest goes down to YOUR INCOME - EXPENSE - INTEREST. So for example 10,000-6,000 expense - $500 = 3,500 x 3% / 12 = roughly $8 per month. Really penny pinching with all the risk associated
We paid off our 30 year mortgage in 6 years and 3 months. We worked every hour we could and paid every extra $ we could every month. No HELOC. I do not borrow money to incur debt to pay off debt. We are debt free. No car loan, no credit card debt, no mortgage, so student loans. Any credit cards we use, we pay in full every month. 800+ credit scores for both my wife and I. Now we are both retired. 😁
Exactly. All we do is overpay our principle every month by just $20. We closed April 13th. First payment wasn't due until June. We've already knocked 3 1/2 YEARS off the life of our 30 year fixed mortgage
Depending on the balance it will cost a lot more to send extra payments. If you send 10-15k chunk and pay down the heloc it will be much beneficial than to send 416 dollars of extra payment monthly for 2 years. The amount of interest in 2 years for 10k will be 420 at 4%. But those 10k will eat at the principal and reduce your interest greatly
When we bought our first home, back in the day when things were cheaper, we were told to put and additional 50 dollars per payment and that goes directly to the principal.. and then after that when we sold and got a little larger home (went from a 725sqft home to a 1200 sqft home) and we only locked in for a year, we decided to double our payments to pay it off in 12 years, well we paid it off in 10 years. If you can afford it, tighten your belts and go double payment for as long as you can. With our first house, we tried that HELOX, and didn't like it, it was to flexible for us. we needed that locked in mortage. Cause with the HELOX you got a credit card to go with it and we over spent without really keeping track of it, till a light went off in our heads, and we buckleted down and went back to a mortage. There was no more stress on that. knowing it was coming down for us. Just our thoughts and experiences.
For those who live in the UK and stumbled upon this video, the HELOC is equivalent to an Offset mortgage. I use the HELOC (Offset)-Credit Card strategy as well, and it really does work.
@@matthewhook3375 Sure. The basic premise is to use your credit card to maximise the length of time you keep the most amount of money in your Offset Mortgage account so as to minimise the amount of interest you pay on your mortgage. So you make all purchases using your credit card and don't use your debit card at all, because if you do, money will go instantly from your account. If you use credit card, you have 1 month before you have to pay, and this keeps more money in your Offset Mortgage account every month. And since interest on your mortgage is calculated daily, the longer you keep the most amount of money in your account, the less interest you're charged. And if you pay off the entire balance on your credit card each month, you will maximise the benefits of this strategy. Another tip is to change all your monthly direct debits / standing orders to a day or two before you get paid your salary. This will keep the balance in your account to the maximum level each month, thereby incurring a reduced interest charge. This is the Offset-Credit card strategy in a nutshell. In fact, you can do this with a regular bank account too. Keep the most amount of money for the longest time to earn the most interest per month.
@@theopenrepublic thank you for the explanation, I guess my next question is what is an offset mortgage account? I haven’t come across these. I already use an Amex cash back credit card for my day to day spending and my salary is paid into a current account, where it earns a pathetic amount of interest until it goes out to pay the Amex bill at the end of the month.
@@matthewhook3375 With an Offset mortgage, you use your monthly savings to "offset" the amount of interest you're charged each month on your mortgage. So if you have £10,000 in savings and a £100,000 mortgage, you pay interest on £90,000 (£100,000 - £10,000). You can then use the saved interest to (1) reduce the amount you pay monthly for your mortgage, or (2) reduce the term of your mortgage - so you pay if off early. The more money you have in savings, the greater the benefit you derive from offsetting. Another advantage is that when interest rates go up, you get a bigger benefit from the offset. You will also save 1,000s of £ in interest over the lifetime of your mortgage. The big drawback is that you don't earn any interest on your savings - because the interest is being used as the offset. But TBH, the interest rates are so pathetic at the moment that you aren't really missing out. If you want to know more, check out Barclays, Coventry building society, or Clydesdale Bank. They offer offset mortgages and have more information on their websites. There used to be more banks offering offset mortgages, but in recent years, many have stopped offering these. They are well worth thinking about if you are looking to re-mortgage.
@@theopenrepublic thanks again for the explanation, I’d never heard of these mortgage products. Unfortunately I’ve recently remortgaged to Lloyds on a 10 year fix at
if you're watching this in Australia, please disregard this video. he is pretty much explaining a loan offset or redraw account but I guess the US banks don't offer that. FYI - Title is abit misleading, yes this works for sure, but to actually pay down the loan in 5-7 years, you'd need at least 60-70% of the mortgage loan balance in savings already then add it to HELOC (i.e. offset account) or alternatively pay additional voluntary repayments.
Am I missing something? This is incredibly informative but how did you get a $270k HELOC when you still owed $200k on a $300k valued home? How was the HELOC $270k vs. $70k? I get you're using the 90% rule but I thought a HELOC was only for the actual equity amount (i.e. $70k in this instance?).
You're not missing anything, the math does not work in the video example. HELOC's are usually structured at 85% of the available equity in your house. So if your house is worth $300k and you have a mortgage balance of $250k your max available HELOC would be $42.5k.
Just a bit of caution...If home values go down the bank could freeze or lower the amount available on the HELOC and then you will be stuck with credit card debt.
He didn't explain that part very well but it's because your mortgage is amertized interest he did explained in the beginning of the video that you pay all the interest upfront. your heloc is not amertized it's a simple interest rate like a credit card accept with a lower interest rate, so your paying more money toward the balance every month and you will pay the heloc off way faster. I know it sounds confusing but once you understand how amertized and simple interest rates work it will make a lot more sense
From what I understand, your whole income goes straight into the HELOC, and your expenses all get paid through a points-rewarding credit card, then you draw upon the HELOC at the end of the month to pay off the whole credit card, thus paying no cc interest and gaining lots of points for travel and other rewards purchases. The big payments against the principle mean you pay less interest at the end of the month on the HELOC, and pay it off much faster. I think 🤷🏻♂️
It's simple; You're paying a few days of interest at the higher amount on the heloc vs. a full billing cycle on the mortgage for that $6000 in the example. It's genius.
Yes, and HELOC interest is variable! The bank can just decide at their will to increase your interest rates! It's better to have fixed mortgage rates rather than HELOC variable rates.
CLEAR AS MUD. We have always paid extra on our loan. We pay off all credit cards monthly. So no debt other than house pmt. But the "deposit all income" I will have to read over a few times. Don't know if I can do this because we just refinanced 1st and 2nd into 2.9% loan and 50,000 to remodel. Thought we were doing something fantastic. Now I will download your calculator. Thanks
@@AzeemUrRehman No, we had an FHA mortgage and we didn't even put down 20% when we bought it. This gave me even more ambition to pay it off in less than 10 years. What we did was we paid more than requested for the principal every month and also I saved a lot out of my salary every month for this purpose. More than 50%. It took a lot of discipline and focus.
@@EugeneCollins2024 I paid more towards the principal every single month for 5 years with the exception of the very first month. When i got my first mortgage bill back in 2016 i analyzed it and saw that extremely little was going towards the principal Seeing that I decided i will always pay more. towards the principal with each monthly payment. I didn't make additional payments each month . I only made the monthly payment adding more to the principal. Then in March 2019 I finished paying my car. I took that money of $ 250 every month that I now stopped paying and added it to the mortgage principal. Then ... Starting August 2020 I made sure every month my mortgage TOTAL amount was decreasing by 400. So depending on this I calculated how much i had to add to the principal. Finally starting January 2021 i made sure every payment was decreasing my total amount by 500 each month . Thus in May I had enough savings to pay off the remaining 76000 to the bank. I basically Brought the loan down from 91500 to 76000 in 5 years. Then paid the 76000 to the bank. Remember I put 16000 down when I bought it which was less then 20%. After the downpayment the loan started at 91,500.
For complicated banking reasons, This is only a good idea if you can get a HELOC with lower intrest than mortgage. Which is possible if you compared to a fixed mortgage but unlikely for a variable mortgage. Variables mortgage tend to give you the best intrest rate anyways and HELOC is a type of variable mortgage. I love HELOC, everyone should use it for used car purchases but I don't think this strategy would be better than a variable mortgage. US banks don't offer good variable rates though so it might be better there.
That’s all fine and dandy... but a HELOC is a home EQUITY line of credit, meaning you can only borrow on the equity in your property (assessed value minus what you owe). Usually they will only lend you beyond a certain loan to value (LTV) threshold like 80%. So if you have a $300k house and owe $200k, your LTV ratio is 67% and they will only lend you $40k or roughly 13% of the home value.
Respectfully Mr Taylor he explains this part very clearly! The calculation is based on the Value of the house X 80 or 90 %. What you did was I think subtract the difference of the value from what you owe and something I got lost...
What you talking about is a traditional HELOC, also known as a second lien HELOC, which functions based on a percentage of equity. A first lien HELOC works like he said, and his based on a percentage of home value.
@@gradivitshitoko9941 This commenter is describing is a Second Lien HELOC, a much more common type, which is based on home equity, the difference between the home value and the mortgage principle. This video covers the less common First Lien HELOC.
I had HELOC 1st Position on my old house. I am in a new house and have to wait 12 months before I do it again, will be worth the wait. I dump my entire check on the heloc, then pay bills out of it. What's left over reduces the principle. 35-40K per year. This works.
You should’ve clarified in the beginning that this is meant for using a 1st position HELOC on one already paid-off property to pay down/pay-off a 2nd property’s mortgage. I’m not sure what mortgage lenders out there would give up 1st position to a HELOC just to get themselves paid off… but they won’t be in business very long.
Can you clarify this please? I am just a regular home owner and have 1 property not looking to invest in a rental property. Is this strategy not good for folks like me? We just purchased our home with a $700k balance. Thanks.
Yesterday Costco lady said the sheds are moving like crazy for people buying them to live. This is what the 86k irs agents are for, to audit the preppers trading and people renting out their sheds in the back yard
In UK a lot f mortgages are on average daily interest.. I paid my last house of quickly by using an offset mortgage. This takes your savings and mortgage debt into one account. You can access your savings at any time but it offers savings interest of mortgage debt. It's an Australian system
I'm not understanding this. If I have a 1500 dollar mortgage at 3 percent (which I actually do), why on earth would I pull any equity, let's say 50k, to pay down the principle? The bank, let's say they give me a fixed 5 percent HELOC. Okay, but now I'm paying 1500 plus whatever the repayment is when I spend the 50. Why not just pay more towards principle if I could already afford say a 500 dollar payment on the HELOC?
@@TheKwakBrothers my home been refinanced a couple times. I went through divorce and chapter 7 bankruptcy in 2011. At that time owed around 137000. Got a loan modification it's at 3.5% 750 per month i now owe 93000. Also there's a second mortgage that went through bankruptcy also but it put a lean on the place. So I owe 93000. Plus 26000 on the lean. From my understanding I don't have to pay the lean unless I sell which I got no plan's to do. Will this Heloc work for me?also what can I do about that lean. Is there a way to get rid of it. The maturity date on the mortgage is 2050. I'll be 78 years old by then. That means I can't retire until then because there's just not enough money. Any suggestions?
Recognized it as well when I started my payments. So I out the first years as much as possible i to additional payments. 7 years later 1/3 of the mortgage left and will be dept free in three years.
I used the supplied excel file, this does not work for me for a 3.75% fixed 20 year and HELOC over 8% now. It's much easier to pay bi weekly or make one extra payment 100% towards your principle per year to substantially reduce the loan time. Also pay attention to your payment amount each year, my payments drop a few bucks each year that I add back as principle. It all adds up at the end!
I noticed this when I started tripling my personal loan payments. I went from accruing about $10/day in interest to $1.90/day. I paid a 37 month loan off in 12 months!
1. You owe 200 not 270 after transferring the mortgage to HELOC. 2. You should really mention that people should be leaving at least their mortgage payment amount in the HELOC every month and that the HELOC balance has to go down over time. Without following that it can cost people a lot
@@zennsalvador2570 OK and? In his illustration for the HELOC he was saying that 270k was owed, which it wasn't. Only 200k was owed and the interest is calculated off of that. It makes it look worse than it actually is. So the illustration and example starting at 18:40 is incorrect.
@@mike4962 $270K is the limit you are given to spend (similar to a credit card limit), in his example he only used $200K to pay the mortgage and you still have $70K to use if needed. The $200K is what's owed and you have an additional $70K you can use if needed
@@derspenc and yet when he continues with the example and pays 6k into the HELOC he does 270-6=264k to calculate the BALANCE. He says balance. It's incorrect. It should be 200-6=194k BALANCE.
Don’t get it. You replace a 30 year mortgage with a Heloc where you still have to pay interest on that same principal amount. And Helocs have higher interest rates than a mortgage. You didn’t explain how you went from 30 years to 7 years.
This video has some good ideas for tools to use to pay down your mortgage. But what’s presented in the video is not correct. You only have one equity on your house and you can’t double loan it. Meaning on the example in the video where your house is worth $300k and u currently have a $200 k mortgage, you only have $100k equity left on your house. The max the bank would loan on this house would be $270k minus your current $200k mortgage would leave you with a $70k HELOC. And of course u cannot pay off a $200k mortgage with a $70k. What’s shown in the video only would work is if u have 2 properties and borrowing from one paid off house to use on the second house mortgage.
Same question popped in my head.May be he is talking about 7-10 years after purchasing a house.Home equity value will go up due to payment towards the mortgage n price appreciation of the property.Then take a heloc to pay off the o/s mortgage.
Question? So if i have 132k left to pay off my house and the value now is about 230k-250k, will i be able to use heloc to use that money pay off my mortgage and pay back heloc with lower interest rate? Please help
I think the concept is the first lien HELOC will be 80-90% of appraised value. You use the new first lien HELOC to pay off the mortgage, so you no longer have a mortgage, just a HELOC with balance of whatever your previous mortgage was. Now you start paying down the HELOC balance and only incur simple interest, not front-loaded interest. Plus you have the benefit of lowering interest rate further by using the HELOC like a checking account for monthly deposits and expenses (which you would have spent anyways, just lowers your average daily balance by optimizing when you pay your credit cards for normal monthly expenses).
I’m thoroughly confused. HELOCs don’t have fixed rates until you convert your variable rate into a fixed rate. At which time you’re closing your draw period. What am I missing??
Big point you are missing is that interest paid is tax deductible. Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately)
In USA can you divide monthly payment into 2 and pay that every 2 weeks - ie same amount? (You also get an extra payment over course of year = 26 payments). It doesn't make a huge difference but better in your pocket than the lenders. Second - double check there's no penalty for paying off early. Third - if your pay goes directly into mortgage account and draw down from that then it means a few more days off principal. Last add any 'windfalls' such as tax refunds, birthday money etc. Every little bit adds up.
Good post, most loans today because of Dodd-Frank don't have any prepayment penalties unless you pay of the loan in less than like 2 years. Even for a 15 year mortgage not that common. I think some of the VA loans and some of the other government backed ones for "special qualifications" have more restrictions.
No. Just multiply your monthly payment by 13/12. That extra one twelfth of a payment each month will still pay down an extra payment each year just like paying 26 biweekly payments.
And adding "windfalls" to a low interest mortgage when you could be investing that money where it would get a much higher ROI doesn't make sense. Why trim your 4% mortgage when you could earn 7-10% buying an index fund?
Never comment on RUclips videos, but feel inclined to comment that as an commercial banking underwriter for over 7 years… this might be the dumbest strategy I’ve ever heard.
-This is not accurate, you said at the beginning of the video "without any extra payments" but technically you're if you are willing to throw in all your income into paying the HELOC, why would you risk your house trying to save on interest through HELOC when you can get 2.125% - 2.5% fixed 15 years fixed loan while interest rates are so cheap?! you're better off refinancing to a shorter-term (15 years) plus throwing in as much as you can spare of your income, you will also be done in 5-7 years without putting your house on the line, that's what our family did, we refinanced from 4.5% 30 years to 2.25% 15 years half the interest and almost half the term PLUS throwing in an additional $1500-$1800/month, we should be done in 5 years, while only paying 12k on interest over 5 years without risking our house. - it all comes down to Interest and extra payments, paying a mortgage down on a 2.25% 15-year loan is going to be faster, safer, and cheaper than paying a 5% HELOC - folks there's no shortcut to pay your mortgage down fast other than making extra payments and refinancing to a lower rate, it's math not magic!
I think the point that was kind of glossed over was that by having the HELOC you still have access to liquidity. If you pay extra on a mortgage you are locking the liquidity in your equity where as with the HELOC it's credit so it can still be used for living expenses with a different interest rate model. Definitely more risky, but greater access to liquidity. I think that's what he is getting at if I understood correctly.
This scenario only works if the mortgage is your only bill. It excludes having to buy a car, credit cards, or any other debt that you currently have or will acquire in the near future. How many people on here can actually afford to pay between $2500-$6000 or more per month to meet the time limit of 10 years? After ten years, that helix will add interest, taxes, and fees for not meeting the time limit. If you have a credit card and have spent $3000 on it, you know how long that will take to pay off meeting the “minimum” payment. It would be nice if RUclipsrs would actually give realistic advice that work within the realm of reality.
He also ignores the fact that you're not going to get a $270k loan when your home only has $100k of equity. Your home would need to be worth $445k to get a loan big enough to pay off the mortgage like he's saying.
@@ChristiantrospectiveGamer Right, you can't get a heloc for more equity than you actually own. I thought at first that he was talking about a $450k home.
If I want to write off my mortgage with a HELOC, there will be a penalty fee because my bank got us to sign a 5 years agreement for fixed percentage and only allows a yearly 10% cash on capital payment. Very interesting video but there are some limits to take into account.
Heloc interest rates are controlled by the bank. So the varied interest can change at their whim. Also If you get a Fixed mortgage interest rate, it's no longer a Heloc (line of Credit) it becomes a Home Equity Loan (i.e. same as a Mortgage). Also either way if you take out a loan/Line of Credit on your home, you are still borrowing against the Equity. If you Owe $60k on a mortgage and you open a Heloc and moved the $60K to a Heloc, you still owe $60k on the house. And you LTV is what your home is worth MINUS WHAT YOU OWE! SO you would only have a $70K Heloc tops. This guy is wrong on many levels. I just went thru all this in June of 2021 with great Credit. Just put 100% of what you make into your home loan and use it like a Credit Card *Face Palm* this guy is going to lose people they're houses faster than the economy in 2008.
Actually Pat, I've been teaching this concept since 2015. Out of 1000+ clients, we had ZERO clients who had an adverse event on their HELOC. (HELOC closures, freezes, or limit curtails). There are fixed rate HELOCs and I have closing statements to prove it. You just need to know where to look for them ;) And I don't think you understand the strategy. Most people who dont understand don't want to understand. They're often fixated on what they already know OR they made up their mind that they're right no matter what - never wanting to learn. Usually, these types of people stay average all their life. They care more about being right than growing/learning. So you get to choose Pat...
Idea is to deal with daily interest vs amortized interest. HELOCS are daily interest, meaning, they arent front loaded but divided daily instead based on how much you owe. As long as you spend less than you make, which you should be doing, you are paying extra towards principal of your “mortgage” per payment. For example, lets keep numbers simple. You make $5000 a month. You have $1000 in bills. Mortgage payment is $3000 but minus taxes and insurance say principle interest payment is $1500. Lets say anything not used goes towards mortgage. So you are sending $2500 to a HELOC OR MORTGAGE. On amortization schedules, during the first 7 years or so, a MUCH higher chunk of the $1500 you paid, will go towards interest, and rest would lower your remaining debt. Imagine if of that $1500, MORE money during the first 7 years was going towards balance; because it’s simple interest. It’s calculated daily and evenly throughout the term whereas amortized loans are structured to take more interest at the front half of the loan. Thats the simple answer.
We personally have a friend who owns four homes and has done this very strategy to pay off two homes already and is working on his third. He has coached us over the past two years on how to do it, and we are finally going to start. It's complicated, but it works. You have to have decent cash flow and be very disciplined to be successful.
@@TheKwakBrothersso is the strategy to make weekly or monthly micro payments towards the principal? Because if you're making just 1 payment towards the mortgage per month then it still amortizes at the same rate no?
This is NOT a "Recession Proof" strategy and many people lost their homes in the 2009 mortgage crisis who got stuck with high-interest HELOCs. A HELOC has a variable interest rate versus a Fixed-Rate Mortgage. You might start out with a low HELOC rate of 5% or so, but in these times of 2022-2023 that rate might go up two or three percentage points. Don't make the mistake that several people who did this back in 2008 did. This is NOT a new strategy. One of the biggest gotchas in this is that most people are not good at managing their extra money. Having access to a whole bunch of it makes many people spend it too easily. And when you do you no longer have any equity left in your home. Your home should NEVER be a credit card.
I'm also a proud beneficiary! I've built my portfolio massively and still building. Started with a RUclips referral just like this and a few thousands. I'm way up to the profits now..
In the end of the day , it is how much extra money you can pay monthly towards you either mortgage or HELOC. Get normal mortgage, pay extra$200-300 towards the principal every months and you will cut off several years and interest rate. put $500-700 towards the principal and you will pay in 15 years :-) Mortgage interest is always lower than HELOC and it is fixed. Heloc is variable and might go up after a while,
So basically you replace your home loan debt(at least some of it) with heloc debt and pay off the heloc debt, then do it all over again. Why not just put all extra money into extra mortgage payments instead? Why bother with the heloc at all?
From what I know after watch this video: Average daily interest make you pay high interest at first and since the balance is high at the beginning so it would work the same at mortgage high interest and low principle at the beginning and opposite at the end. So you able to shave off mortgage pay low interest and now you pay high interest and still pay principal the same way as mortgage. So mortgage and Heloc the same except for open and close end. I would recommend use properties as an asset and use this strategy for investment properties if you want to buy a house as a liability buy it with all cash. Edit: Unless you mean HELOC will charge you interest fees every month and paying the balance and interest is separate unlike mortgage if so please include it in the video. Edit: Also putting your income to the Heloc do not mean that money 100% gonna pay the balance it also includes interest on it so the bank can make money.
IMHO: Don't pay off your mortgage in 5-7 years, that's not the best use of your money and that's not the fastest way to build wealth. Invest that extra income (assuming you have extra income) and take advantage of compound interest. Don't be house poor .
@@jmarie7405 True and if, God forbid, you lose your job and have no income fall back on you'd still have to pay for property taxes, insurance and other home related expenses.
At that point you would be building wealth contributing to various accounts, and you would also have an emergency fund. All else fails sell the house and, or other assets.
@@blaizon at which point? this plan is based on 5-7 years where any "extra" income gained is "invested" in a single family house. The average length of time at one job is about 4-5 yrs. If in that 5 years, you are not diversifying your financial portfolio and only "investing" in your home and you encounter a series of unfortunate events, then you would indeed be left only with a house. Maybe you'll walk away with something if the housing market is hot, but if we hit a recession or low market during that period of time then you are just out of luck. I am not saying it's a bad idea, it's just not for me because it relies on the assumption that nothing unfortunate will happen. I rather hope for the best and plan for the worst and for me that means redirecting any "excess" revenue I have into at least 3 different income generating avenues.
BUT.... in case of any unfortunate events having a HELOC which is an open ended product will allow you to be able to grab any extra money at any time from it but in a Mortgage if anything was to happen to you you’d have to Refinace ( 3k average fee ) and start completely over and you’d still have ridiculous interest upfront and as if you just bought the house over again. Being able to pay a home in 5-7 years compared to the average 15-30 years is one the biggest investment you can make.
Pertinent changes since this video was released? HELOCs are tougher to get with higher credit score requirements. Interest paid on HELOCs are no longer federally tax deductible. Interest rates have shot up allowing for greater APY on bank deposits and CDs. And this from someone who used a HELOC as an investment arbitrage for many years.
Hello there @YankeeStacking, so a few things to note. HELOCs are non-QM meaning that different banks have different underwriting guidelines. Some will offer HELOCs at 660 FICO... and some have a hard limit that starts at 720. As far as the tax dectibility question, they ARE deductible as long as the interest cost is derived of the original principal balance - not draws for non-housing related expenses. In regards to interest rates, one of the things we say over and over for our strategy is that the interest rate is not the enemy - time and balance is. We have clients who have 6,7,8% APR rates on their 2nd or 1st lien HELOC but they still come out on top by saving DECADES and THOUSANDS of dollars of savings even though they might have a low fixed rate mortgage of 3 to 5%. I would encourage and invite you to download our free calculator and see for yourself. Plus, we're HIGHLY rated on Trustpilot and BBB. You'll notice that most of the 5 star reviews are farily recent: www.trustpilot.com/review/thekwakbrothers.com www.bbb.org/us/il/st-charles/profile/real-estate-consultant/the-kwak-brothers-0654-1000017204
The only part I don't understand is, most of us get paid every 2 weeks or twice a month and I would be paying that daily interest at that higher daily interest until each payday correct? You say in a few short days you add $6,000 more which the average household income is not close to that. I'm just trying to get my mind around it.
HELOC interest is always higher than Mortgage interest. Interest payment = owing amount * interest rate => The interest payment will higher if we owe the same amount in HELOC compared to owing in Mortgage. The benefit to have debt in HELOC instead of in Mortgage that is the flexibility. We can pay it off anytime while in Mortgage we have some limitations to pay it off right away (if we want to) depends on banks/creditors plus penalties…
I feel sad that even though I am lnvesting, I don't have the brain power t0 dig through how each company is doing, is this a good time to buy stocks 0r not, my reserve of $450K is laying waste to inflation and I don't know what to do at this point tbh, I need solid data 0n market trajectory
Grace Ellis appears to know her stuff; after researching her, I discovered her educational background and qualifications on her website. I sent her a message outlining my experience and goals; hopefully, she responds soon..
Patricia Grace is quite popular on Bloomberg I doubt if there is anyone who is serious about stock trading that doesn't know her. She has helped me quite a few times in growing my portfolio and it was blissful without any setbacks. she is a tough person in an industry that demands clairvoyance
By your calculations, the 90% value on a $300k house is $270k. The mortgage is $200k… so the HELOC would only be $70k for the grand total of 90% equity. So you would be able only pay the mortgage down to 130k using the HELOC.
Excellent presentation on how to convert a purchase money mortgage to a HELOC that bears a higher rate of interest. So where in the equation does the house actually get paid off?
Why would you want to pay off your house early? I'm sure your interest rate is less than 4% and you can easily earn double that amount by investing in the stock market per year, not to mention you retain the tax write-off in most cases.
You could either invest a small amount of money and pay your normal mortgage payments for 30 years or get intense pay off your mortgage in 5-10 years then have the rest of your life to invest even more money.
If you're making more than the interest on a 30 years mortgage go for it. I'm going to pay my mortgage off in 10 years n save 2o years of payments equals more money n freedom
just ran the calculator. with my current situation, i have $1,195 cash flow monthly and could pay off my home 10 years early if i wanted to pay an extra 156,000 of interest. but if i lowered my living expenses by $1,000 (sold my truck and got something cheaper and cut back on some other stuff ive been wanting to cut out anyways) my cashflow would be $2,195, and i could pay off my house (still owe 380,000) 18 years early with the added cost of only $15,000 extra interest paid. in my opinion paying an extra $15,000 to be paid off nearly 20 years early is worth it for sure. make sure yall run the numbers and see if you can maximise you cash flow, if you can do that, you can do this strategy
The only issue I see with first lien HELOC, assuming bank won't pull the HELOC when the next great recession hit forcing you to sell or get a new mortgage in adverse market conditions, is if the HELOC is tied to variable interest such as prime -0.5%. If we enter hyper inflation, a traditional front-loaded mortgage may fare better longer term if interest rates rise like in the 70's due to all of the money inflation by the government.
So two things there... we've never seen a 1st lien HELOC get "pulled" personally with our clients. In fact, one bank has never had a borrower foreclose or default on their 1st lien HELOC since 2007. It's got ALOT of safety nets, in my opinion. Second, you're right about the hyper inflation but the problem is that most homeowners stay stuck in the front-loaded mortgage forever since most refinance or sell/buy a new home e very 7-10 years.
EXACTLY!!!!! In 2021 the average HELOC rate according to Bankrate was 4.08%. Today, in December 2022 that average is close to 8% which means DOUBLE the interest! So all that savings now just cost you 4% more to keep this strategy going. If inflation and recession continue, that HELOC rate will keep climbing.
if i knew this video i would definitely follow your strategy...i fully paid my mortgage in 5 years too but mine is totally different i used my TFSA account by paying off my mortgage. I got lucky with options and stocks that made money then i withdrew to pay my mortgage especially before the pandemic...good luck to all
FYI: This is bad advice for anyone who bought their home with a low interest rate. Statistically speaking (of expected value): If your mortgage rate is low, it's best to take as long as you can to pay it off, and put your extra money into other investments. Example: For me, after 30 years I will be $130,000 richer by investing $500 a month in a fund earning 7% annually than if I use that $500 a month as an extra payment into my mortgage at around 3% ($200K earned from investing vs $70k saved in mortgage interest). This works as long as you can invest at a higher rate than you can borrow. Also - Inflation is on your side in this case with a long-term mortgage. Sure due to interest you pay more for a mortgage than your house is worth now... but far less than it will be worth later. For other people with high interest rates (above or close to what they can expect to get through investing), then the HELOC can make sense, and you do want to pay off your mortgage as soon as possible, but you can't get one for more than what you already paid on the home + increased value of the home …so you can’t trade it for your mortgage entirely unless you have another asset to trade on.
Just found this video Very informative and detailed so I subscribed and gave thumbs up Going to binge watch the others you have Thank you for a great video
Interesting but I can't help but feel this comes with more risk, and that there are safer (and easier) ways of accomplishing the same thing. With regards to risk, I suspect you may have tax implications once you used the heloc to pay down your credit card. At that point, your heloc funds are not used exclusively for buying or improving your house and technically no longer qualifies for interest deduction from your taxes. Would appreciate any tax professionals insight on that. Second, merely paying a little bit more towards the principal every month can knock of years or decades from your mortgage and save hundreds of thousands in interest. The best part is this is really simple: Your mortgage processor likely already lets you specify an extra amount towards principal every month, no funny hoops to jump through, no risk.
Where is calculator, please? My original mortgage is at 2.4% interest rate. Why I would pay it off from Heloc and start paying 7% interest even if heloc has a daily interest?
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Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Catherine Morrison Evans comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.
I am on her site doing my due diligence. She seems proficient. I wrote her an email and scheduled a phone call. Thanks for sharing
I paid off my mortgage in 8 years. Was paid off the year before Covid. Best decision I ever made. I have no CC debt either. Everyone talks about inflation and high interest rates but i haven't noticed. I created my own personal economy so I don't need to worry about interest and inflation. 🙂🙂
Did you use this method?
@@Izzy267NZ I did huge prepayments (took on extra work for few years) and was lucky enough to lock into a really low interest rate at the time. The big monthly prepayments ($1500+ my regular payment) really made it go down fast. I was super focused on it though. Now I'm focused on retirement savings because I'm not quite where I want to be. I don't want to live on Ramen noodles when I retire, but I also don't want to travel the world or anything either. Lol
Why didn’t you put that money in stock market? You would have some profit. During the Covid the rates were super low, people were getting refinancing. It was basically free money with 2.2 - 2.5% interest rate.
@@julget3648 It is a far better rate of return to pay off a 25 year amortization with current interest rates rising fast. Plus, the value of my house has now risen to almost 3 times what I paid for it, and I now have no mortgage. Way more profitable than a 2% return on higher risk stocks. I also wanted to semi retire sooner by paying off my mortgage.
@@purplenaturellc733 this is incorrect due to the trading fees it would cost per investment transaction as I'm not from the US. I do have some investments in equity growth funds which are doing well. I believe in balance and security so I'm personally more comfortable with a paid off mortgage and investments on the side.
How to pay off your mortgage faster: trim unnecessary expenses. Increase principle payments. Simple
Thats what I am doing, after my divorce I refinance at a lower interest rate and did a 15 yr instead of 30yr.
Maria Brisbane helped me secure HELOC with 650 credit score
@@Rainbowsun1check her out on Google or check her website
Sure we are going to talk about helix’s in this video but I’ll give it a chance
@@Rainbowsun1you still paid mostly interest at first
Despite the naysayers posting in here, we did this circa 2006 and, while we didn't pay in 5-7 years, we did kill it pretty much in 10 (instead of 30). It does work.
BOOM!
Bad ideas to pay off mortgage. How about never pay it off and use equity fir more properties instead and make more money live rent free
@@klk538 interesting... That's exactly what we teach on our channel. So who are you arguing against here?
I can see how this strategy would be incomplete without using your new found equity increase to investment opportunity and therefore pay down your increased debt! Crazy but i think it woukd work. @klk538
I wasn't financial free until my 40's and I'm still in my 40's, bought my third house already, earn on a monthly through passive income, and got 4 out of 5 goals, just hope it encourages someone that it doesn't matter if you don't have any of them right now, you can start today regardless your age invest and change your future! Investing in the financial market is a grand choice I made.
I understand that tomorrow isn't promised to anyone, but investing today is hard for me now because I have no idea of how and where to invest in. I would be happy if you could advise me based on how you went about yours, as am ready to go the passive income path.
@@obodoaghahenry9297 Even with the right technique and assets some investors would still make more than others, as an investor, you should've known that by now, nothing beats experience and that's final, personally I had to reach out to a stock expert for guidance which is how I was able to grow my account close to a million, withdraw my profit right before the correction and now I'm buying again.
@@Manuelcliford Sure, My advisor I'm in touch with is "Julie Anne Hoover" , she works with Smith incorporated and interviewed on CNBC Television. You can use something else, for me her strategy works hence my result. he provides entry and exit point for the securities I focus on.
@@marcelrobert9569 I just looked up this person out of curiosity on the Google internet; surprisingly, she seems proficient. I thought this was just some overrated BS, appreciate this.
No one cares
Great video. I’m making my last mortgage payment this month. It took me 7 years to pay off my house after paying off $200k in student loans. Discipline and living within your means was key.
Your an inspiration 🎉😊
How much was your mortgage and what is your salary? Those numbers matters as well.
@@ToOpen6seven I make $370k per year and my total mortgage was for $360k. But I pay $70k for my children’s schooling per year while saving $150k in their 529s.
@@imdoc7872 what were you doing to be making 370k a year
@@aminbalank9962 I’m a doctor. That’s my salary.
Year-over-year inflation stood at 6.5% in December 2022-the lowest that figure has been in more than a year. Inflation was in line with what economists expected and gave many of them a reason to believe that the peak of inflation may be behind us. I have approximately $150k stagnant in my port_folio that needs growth. What is the best way to take advantage of this downturn?
This is the type of stuff that should be taught to us in high school.
EXACTLY!
Fr Fr! I would have loved to learn in high school that I can get a HELOC against the value of my home. Who needs equity in a home “equity” line of credit? Not me!
No, it really shouldn't.
I can understand why most millennials and zoomers say they'll never own a home or retire.
@@brettmortenson5181Maria Brisbane helped me secure HELOC with 650 credit score
@@AnalyticalMenacecheck her out on Google or check her website
*Creditlord* literally gave me a fresh start. Before, I was stressed out and exhausted from being turned down from lender to lender. As of now, I'm currently in the phase of purchasing a home. I'm more confident and I feel more secure.
Maria Brisbane helped me secure HELOC with 650 credit score.....
I finally paid off my whole mortgage in 5 1/2 years. This has been quite an achievement for me. Thank goodness I did well in saving money for many years since I was a teen.
Wow 👍👍👍 congratulations!
@@charlenelynch6505 Thank you very much!! It was quite an accomplishment!
Congratulations 🎉 👏 🎉 well done
@@princessmdify Thank you very much for that!
Well done... I paid up in 7 nd a half... I'm on the second debt, how go for 5years?
Great video, my wife and I have been rounding up our payments to pay down the principal balance. It may not be much over our mortgage payments, but it shortened our loan by a few payments earlier. $25 now is $1000 later . We just refinanced and shortened our loan by 3 years and received a lower interest rate, it's going to save us about $50k overall
You can also call your bank and see if they would allow you to pay your monthly mortgage payment via bi-weekly. You gain one extra payment at the end of the year.
This seems very fascinating but has it changed because of increasing interest rates but especially increased inflation?
Nice that’s beautiful
@@brianesbaugh6897 my heloc rate has gone up a ton. I’m in year 11 of 3.25% and haven’t paid a dime extra. I’m buying up as much as I can in stocks. Owe $225k on the house and invested $40k last year in the bear market. Hope to do that much or more this year. We make $220k (Dual income) before taxes but live on about $10k a month.
I have been thinking with current technology of online banking, why couldn't I do DAILY payments and save a ton, especially if I can increase the amount paid over the monthly mortgage amount. I just refinanced and was told I can make extra payments without penalty. Why not just schedule daily payments? Has anyone ever done this? I couldn't find much by Googling it but when I did it with a mortgage calculator it seems to make a big difference, I can pay off a 30 year loan in just over 10 years by adding a few bucks a day.
I did this two times. The first time was when I got divorced. I paid off a 50k mortgage in 3 years as a single mom. Then, I did it again , mostly .B. As a single Mom. I paidas an extra $600.00 a month. I am thanking God above for leading me in that direction. I should have had a custom built home (expensive home) paid off in 2016. What I couldn't anticipate was my future. I had to have a back surgery that didn't pan out! I became disabled. I thank God everyday that I did this. It made the difference between losing my home or almost paying it off. Listen to this guy. He is right 👍
Im only paying 200 more on top of my mortgage u think i should pay more
Just want to say that I'm Canadian, so the bank rules might be different in your country. First mortgage was paid off in 5 years with an interest of 9.4% (back in 1994). Saved up and purchased a rental home and paid that off in 3 years (4.3%). There are many ways how to achieve this. Check with your bank and find out the rules on your mortgage. With a fix mortgage, most bank will allow you to make one extra payment per year (either calendar year, or anniversary year). So basically, just save as much as possible and deposit as much as you can (to the limit....some bank will allow you up to 20% of your initial value of the mortgage borrow....so $200K, you would be allow a max of $40K per year at 20%). If you're your income is weekly, you would get 26 pay check per year, and not 24....meaning change your mortgage payment to weekly...by doing so a 25 year mortgage will drop to about 20 years....and you would not even feel any pain. Always remember it's not what you do in the last few years of the mortgage, but the first few. Just use something online and see how much interest you're paying vs the principal. Example, let's say your mortgage ($300k) payment is $1,700/month, about $1200 is in interest, while $500 goes toward principal. I know this will be hard, but for easy math, you were to find a way to save $1K/month, that's $12K you can deposit toward the mortgage. By doing this, your mortgage had just dropped by 20 months....20 months of interest, so about $10k in savings (not to mentioned that you paid off your mortgage faster, meaning more time to save for retirement). IF your mortgage is on calendar year, you got a few months to deposit some money towards your mortgage...even it's just $500 (using the example above)...just that alone will take one month payment off you total mortgage...saving you $1200. Can't stress my method works, the only problem is that everything is on paper....meaning you don't see the vacation, or the brand new flat screen tv....you have to wait, and when your mortgage is paid off....you can sit back and enjoy....retired at the age of 40.
Per retired at the age of 40, Too bad, i'm 40 and just bought a new home. thanks for your advices, i will follow it as much as possible.
I just turned 25 and I’m buying a house soon. As you said, I did all the calculations on paper and probably won’t be able to get a brand new car or travel every year but it will feel great to cut the debt from 30 years to maybe 10-15 and be debt free in my late 30s/early 40s
Good job explaining all this. 👍
@@miguelbernal1435 way to go!
Im 6 year in my journey to pay my house im 14 years.
Puttin more than asked to pay principle faster. Still investing moneu eslewhere too cause life made me learn not to put all my eggs in the same basket !
The bank already fix your monthly payments for 360 months. You can pay them off in 30 years or shorter but it won’t change your total interest. You just save your current money to pay your future bills.
And always future money is cheaper than current money.
Huge trouble for big spenders or gamblers. Unlike a checking account, your house and property are gone when your equity balance hits $0 on a HELOC.
I have worked in banking for many years and you nailed it. 99% of people do not get it
It’s very simple, so basically this mortgage vs heloc is like life term insurance and whole life insurance. Having whole life is like having a bank account, the money you take out you eventually put back in and the interest you have also goes back into the account so it’s almost like paying yourself and going in debt with yourself. Very simple but also dumb because what happens when you owe yourself and can’t pay yourself back??
@@Christorment5 The people who benefit most from whole life are the agents who sell it. The commissions are some of the highest of any insurance or investment product.
But will the banks let u do it? Wont they charge hefty penalties for paying mortgage early?
@@jaspreetbuttar332 Most single home mortgages have no prepayment penalty. FHA and VA loans can't include them and if mortgage company does include them they can't last for more than 3 years.
Mine is with Rocket and I've paid extra principle for more than a decade. Just $60 extra a month took almost a year off the term of a 10 year refi.
I’m 99% of people
This was a great informational video. Hoever, you forgot to emntion an important fact that you need to have more equity, in fact more 80 to 90 percent of equity than the balance your current mortgage debt to pay off and close your mortgage. Most people may not have built enough equity in 7-10 years to be able to pull a HELOC out and pay the 30 year mortgage balance off. Plus, we are talking 7-10 years into the mortgage and then just starting to pay off the mortgage and start the HELOC with another 5-7 years, whioch will be som ewhere around 20 years. Yes it will reduce 10 years off of 30 yr mortgage, but isn't that also possible by just putting more toward principal in that initial 7-10 years (front loaded period). What's your idea folks?
Right, this entire presentation is bogus. He goes from bemoaning front-loaded interest, which yes, sucks. But then jumps to an example where he borrows 90% of a magical $300K in equity to create a $270K HELOC. Newsflash - there is no $300K equity in almost any mortgage that is still in the year 1-7 age (some coastal & crazy markets excluded). A point to be clear on - a HELOC is borrowed against EQUITY, not against VALUE. Consider a 30 year, 5% mortgage with 10% down on a $300K house. End of year 7, loan principle is $237K. To grab a 90% HELOC to cover that, you would need $263K in EQUITY, which means a home VALUE of $500K. Maybe the home appreciated 67% in 7 years? That's 8% a year, with no corrections, so a very big maybe, but even then you're already 7 years into the front loaded mortgage interest! You've already missed the big payoff he is selling! There is basically zero scenario where this HELOC strategy could possibly work any earlier than year 7, and even then only in a perfect world of ever-increasing home values.
And, that leaves out the very real chance the bank could call your HELOC. He downplays that, but it creates a 30 day window where you come up with $237K cash, or you're on the street. Do you really want to run that risk? Misery loves company, so a market downturn + housing downturn + job losses all ride together, so the circumstances in which your loan WOULD be called are all during the worst possible time. Also, the cash swap to credit card strategy requires so much discipline and timing, it's essentially impossible in the real world to repeat month after month for years, and leaves you so illiquid for other emergencies, it's just terrible, terrible advice.
Also, many HELOCs are variable rate. Also, many have pre-payment penalties, unlike mortgages. This advice has so many landmines, that the cash-strapped people this advice is targeting are almost guaranteed to get sideways on it. The only good news is that almost no bank is going to engage in it, because you'll never have enough equity early enough in your loan to come anywhere close to the savings he is selling. So this is really just a 20 minute smokescreen.
Just pay more towards your principle if you really hate mortgage interest. Or better yet, invest the difference in a Roth IRA wit superior tax advantages or a brokerage index fund that will likely return more than your mortgage rate over time.
That's what I was thinking, thanks for the explanation
Agree, that’s what I was thinking too. I’m like did I miss something here, where did this guy get 270k from? Just like 💨 out of nowhere says his home gained a value of 270k. Shady stuff
@6SpeedsGood What about putting the smallest amount down then on the 1st mortgage payment; give as much as you possibly can ?
@@6SpeedsGood if you have not paid extra payments, even theoretically it's not possible to pay down a 30-year mortgage in 7 years
FINALLY! I've been telling people about the way amortization charts are scheduled ever since I figured it out. It's NOT common knowledge, and the banks don't want you to know about it either. THANK you, sir, for bringing this to light!!
Girl I’m glad you got it, I’m so lost
@@debz7682Maria Brisbane helped me secure HELOC with 650 credit score
@@debz7682check her out on Google or check her website
I have a Heloc from BOFA with a variable rate. When I locked in the rate I was told it can easily convert to a fixed rate after usage. Now that I’m ready “fix the rate” they claim the only way is to get a mortgage and amortize… make sure to pursue the fixed rate option up front. That is what I’m working to resolve now… good luck all.
BOFA is a den of thieves.
Maria Brisbane helped me secure HELOC with 650 credit score...
check her out on Google or check her website.
This doesn't work for me, but it may be fine for someone else.
There is a cost to opening a HELOC. Even if you use a HELOC to pay off your mortgage, you still owe that money as a HELOC. Having the interest accrue daily on the HELOC works best for the lender. That limit of 90% value, assuming you can get more than 80% value, is also constrained by what you owe on your mortgage. So in the example, you only have access to $70K calculated as $270K - $200K.
Assuming you already have a HELOC, paying off an initial credit card balance with a HELOC is fine. The reason is that you'd be paying off a high interest loan with a low interest loan (essentially a balance transfer). However, once the credit card is paid off, you should be able to pay off any future charges to the card at the end of each month without using the HELOC. If not, you are in for a world of hurt. It doesn't matter if you directly pay your credit card bill with your paycheck, or indirectly pay it using a HELOC. If you can't pay off the credit card and must carry a balance, then it is better to carry the balance on the HELOC than the credit card since the card will have a higher interest rate. However, you need to bring in enough to pay off the credit card and pay back the HELOC. If your credit card is being paid off each month but the amount you borrow from the HELOC keeps increasing, you are still losing.
Your goal should be to pay off your debt fast. It doesnt matter if that debt is a mortgage or a HELOC. The HELOC allows you to borrow the equity in your home, but doing so will simply increase your debt. There is also a high probability that the interest rate on your HELOC is worse than the interest rate for your mortgage.
The best way to pay down the mortgage faster is to pay more money towards the principal. Replacing a high interest debt with a low interest debt (a reason to refinance) will help, but you still have to pay off the debt.
exactly. When I look at the title of this video "Paying off mortgage in 5-7 Years", I was like "Woah, it's must be some secret hack, let's see what's going on here".
But after spending 25 min listening to this, I realized that the core solution (at least in his case) is to put $6000 into paying off the debt (doesn't matter HELOC or mortgage).
If I had $6000 every month to do that, I might as well use $1000 to pay the mortgage and $5000 to pay the principal, then I'd pay off my $200,000 mortgage in just 3 years.
If I misunderstood the video, please explain it to me.
@@QuanNguyen-og6pq You didn't misunderstand, the video is garbage. If you owe $200K, that's $5,555/month for 36 months, no interest. There is no magic here, just smoke and mirrors while simultaneously putting folks into a seriously illiquid position in life, while also putting them at the mercy of a bank call on the HELOC, a catastrophic position for almost anyone. Good times!
And if your mortgage rate is below 4 or 5, you're even better off putting that extra $5k into a Vanguard fund!
@@6SpeedsGood Thanks for clarifying.
easier done if you have a certain income etc. As well depending on the interest rate it may not be better to pay off the mortgage as quick and better to actually invest money in more income producing opportunities that pay far more than what your mortgage costs. Also yes you can put yourself in a 15 year but I prefer 30 and treat it like 15 this way if something happens financially in your life then at least you are not obligated to a higher monthly payment !
I am doing the same and adding as much additional principal payments as I can but I dont see the loan being paid off much faster
@@paulmasonmiller then you're doing something wrong!! If you make one payment extra a year on a 30-year mortgage you will cut off 7 years right off the bat!! You need to call Sam Kwak I know him personally he's awesome and so intelligent with money
You clearly missed the point there are no extra payments being made you're paying the same amount just threw a different Source instead of dropping it into your checking account you're dropping into your HELOC account. You are not understanding what was just demonstrated
Same!
@@paulmasonmillerMaria Brisbane helped me secure HELOC with 650 credit score
Duh, no kidding.
I used my mortgage as my saving account. Meaning that I was getting 4 38% interest on every payment I made. I kept a few thousand dollars as an emergency fund and ALL the other money I had went towards my mortgage. I was making 6-7 additional principle payments per month. If I got a bonus from work, it all went to the mortgage payment. All my tax return money went directly towards the mortgage. I found a Heloc at 2% and took that. I paid off the remaining balance in 1 year. I paid everything off in 6 years.
I didn't have much in savings then but I sure do now.
You spoke correctly at 17:00 check to mortgage at $200k, but at 19:00, balance should be $194k after applying $6k income to pay down heloc. Concept not lost, but details are important when dealing with finances.
My wife and I bought our home in Dec. 1989, and paid it off in mid 1994. It was only $29,500, but we were only making $23k a year, together. It's just a matter of denying yourself some luxuries for awhile. Our house is worth $110k, now, and we're debt free today. We are far from being rich, so anyone can do it if they really want to.
This isn’t the best example. Making $23k a year with a mortgage of $29,500 is like making $312k/yr and having a $400k mortgage.
Average mortgage is close to $800,000 now, not a realistic comparison in this economy at all. Have a good think about it and try again 😅
Thanks for posting, all I could say has already been said here in different ways. I just called my credit union to open my HELOC. You've made a subscriber out of me.
Sam I was a Loan Manager for a bank and NEVER saw a fixed HELOC and most of them can cap at 18%. They are priced according to prime plus 0.00% and sometimes there is add on.
I started doing this and at first I would send a $5000 to $7500 check with my HELOC, then one month I sent $15000 and to my surprise my payment had dropped $400 a month, I called the loan company to ask why and I was informed that anytime I send a payment of over $10.000 over the mortgage amount they reamertize the loan.
This is crazy, it's like living off a credit card! One has to have nerves of steel to keep track of what's going on.
Not really. Just set an autopay on your credit card so you don't screw up and end up paying interest.
Paid off 30 year mortgage in 10 years. Just made double or triple principal monthly prepayments.
I actually love how clever this is. The biggest downsides I can see are 1) Finding a low interest, fixed rate HELOC, and 2) Making sure you have some control over when the lender turns off your draw period on the HELOC. I know you're saying you've got lenders who haven't shut down the draw period during economic downturns but those types of lenders are few and far between. Anyways-- great info and video!
Thanks for getting it! Lol
@@TheKwakBrothers The math works out, I ran an 84 month model. Exactly what Dan said, without those conditions it's pretty risky potentially having to come up with the balance unless the terms are concrete. Was about a 35% deduction for interest paid even compared to a 15 year.
Its not about the interest rate on the HELOC or the 30yr Mgt. Its about time to pay off your Mgt and using lazy money accumulating in one's checking account.
@@marshallwise1763 doesn’t that all compute to having a low interest rate?
@@keysoteriq2590 CMG, even during the 2007 crash they kept the HELOC open. Reason, they only work with A paper people.
Excellent & right on time for me! Just talking to my Loan Officer about a HELOC! And recently made the decision to 'Payoff' my home. Thanks for the education!
I'm impressed with how easy you were able to break down and explain this info. Nicely done
Maria Brisbane helped me secure HELOC with 650 credit score
I did mine in 4 years by hustling 2 full time jobs. Thank God I did it! Now it's time to start a business and increase my investment.
Congratulations!!!
This is not a calculated financing advise but a lifestyle advice in my opinion. With this method:
-you don’t put any money away
-your heloc available balance is what you can use for emergency
-pay off as much mortgage principal as possible for 5-7 years
-get credit card points
You can technically achieve the same result by paying extra principle. For example if your mortgage is 200,000 at 30 years at 3% your payment is $843. If you make extra $1800 per month ($2,600) you would pay off that mortgage in 7 years. Your literally saving maybe $4 in interest per month with the extra $1800 balance reduced on the first month (1800 x 3% =54 /12 = $4.5)
With the interest rate being so low for a fixed mortgage this makes 0 sense. Get a 30 year fixed mortgage and dedicate yourself to paying extra each month. Your interest/principal for the following month is AUTOMATICALLY ADJUSTED from you paying extra $1800 the first month so your not paying interest on the previous months balance.
*coming from a retired loan officer
Correction if your income is about $10,000/month then by putting everything into heloc each month you would save $9,200x3%=$276/12=~$22/month and then following month the difference in interest goes down to YOUR INCOME - EXPENSE - INTEREST. So for example 10,000-6,000 expense - $500 = 3,500 x 3% / 12 = roughly $8 per month. Really penny pinching with all the risk associated
My thoughts exactly
We paid off our 30 year mortgage in 6 years and 3 months. We worked every hour we could and paid every extra $ we could every month. No HELOC. I do not borrow money to incur debt to pay off debt. We are debt free. No car loan, no credit card debt, no mortgage, so student loans. Any credit cards we use, we pay in full every month. 800+ credit scores for both my wife and I.
Now we are both retired. 😁
When 15 year APR is near 2%, it's advantageous to just pay extra monthly. Rather than a 4% - 6% HELOC.
Exactly. All we do is overpay our principle every month by just $20. We closed April 13th. First payment wasn't due until June. We've already knocked 3 1/2 YEARS off the life of our 30 year fixed mortgage
You have to do the math based on the rates you can get. I have a 2.24% HELOC. The lowest 15 year mortgage I could find is 2.375%.
@@brianparks8321 in my case I bought down the rate to 2%, and just closed on my 15 year mortgage.
Depending on the balance it will cost a lot more to send extra payments.
If you send 10-15k chunk and pay down the heloc it will be much beneficial than to send 416 dollars of extra payment monthly for 2 years. The amount of interest in 2 years for 10k will be 420 at 4%. But those 10k will eat at the principal and reduce your interest greatly
When we bought our first home, back in the day when things were cheaper, we were told to put and additional 50 dollars per payment and that goes directly to the principal.. and then after that when we sold and got a little larger home (went from a 725sqft home to a 1200 sqft home) and we only locked in for a year, we decided to double our payments to pay it off in 12 years, well we paid it off in 10 years. If you can afford it, tighten your belts and go double payment for as long as you can. With our first house, we tried that HELOX, and didn't like it, it was to flexible for us. we needed that locked in mortage. Cause with the HELOX you got a credit card to go with it and we over spent without really keeping track of it, till a light went off in our heads, and we buckleted down and went back to a mortage. There was no more stress on that. knowing it was coming down for us. Just our thoughts and experiences.
For those who live in the UK and stumbled upon this video, the HELOC is equivalent to an Offset mortgage. I use the HELOC (Offset)-Credit Card strategy as well, and it really does work.
I'm in the UK and just stumbled across this - please could you elaborate on the offset credit card strategy?
@@matthewhook3375 Sure. The basic premise is to use your credit card to maximise the length of time you keep the most amount of money in your Offset Mortgage account so as to minimise the amount of interest you pay on your mortgage.
So you make all purchases using your credit card and don't use your debit card at all, because if you do, money will go instantly from your account. If you use credit card, you have 1 month before you have to pay, and this keeps more money in your Offset Mortgage account every month. And since interest on your mortgage is calculated daily, the longer you keep the most amount of money in your account, the less interest you're charged.
And if you pay off the entire balance on your credit card each month, you will maximise the benefits of this strategy.
Another tip is to change all your monthly direct debits / standing orders to a day or two before you get paid your salary. This will keep the balance in your account to the maximum level each month, thereby incurring a reduced interest charge. This is the Offset-Credit card strategy in a nutshell. In fact, you can do this with a regular bank account too. Keep the most amount of money for the longest time to earn the most interest per month.
@@theopenrepublic thank you for the explanation, I guess my next question is what is an offset mortgage account? I haven’t come across these.
I already use an Amex cash back credit card for my day to day spending and my salary is paid into a current account, where it earns a pathetic amount of interest until it goes out to pay the Amex bill at the end of the month.
@@matthewhook3375 With an Offset mortgage, you use your monthly savings to "offset" the amount of interest you're charged each month on your mortgage. So if you have £10,000 in savings and a £100,000 mortgage, you pay interest on £90,000 (£100,000 - £10,000). You can then use the saved interest to (1) reduce the amount you pay monthly for your mortgage, or (2) reduce the term of your mortgage - so you pay if off early. The more money you have in savings, the greater the benefit you derive from offsetting. Another advantage is that when interest rates go up, you get a bigger benefit from the offset. You will also save 1,000s of £ in interest over the lifetime of your mortgage.
The big drawback is that you don't earn any interest on your savings - because the interest is being used as the offset. But TBH, the interest rates are so pathetic at the moment that you aren't really missing out.
If you want to know more, check out Barclays, Coventry building society, or Clydesdale Bank. They offer offset mortgages and have more information on their websites. There used to be more banks offering offset mortgages, but in recent years, many have stopped offering these. They are well worth thinking about if you are looking to re-mortgage.
@@theopenrepublic thanks again for the explanation, I’d never heard of these mortgage products. Unfortunately I’ve recently remortgaged to Lloyds on a 10 year fix at
if you're watching this in Australia, please disregard this video. he is pretty much explaining a loan offset or redraw account but I guess the US banks don't offer that. FYI - Title is abit misleading, yes this works for sure, but to actually pay down the loan in 5-7 years, you'd need at least 60-70% of the mortgage loan balance in savings already then add it to HELOC (i.e. offset account) or alternatively pay additional voluntary repayments.
Thanks. I was starting to get confused thinking I've done the wrong thing 🇦🇺
Am I missing something? This is incredibly informative but how did you get a $270k HELOC when you still owed $200k on a $300k valued home? How was the HELOC $270k vs. $70k? I get you're using the 90% rule but I thought a HELOC was only for the actual equity amount (i.e. $70k in this instance?).
You're not missing anything, the math does not work in the video example. HELOC's are usually structured at 85% of the available equity in your house. So if your house is worth $300k and you have a mortgage balance of $250k your max available HELOC would be $42.5k.
Used a 1st LEIN HELOC vs 2nd (traditional) HELOC.
@@quasimo1412Maria Brisbane helped me secure HELOC with 650 credit score
@@BMLM49check her out on Google or check her website
@@albajessicalove Who?
Just a bit of caution...If home values go down the bank could freeze or lower the amount available on the HELOC and then you will be stuck with credit card debt.
Jus pay more than you owe ....simple as that and you'll be paying it off in no time.
An extra payment a year will pay it off in 22 years.
Yes much simpler
@@MichaelDavis-uu9zh pay more on principle every month
@@emmanuelsepulveda2468 how many extra payments a month shots it take for 7 years?
@@emmanuelsepulveda2468 we are doing the same, and we’re also halfway - and my name is Emmanuel too ! I had to double take 😂
Step one. Have or make a ton of money.
You never explained how the HELOC is paid off in 5 to 7 years. You are only replacing mortgage for HELOC and you still paying on a loan.
He didn't explain that part very well but it's because your mortgage is amertized interest he did explained in the beginning of the video that you pay all the interest upfront. your heloc is not amertized it's a simple interest rate like a credit card accept with a lower interest rate, so your paying more money toward the balance every month and you will pay the heloc off way faster. I know it sounds confusing but once you understand how amertized and simple interest rates work it will make a lot more sense
Yes something is missing I got lost in between
From what I understand, your whole income goes straight into the HELOC, and your expenses all get paid through a points-rewarding credit card, then you draw upon the HELOC at the end of the month to pay off the whole credit card, thus paying no cc interest and gaining lots of points for travel and other rewards purchases. The big payments against the principle mean you pay less interest at the end of the month on the HELOC, and pay it off much faster. I think 🤷🏻♂️
It's simple; You're paying a few days of interest at the higher amount on the heloc vs. a full billing cycle on the mortgage for that $6000 in the example. It's genius.
Yes, and HELOC interest is variable! The bank can just decide at their will to increase your interest rates! It's better to have fixed mortgage rates rather than HELOC variable rates.
CLEAR AS MUD. We have always paid extra on our loan. We pay off all credit cards monthly. So no debt other than house pmt. But the "deposit all income" I will have to read over a few times. Don't know if I can do this because we just refinanced 1st and 2nd into 2.9% loan and 50,000 to remodel. Thought we were doing something fantastic. Now I will download your calculator. Thanks
It is so good to watch this today, after we just paid off our home a couple of days ago after only 5 years instead of 30! We did it! yay!!!
How you achieve that ? Is it through heloc ?
Congratulations
@@AzeemUrRehman No, we had an FHA mortgage and we didn't even put down 20% when we bought it. This gave me even more ambition to pay it off in less than 10 years. What we did was we paid more than requested for the principal every month and also I saved a lot out of my salary every month for this purpose. More than 50%. It took a lot of discipline and focus.
@@laurelleafr6091 So, how many additional/separate monthly payments did you make towards your principle?
@@EugeneCollins2024 I paid more towards the principal every single month for 5 years with the exception of the very first month. When i got my first mortgage bill back in 2016 i analyzed it and saw that extremely little was going towards the principal Seeing that I decided i will always pay more. towards the principal with each monthly payment. I didn't make additional payments each month . I only made the monthly payment adding more to the principal. Then in March 2019 I finished paying my car. I took that money of $ 250 every month that I now stopped paying and added it to the mortgage principal. Then ... Starting August 2020 I made sure every month my mortgage TOTAL amount was decreasing by 400. So depending on this I calculated how much i had to add to the principal. Finally starting January 2021 i made sure every payment was decreasing my total amount by 500 each month . Thus in May I had enough savings to pay off the remaining 76000 to the bank. I basically Brought the loan down from 91500 to 76000 in 5 years. Then paid the 76000 to the bank. Remember I put 16000 down when I bought it which was less then 20%. After the downpayment the loan started at 91,500.
For complicated banking reasons, This is only a good idea if you can get a HELOC with lower intrest than mortgage. Which is possible if you compared to a fixed mortgage but unlikely for a variable mortgage. Variables mortgage tend to give you the best intrest rate anyways and HELOC is a type of variable mortgage. I love HELOC, everyone should use it for used car purchases but I don't think this strategy would be better than a variable mortgage. US banks don't offer good variable rates though so it might be better there.
Maria Brisbane helped me secure HELOC with 650 credit score......
Liked and subscribed! Just bought a house and made my first mortgage payment for $140 over the regular payment
That’s all fine and dandy... but a HELOC is a home EQUITY line of credit, meaning you can only borrow on the equity in your property (assessed value minus what you owe). Usually they will only lend you beyond a certain loan to value (LTV) threshold like 80%. So if you have a $300k house and owe $200k, your LTV ratio is 67% and they will only lend you $40k or roughly 13% of the home value.
thats what i was thinking??
The premise, borrow money to pay down debt, is stupid.
Respectfully Mr Taylor he explains this part very clearly! The calculation is based on the Value of the house X 80 or 90 %.
What you did was I think subtract the difference of the value from what you owe and something I got lost...
What you talking about is a traditional HELOC, also known as a second lien HELOC, which functions based on a percentage of equity. A first lien HELOC works like he said, and his based on a percentage of home value.
@@gradivitshitoko9941 This commenter is describing is a Second Lien HELOC, a much more common type, which is based on home equity, the difference between the home value and the mortgage principle. This video covers the less common First Lien HELOC.
I had HELOC 1st Position on my old house. I am in a new house and have to wait 12 months before I do it again, will be worth the wait. I dump my entire check on the heloc, then pay bills out of it. What's left over reduces the principle. 35-40K per year. This works.
You should’ve clarified in the beginning that this is meant for using a 1st position HELOC on one already paid-off property to pay down/pay-off a 2nd property’s mortgage. I’m not sure what mortgage lenders out there would give up 1st position to a HELOC just to get themselves paid off… but they won’t be in business very long.
Can you clarify this please? I am just a regular home owner and have 1 property not looking to invest in a rental property. Is this strategy not good for folks like me? We just purchased our home with a $700k balance. Thanks.
Yesterday Costco lady said the sheds are moving like crazy for people buying them to live. This is what the 86k irs agents are for, to audit the preppers trading and people renting out their sheds in the back yard
In UK a lot f mortgages are on average daily interest.. I paid my last house of quickly by using an offset mortgage. This takes your savings and mortgage debt into one account. You can access your savings at any time but it offers savings interest of mortgage debt. It's an Australian system
I'm not understanding this. If I have a 1500 dollar mortgage at 3 percent (which I actually do), why on earth would I pull any equity, let's say 50k, to pay down the principle? The bank, let's say they give me a fixed 5 percent HELOC. Okay, but now I'm paying 1500 plus whatever the repayment is when I spend the 50. Why not just pay more towards principle if I could already afford say a 500 dollar payment on the HELOC?
Brilliant!
most borrowers doesn’t understand compounding interest
Exactly!
@@TheKwakBrothers or compound finance charges!
@@TheKwakBrothers my home been refinanced a couple times. I went through divorce and chapter 7 bankruptcy in 2011. At that time owed around 137000. Got a loan modification it's at 3.5% 750 per month i now owe 93000. Also there's a second mortgage that went through bankruptcy also but it put a lean on the place. So I owe 93000. Plus 26000 on the lean. From my understanding I don't have to pay the lean unless I sell which I got no plan's to do. Will this Heloc work for me?also what can I do about that lean. Is there a way to get rid of it. The maturity date on the mortgage is 2050. I'll be 78 years old by then. That means I can't retire until then because there's just not enough money. Any suggestions?
Recognized it as well when I started my payments. So I out the first years as much as possible i to additional payments. 7 years later 1/3 of the mortgage left and will be dept free in three years.
You can’t learn this in school. Great stuff. Life experience only has true value.
I would hope they wouldn't teach this in school, because it's awful financial advice and bad math.
I used the supplied excel file, this does not work for me for a 3.75% fixed 20 year and HELOC over 8% now.
It's much easier to pay bi weekly or make one extra payment 100% towards your principle per year to substantially reduce the loan time.
Also pay attention to your payment amount each year, my payments drop a few bucks each year that I add back as principle.
It all adds up at the end!
This is the MOST CLEAR EXPLANATION of a HELOC. Thank you! Subscribed!!
Awesome!! Thanks for your kind words!
I noticed this when I started tripling my personal loan payments. I went from accruing about $10/day in interest to $1.90/day. I paid a 37 month loan off in 12 months!
1. You owe 200 not 270 after transferring the mortgage to HELOC.
2. You should really mention that people should be leaving at least their mortgage payment amount in the HELOC every month and that the HELOC balance has to go down over time. Without following that it can cost people a lot
270 is the value of the home when you apply for a loan.
@@zennsalvador2570 OK and? In his illustration for the HELOC he was saying that 270k was owed, which it wasn't. Only 200k was owed and the interest is calculated off of that. It makes it look worse than it actually is. So the illustration and example starting at 18:40 is incorrect.
Not to mention that the LTV would only be 80-90k....not 270,000.....a lot of misinformation here.
@@mike4962 $270K is the limit you are given to spend (similar to a credit card limit), in his example he only used $200K to pay the mortgage and you still have $70K to use if needed. The $200K is what's owed and you have an additional $70K you can use if needed
@@derspenc and yet when he continues with the example and pays 6k into the HELOC he does 270-6=264k to calculate the BALANCE. He says balance. It's incorrect. It should be 200-6=194k BALANCE.
Don’t get it. You replace a 30 year mortgage with a Heloc where you still have to pay interest on that same principal amount. And Helocs have higher interest rates than a mortgage. You didn’t explain how you went from 30 years to 7 years.
This video has some good ideas for tools to use to pay down your mortgage. But what’s presented in the video is not correct. You only have one equity on your house and you can’t double loan it. Meaning on the example in the video where your house is worth $300k and u currently have a $200 k mortgage, you only have $100k equity left on your house. The max the bank would loan on this house would be $270k minus your current $200k mortgage would leave you with a $70k HELOC. And of course u cannot pay off a $200k mortgage with a $70k. What’s shown in the video only would work is if u have 2 properties and borrowing from one paid off house to use on the second house mortgage.
Same question popped in my head.May be he is talking about 7-10 years after purchasing a house.Home equity value will go up due to payment towards the mortgage n price appreciation of the property.Then take a heloc to pay off the o/s mortgage.
Question? So if i have 132k left to pay off my house and the value now is about 230k-250k, will i be able to use heloc to use that money pay off my mortgage and pay back heloc with lower interest rate? Please help
I think the concept is the first lien HELOC will be 80-90% of appraised value. You use the new first lien HELOC to pay off the mortgage, so you no longer have a mortgage, just a HELOC with balance of whatever your previous mortgage was.
Now you start paying down the HELOC balance and only incur simple interest, not front-loaded interest. Plus you have the benefit of lowering interest rate further by using the HELOC like a checking account for monthly deposits and expenses (which you would have spent anyways, just lowers your average daily balance by optimizing when you pay your credit cards for normal monthly expenses).
I know I'm not disciplined enough to pull this off but I like the concept/strategy
I’m thoroughly confused. HELOCs don’t have fixed rates until you convert your variable rate into a fixed rate. At which time you’re closing your draw period. What am I missing??
Big point you are missing is that interest paid is tax deductible.
Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately)
In USA can you divide monthly payment into 2 and pay that every 2 weeks - ie same amount? (You also get an extra payment over course of year = 26 payments). It doesn't make a huge difference but better in your pocket than the lenders. Second - double check there's no penalty for paying off early. Third - if your pay goes directly into mortgage account and draw down from that then it means a few more days off principal. Last add any 'windfalls' such as tax refunds, birthday money etc. Every little bit adds up.
Good post, most loans today because of Dodd-Frank don't have any prepayment penalties unless you pay of the loan in less than like 2 years. Even for a 15 year mortgage not that common. I think some of the VA loans and some of the other government backed ones for "special qualifications" have more restrictions.
No. Just multiply your monthly payment by 13/12. That extra one twelfth of a payment each month will still pay down an extra payment each year just like paying 26 biweekly payments.
And adding "windfalls" to a low interest mortgage when you could be investing that money where it would get a much higher ROI doesn't make sense. Why trim your 4% mortgage when you could earn 7-10% buying an index fund?
Never comment on RUclips videos, but feel inclined to comment that as an commercial banking underwriter for over 7 years… this might be the dumbest strategy I’ve ever heard.
I'm working two jobs 60 to 80 hours but with Inflation for food and energy is killing me can't get ahead 😩!!
-This is not accurate, you said at the beginning of the video "without any extra payments" but technically you're if you are willing to throw in all your income into paying the HELOC, why would you risk your house trying to save on interest through HELOC when you can get 2.125% - 2.5% fixed 15 years fixed loan while interest rates are so cheap?! you're better off refinancing to a shorter-term (15 years) plus throwing in as much as you can spare of your income, you will also be done in 5-7 years without putting your house on the line, that's what our family did, we refinanced from 4.5% 30 years to 2.25% 15 years half the interest and almost half the term PLUS throwing in an additional $1500-$1800/month, we should be done in 5 years, while only paying 12k on interest over 5 years without risking our house.
- it all comes down to Interest and extra payments, paying a mortgage down on a 2.25% 15-year loan is going to be faster, safer, and cheaper than paying a 5% HELOC
- folks there's no shortcut to pay your mortgage down fast other than making extra payments and refinancing to a lower rate, it's math not magic!
I think the point that was kind of glossed over was that by having the HELOC you still have access to liquidity. If you pay extra on a mortgage you are locking the liquidity in your equity where as with the HELOC it's credit so it can still be used for living expenses with a different interest rate model. Definitely more risky, but greater access to liquidity. I think that's what he is getting at if I understood correctly.
Really wished this was taught in school...I did this strategy and cleared the remaining $115K of my mortgage in 2 years.
Thats cause the teachers have no skills or experience in finance otherwise they wouldnt be in education
This scenario only works if the mortgage is your only bill. It excludes having to buy a car, credit cards, or any other debt that you currently have or will acquire in the near future. How many people on here can actually afford to pay between $2500-$6000 or more per month to meet the time limit of 10 years? After ten years, that helix will add interest, taxes, and fees for not meeting the time limit. If you have a credit card and have spent $3000 on it, you know how long that will take to pay off meeting the “minimum” payment. It would be nice if RUclipsrs would actually give realistic advice that work within the realm of reality.
He also ignores the fact that you're not going to get a $270k loan when your home only has $100k of equity. Your home would need to be worth $445k to get a loan big enough to pay off the mortgage like he's saying.
@@ChristiantrospectiveGamer Right, you can't get a heloc for more equity than you actually own. I thought at first that he was talking about a $450k home.
If I want to write off my mortgage with a HELOC, there will be a penalty fee because my bank got us to sign a 5 years agreement for fixed percentage and only allows a yearly 10% cash on capital payment. Very interesting video but there are some limits to take into account.
Heloc interest rates are controlled by the bank. So the varied interest can change at their whim. Also If you get a Fixed mortgage interest rate, it's no longer a Heloc (line of Credit) it becomes a Home Equity Loan (i.e. same as a Mortgage). Also either way if you take out a loan/Line of Credit on your home, you are still borrowing against the Equity. If you Owe $60k on a mortgage and you open a Heloc and moved the $60K to a Heloc, you still owe $60k on the house. And you LTV is what your home is worth MINUS WHAT YOU OWE! SO you would only have a $70K Heloc tops. This guy is wrong on many levels. I just went thru all this in June of 2021 with great Credit. Just put 100% of what you make into your home loan and use it like a Credit Card *Face Palm* this guy is going to lose people they're houses faster than the economy in 2008.
Actually Pat, I've been teaching this concept since 2015. Out of 1000+ clients, we had ZERO clients who had an adverse event on their HELOC. (HELOC closures, freezes, or limit curtails).
There are fixed rate HELOCs and I have closing statements to prove it. You just need to know where to look for them ;)
And I don't think you understand the strategy. Most people who dont understand don't want to understand. They're often fixated on what they already know OR they made up their mind that they're right no matter what - never wanting to learn. Usually, these types of people stay average all their life. They care more about being right than growing/learning.
So you get to choose Pat...
It didn't make sense to me either.
Idea is to deal with daily interest vs amortized interest. HELOCS are daily interest, meaning, they arent front loaded but divided daily instead based on how much you owe. As long as you spend less than you make, which you should be doing, you are paying extra towards principal of your “mortgage” per payment.
For example, lets keep numbers simple.
You make $5000 a month. You have $1000 in bills. Mortgage payment is $3000 but minus taxes and insurance say principle interest payment is $1500. Lets say anything not used goes towards mortgage. So you are sending $2500 to a HELOC OR MORTGAGE.
On amortization schedules, during the first 7 years or so, a MUCH higher chunk of the $1500 you paid, will go towards interest, and rest would lower your remaining debt.
Imagine if of that $1500, MORE money during the first 7 years was going towards balance; because it’s simple interest. It’s calculated daily and evenly throughout the term whereas amortized loans are structured to take more interest at the front half of the loan.
Thats the simple answer.
We personally have a friend who owns four homes and has done this very strategy to pay off two homes already and is working on his third. He has coached us over the past two years on how to do it, and we are finally going to start. It's complicated, but it works. You have to have decent cash flow and be very disciplined to be successful.
@@TheKwakBrothersso is the strategy to make weekly or monthly micro payments towards the principal? Because if you're making just 1 payment towards the mortgage per month then it still amortizes at the same rate no?
This is NOT a "Recession Proof" strategy and many people lost their homes in the 2009 mortgage crisis who got stuck with high-interest HELOCs. A HELOC has a variable interest rate versus a Fixed-Rate Mortgage. You might start out with a low HELOC rate of 5% or so, but in these times of 2022-2023 that rate might go up two or three percentage points. Don't make the mistake that several people who did this back in 2008 did. This is NOT a new strategy. One of the biggest gotchas in this is that most people are not good at managing their extra money. Having access to a whole bunch of it makes many people spend it too easily. And when you do you no longer have any equity left in your home. Your home should NEVER be a credit card.
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In the end of the day , it is how much extra money you can pay monthly towards you either mortgage or HELOC. Get normal mortgage, pay extra$200-300 towards the principal every months and you will cut off several years and interest rate. put $500-700 towards the principal and you will pay in 15 years :-) Mortgage interest is always lower than HELOC and it is fixed. Heloc is variable and might go up after a while,
So basically you replace your home loan debt(at least some of it) with heloc debt and pay off the heloc debt, then do it all over again. Why not just put all extra money into extra mortgage payments instead? Why bother with the heloc at all?
Because many people don't have $100,000 lying around. The HELOC gives you the lump sum to tackle the front loading of a 1st mortgage.
@@ryanmorrison487 can you explain this to me?
From what I know after watch this video:
Average daily interest make you pay high interest at first and since the balance is high at the beginning so it would work the same at mortgage high interest and low principle at the beginning and opposite at the end. So you able to shave off mortgage pay low interest and now you pay high interest and still pay principal the same way as mortgage. So mortgage and Heloc the same except for open and close end.
I would recommend use properties as an asset and use this strategy for investment properties if you want to buy a house as a liability buy it with all cash.
Edit: Unless you mean HELOC will charge you interest fees every month and paying the balance and interest is separate unlike mortgage if so please include it in the video.
Edit: Also putting your income to the Heloc do not mean that money 100% gonna pay the balance it also includes interest on it so the bank can make money.
IMHO: Don't pay off your mortgage in 5-7 years, that's not the best use of your money and that's not the fastest way to build wealth. Invest that extra income (assuming you have extra income) and take advantage of compound interest. Don't be house poor .
True altho I guess to your point tho, if your house is paid off you're not house poor.
@@jmarie7405 True and if, God forbid, you lose your job and have no income fall back on you'd still have to pay for property taxes, insurance and other home related expenses.
At that point you would be building wealth contributing to various accounts, and you would also have an emergency fund. All else fails sell the house and, or other assets.
@@blaizon at which point? this plan is based on 5-7 years where any "extra" income gained is "invested" in a single family house. The average length of time at one job is about 4-5 yrs. If in that 5 years, you are not diversifying your financial portfolio and only "investing" in your home and you encounter a series of unfortunate events, then you would indeed be left only with a house. Maybe you'll walk away with something if the housing market is hot, but if we hit a recession or low market during that period of time then you are just out of luck.
I am not saying it's a bad idea, it's just not for me because it relies on the assumption that nothing unfortunate will happen. I rather hope for the best and plan for the worst and for me that means redirecting any "excess" revenue I have into at least 3 different income generating avenues.
BUT.... in case of any unfortunate events having a HELOC which is an open ended product will allow you to be able to grab any extra money at any time from it but in a Mortgage if anything was to happen to you you’d have to Refinace ( 3k average fee ) and start completely over and you’d still have ridiculous interest upfront and as if you just bought the house over again.
Being able to pay a home in 5-7 years compared to the average 15-30 years is one the biggest investment you can make.
Pertinent changes since this video was released? HELOCs are tougher to get with higher credit score requirements. Interest paid on HELOCs are no longer federally tax deductible. Interest rates have shot up allowing for greater APY on bank deposits and CDs. And this from someone who used a HELOC as an investment arbitrage for many years.
Hello there @YankeeStacking, so a few things to note. HELOCs are non-QM meaning that different banks have different underwriting guidelines. Some will offer HELOCs at 660 FICO... and some have a hard limit that starts at 720. As far as the tax dectibility question, they ARE deductible as long as the interest cost is derived of the original principal balance - not draws for non-housing related expenses. In regards to interest rates, one of the things we say over and over for our strategy is that the interest rate is not the enemy - time and balance is. We have clients who have 6,7,8% APR rates on their 2nd or 1st lien HELOC but they still come out on top by saving DECADES and THOUSANDS of dollars of savings even though they might have a low fixed rate mortgage of 3 to 5%. I would encourage and invite you to download our free calculator and see for yourself. Plus, we're HIGHLY rated on Trustpilot and BBB. You'll notice that most of the 5 star reviews are farily recent: www.trustpilot.com/review/thekwakbrothers.com
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The only part I don't understand is, most of us get paid every 2 weeks or twice a month and I would be paying that daily interest at that higher daily interest until each payday correct? You say in a few short days you add $6,000 more which the average household income is not close to that. I'm just trying to get my mind around it.
HELOC interest is always higher than Mortgage interest.
Interest payment = owing amount * interest rate
=> The interest payment will higher if we owe the same amount in HELOC compared to owing in Mortgage.
The benefit to have debt in HELOC instead of in Mortgage that is the flexibility. We can pay it off anytime while in Mortgage we have some limitations to pay it off right away (if we want to) depends on banks/creditors plus penalties…
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By your calculations, the 90% value on a $300k house is $270k.
The mortgage is $200k… so the HELOC would only be $70k for the grand total of 90% equity. So you would be able only pay the mortgage down to 130k using the HELOC.
Excellent presentation on how to convert a purchase money mortgage to a HELOC that bears a higher rate of interest. So where in the equation does the house actually get paid off?
It gets paid off at the Sheriff's sale when it gets repossessed.
I have HELOC fixed 1.6. Signed 30 yrs back on 2012 as of today I have 5 years left without out lump sum payment
Love this strategy but HELOC rate is over 4% and my home loan is 2%?? I have a 10 year loan.
Your rep turn me away due to low credit score so I went to my bank and my credit score was 700. I now got a HELOC and will try to use this method.
Why would you want to pay off your house early? I'm sure your interest rate is less than 4% and you can easily earn double that amount by investing in the stock market per year, not to mention you retain the tax write-off in most cases.
You could either invest a small amount of money and pay your normal mortgage payments for 30 years or get intense pay off your mortgage in 5-10 years then have the rest of your life to invest even more money.
Also financial freedom of not owing anyone anything besides taxes is a feeling unlike nothing elsw
If you're making more than the interest on a 30 years mortgage go for it. I'm going to pay my mortgage off in 10 years n save 2o years of payments equals more money n freedom
just ran the calculator. with my current situation, i have $1,195 cash flow monthly and could pay off my home 10 years early if i wanted to pay an extra 156,000 of interest. but if i lowered my living expenses by $1,000 (sold my truck and got something cheaper and cut back on some other stuff ive been wanting to cut out anyways) my cashflow would be $2,195, and i could pay off my house (still owe 380,000) 18 years early with the added cost of only $15,000 extra interest paid. in my opinion paying an extra $15,000 to be paid off nearly 20 years early is worth it for sure. make sure yall run the numbers and see if you can maximise you cash flow, if you can do that, you can do this strategy
The only issue I see with first lien HELOC, assuming bank won't pull the HELOC when the next great recession hit forcing you to sell or get a new mortgage in adverse market conditions, is if the HELOC is tied to variable interest such as prime -0.5%. If we enter hyper inflation, a traditional front-loaded mortgage may fare better longer term if interest rates rise like in the 70's due to all of the money inflation by the government.
So two things there... we've never seen a 1st lien HELOC get "pulled" personally with our clients. In fact, one bank has never had a borrower foreclose or default on their 1st lien HELOC since 2007. It's got ALOT of safety nets, in my opinion.
Second, you're right about the hyper inflation but the problem is that most homeowners stay stuck in the front-loaded mortgage forever since most refinance or sell/buy a new home e very 7-10 years.
EXACTLY!!!!! In 2021 the average HELOC rate according to Bankrate was 4.08%. Today, in December 2022 that average is close to 8% which means DOUBLE the interest! So all that savings now just cost you 4% more to keep this strategy going. If inflation and recession continue, that HELOC rate will keep climbing.
@@thinklikemike2Maria Brisbane helped me secure HELOC with 650 credit score
@@TheKwakBrotherscheck her out on Google or check her website
if i knew this video i would definitely follow your strategy...i fully paid my mortgage in 5 years too but mine is totally different i used my TFSA account by paying off my mortgage. I got lucky with options and stocks that made money then i withdrew to pay my mortgage especially before the pandemic...good luck to all
The explanation truly motivates. Thank you for sharing.
Way to make this understandable. I've been watching videos for a while now, and this is probably the best video to follow along with
Oh oh, this could get very messy for people who don't have the discipline to manage well their money
FYI: This is bad advice for anyone who bought their home with a low interest rate. Statistically speaking (of expected value): If your mortgage rate is low, it's best to take as long as you can to pay it off, and put your extra money into other investments. Example: For me, after 30 years I will be $130,000 richer by investing $500 a month in a fund earning 7% annually than if I use that $500 a month as an extra payment into my mortgage at around 3% ($200K earned from investing vs $70k saved in mortgage interest). This works as long as you can invest at a higher rate than you can borrow. Also - Inflation is on your side in this case with a long-term mortgage. Sure due to interest you pay more for a mortgage than your house is worth now... but far less than it will be worth later. For other people with high interest rates (above or close to what they can expect to get through investing), then the HELOC can make sense, and you do want to pay off your mortgage as soon as possible, but you can't get one for more than what you already paid on the home + increased value of the home …so you can’t trade it for your mortgage entirely unless you have another asset to trade on.
Just found this video
Very informative and detailed so I subscribed and gave thumbs up
Going to binge watch the others you have
Thank you for a great video
Aw it looks like you unsubscribed.
Interesting but I can't help but feel this comes with more risk, and that there are safer (and easier) ways of accomplishing the same thing. With regards to risk, I suspect you may have tax implications once you used the heloc to pay down your credit card. At that point, your heloc funds are not used exclusively for buying or improving your house and technically no longer qualifies for interest deduction from your taxes. Would appreciate any tax professionals insight on that. Second, merely paying a little bit more towards the principal every month can knock of years or decades from your mortgage and save hundreds of thousands in interest. The best part is this is really simple: Your mortgage processor likely already lets you specify an extra amount towards principal every month, no funny hoops to jump through, no risk.
Where is calculator, please?
My original mortgage is at 2.4% interest rate. Why I would pay it off from Heloc and start paying 7% interest even if heloc has a daily interest?
Want to make sure I understand correctly: How long do you pay off the HELOC?