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'm also a proud beneficiary! I've built my portfolio massively and still building. Started with a UA-cam referral just like this and a few thousands. I'm way up to the profits now..
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?
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
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.
Never comment on UA-cam 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 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
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.
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.
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.
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!
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.
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!
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.
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.
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?
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.
It's easy when you have the EXTRA MONEY to pay extra, tell us something we don't already know. Most people have no wiggle room. Show us how to pay off your mortgage in 5-7 years without paying anything more every month genius.
I did the math on a mortgage, at 6% on a HELOC moving 300k over would be a monthly interest of over $1,400 where as the mortgage interest for the month is only 900... soooo what am I missing?
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.
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
This is thr dumbest advice I've ever heard. If you do this, you will NEVER get your debt paid. And you can absolutely set the terms to something different from 30 or 15 years when you refi. One time I set it to 27 because i cut my rate in half just 3 years into my mortgage. This is terrible advice. This guy is a grifter. A con man.
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.
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.
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 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.
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
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 👍
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?
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.
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.
@@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?
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??
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).
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
*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.
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.
You give a 25 minute fast sales pitch that doesnt really help understand how the mortgage decreased to 5-7 years, you never mentioned it. Never state why we are HELOC much higher than mortgage.
He is not explaining this accurately and his numbers do not make sense. If you owe $200,000 on a home that appraised for $300,000. You will have $100,000 in Equity. However, if an HELOC allowed you to access a credit line equal 90% of the homes appraised value ($300k). The HELOC will be $270,000 - $200,000 mortgage balance. Which means your HELOC will be for $70,000 NOT $270,000. The question is, does this method work with a $70,000 HELOC?
Wow. Dumb. He doesn't even mention that I write off a good portion of my mortgage interest every year at tax time. Not even mention this? FAIL. When you pay off your mortgage with a HELOC, you get to write down exactly $0.00 of your HELOC interest. PLUS HELOCs interest. 5%??? DREAM ON. Here's the latest from US Bank: As of November 3, 2022, the variable rate for Home Equity Lines of Credit ranged from 7.95% APR to 11.70% APR. Can you get fixed? Yes, at a huge fee - that's if they even offer it. Such a dumb strategy. Just pay additional principle payments on your mortgage. Do it when you want, if you want. My interest rate is $2.79 fixed/30. I wouldn't touch this in any way.
Doesn't make sense that you can borrow $270K when your mortgage principal is still $200K, it's EQUITY in HELOC. If the house appraised at $300K and the outstanding principal is $200K, you can borrow $70K (Appraised Value *0.90 - Outstanding Principal).
It's great way to lose your home when they cancel your HELOC, jack up its interest rate or limit the total amount. He doesn't know anybody who had their HELOCS canceled? I know three that have! And fixed rate HELOC? Where? Show me the bank giving 5% fixed HELOCS. People: Don't get trapped by these pay off strategies. Even if you COULD borrow the full amount of your loan in a HELOC (which is actually impossible and against all banking lending rules as HELOCS are based on EQUITY in your home NOT home value), you LOSE your interest write off at tax time. How to pay off mortgage early: Throw as much as you can each month at your principle. Don't have extra this month? No problem! Throw it at your mortgage the next time you get cash.
I refinanced 4 months ago=$290,000.00 at 4.125% fixed 30 year. Interest is $992.65 for July. If I use the HELOC which is 5.25%, my monthly interest is $1251.00. It does not look like this will benefit me. I can make a few thousand dollars a month principal only payments on the 30 year traditional mortgage. Whatcha think?
In his example HELOC with a $13.69 daily interest, if you replace your checking account with the HELOC and put $6k into it like he suggests, you are saving 82 cents daily, amounting to $17.26 over 21 days or $24.66 over thirty days. Your time and effort might be better spent getting a cheaper phone plan, canceling a subscription, or buying less Starbucks. The actual advantage I see to this strategy that I don't think he really explained is that you are paying off the loan much more aggressively than with the mortgage approach (higher monthly payments). This can legitimately save you money but is also risky in that you don't have any emergency savings, and would have to borrow money from your HELOC and incur interest on any money borrowed. (His implicit argument is that the HELOC interest rate is higher than your savings account interest rate, so you are saving money anyway by paying off part of your home loan faster.) The other advantage, though the exact terms of this part are really not clear to me, is that you might be able to increase your loan balance during a period of hardship rather lose your house outright. Ultimately you should just compare the interest rate and estimated duration of the loan of a HELOC vs a mortgage for your situation. If inflation is 2% and your mortgage interest rate is also 2%, then you effectively have an interest-free mortgage. If you can only afford a 30-year fixed mortgage rather than a shorter duration, it seems unlikely to me that you would be able to pay off a HELOC in 5-7 years.
Isn’t HELOC calculated based on 80-90% of home value - mortgage you still owe? In this case, I think the bank will only allow you to borrow $70,000, not $270,000 in your example.
Please explain to me how the hell you can have an existing mortgage (which is in first position) and then have a HELOC in first position too? The beginning of this video made absolutely no sense at all. If you have a traditional 30 year fixed mortgage, that is in the first lien position. On a $300k home with a mortgage balance of $200k your borrowable equity is only $80k. (100k multiplied by. 80). That would not be closed to being enough to pay off the existing mortgage. LTV for most financial institutions it 80%. I would not get my financial education from this guy.
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.
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.
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.
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.
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.
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.
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.
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
Well this clearly doesn't work. You must know that. One can't get a HELOC at the beginning of your mortgage life due to the fact that you won't have much home equity. Also no one gets paid the 6k the 1st of the month. Regular people get paid biweekly. I could go on but I think I've made my point.
Ikr. The house is worth $300k and you owed $200k that means your equity is $100k and 90% of $100k is $90k. I laughed when he said you can get $270k HELOC
Those are second lien heloc, first lien heloc you payoff mortgage and that balance is subtracted from your heloc limit which is giving you credit based on value of home.
@@jesseaharris You just apply for it. You are refinancing your home with a different type of loan. This is inherently a riskier loan so requirements are high.
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!
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
Here is a fix … find a rich friend - ask them to lend you the money interest free … then you are paying back your friend the full 1000 per month !! So your curve reduces your friend is a gurantor to you … so they hold the title deeds until you pay off your agreed loan with your friend … so this way you save and 90% interest rates at all !!
Exactly! It’s maximum amount of loan (80-90% depending on bank) minus existing loan amount = HELOC limit amount you can borrow. Example with 80% LTV ratio... $270,000 appraised value - $200,000 mortgage owed = $16,000 HELOC credit limit
Not with a 1st lien HELOC since it takes over the entire mortgage... What you guys are thinking is a CLTV (combined loan to value). So what you're referring to is a 2nd lien HELOC not a 1st lien.
It's loan to value. You would need at least 20% into the value of the home for this to work. If your house is worth $100,000 then the HELOC would be 80 to 90 thousand, thereby allowing you to payoff the mortgage entirely, which makes it a first lien and not a second lien heloc.
HELOC is a daily compounded interest which you don’t MENTION!!! The $100k surcharge $13 interest per a day, which your not going to pay it off every single day, so… it rolls over, which become $100.013. Next day you will pay interest on the $100k and on the $13 from yesterday’s interest. That’s a a daily compounding interstate and not a simple interest rate . Worse thing to do to your clients.
Go to another bank and apply for one. Think out side the box. And this is if your credit is good. Secret: keep your credit in good standing. Do not over spend.
I saw your similar videos a few yrs ago but didnt quite grasp the fine details I would need to be clear on before actually using this method. Now I'm wondering since it is not a mortgage, whether the banks can demand payment in full at their leisure for a HELOC. In 2008 my credit card company demanded payment in full which I paid but no way would I have the funds to pay off the amount of my "mortgage"/HELOC
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
Thank you for explaining this! I struggle to understand financial information and you broke it down so easily. I do have a question though…. In this scenario of the mortgage being $200,000 and the heloc being $270,000…. Can you help me understand the benefits (maybe a different term would be more fitting?) to taking the excess of $70,000? If the goal is not to improve your home or take on some kind of project but to merely get out of the scenario of a 30 year mortgage would it work the same to take just 200,000 or even 206,000 to match the income in and out for this particular scenario….? Hope that makes sense. Thanks in advance for any answers and advice.
I *think* the 70k was existing equity in the home and the 200k was what was owed still on the mortgage. So the HELOC was the total value of the home possibly
The first part of your strategy doesn't work. Your HELOC doesn't give you $270,000 to work with. It gives you $70,000. Your LTV is your home's value x .9 MINUS what you owe on the home. If your home only has $100k in equity, you can't get a HELOC for $270k.
-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.
I saw your videos and have been trying to figure it out. Have to admit it took me a bit. But, with your plan you are only gaining a month of interest. I have seen comments of people saying I'm paying $5000 on my house every month! No, they are paying $5000 a month on all their bills they added to the heloc every month including the heloc payment. The true ballance is only going down as much as the heloc payment is paying towards the principal each month minus the bills they paid off on the credit card with the heloc. Same as the regular mortgage payment. A regular mortgage or a heloc at 3% it's not going to matter. Unless your knocking the house principal down with extra payments on either, you're not making difference.
Hate to break it to everyone, but the part where this plan falls apart is where he explained the concept of LTV for a max HELOC balance. While he is correct about the % banks will let you borrow, (typically 85% or so), you have to subtract out your current mortgage balance as well. Using his numbers, you'd only be approved for $70,000 max on a HELOC, rather than the $270k he quoted. If something sounds too good to be true, that's because it is. No such thing as a free lunch.
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
There is no way it's going to work in the practical world unless all the stars are aligned in your favor, well in that case, just buy a lottery ticket. Come on, which lender is going to give you almost 70-80% of HELOC within the first 7 years. It's possible only if your property is 'significantly' up, or you have reduced lots of the principal by paying down extra payments. In fact, in the second case where you reduced the principal, I am thinking isn't a better idea to continue with the same process to get rid of the mortgage. Because LOC is usually 2-3% higher than the original mortgage interest. I would definitely agree with this process after 10 or 15 years. Getting rid of 30 years mortgage within 5-7 years, without putting in 'extra' payment, is not even theoretically possible.
Thanks for such an informative video. I'm a bit confused about the difference between the HELOC, revolving credit facility and a redraw account. Are you able to explain the differences and why the HELOC may be better to pay it down faster?
They are both lines of credit. The heloc portion is carrying the remaining principle on your mortgage as the balance with the total value of the home as the credit limit.
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
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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
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?
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
Step one. Have or make a ton of money.
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?
Never comment on UA-cam 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.
Thanks for the video but *creditlord* helped fix I and my spouse credit,.
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
I'll suggest you find a mentor or someone with experience to guide you especially in this recession..
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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.
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.
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 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
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 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
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.
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.
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.
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?
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.
It's easy when you have the EXTRA MONEY to pay extra, tell us something we don't already know. Most people have no wiggle room. Show us how to pay off your mortgage in 5-7 years without paying anything more every month genius.
Oh oh, this could get very messy for people who don't have the discipline to manage well their money
I did the math on a mortgage, at 6% on a HELOC moving 300k over would be a monthly interest of over $1,400 where as the mortgage interest for the month is only 900... soooo what am I missing?
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.
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
This is thr dumbest advice I've ever heard. If you do this, you will NEVER get your debt paid.
And you can absolutely set the terms to something different from 30 or 15 years when you refi. One time I set it to 27 because i cut my rate in half just 3 years into my mortgage.
This is terrible advice. This guy is a grifter. A con man.
Even with a 27 amortization, you still have front loaded interest. Just look at your TILA statement
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
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.
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.
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 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?
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
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.
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
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?
In Australia, we can get "offset accounts" which reduce interest from the mortgage, is thats the same as a HELOC?
Yes, in Australia, Offset Accounts are perfectly designed for this strategy. Here in the U.S., we don't get the same luxury
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.
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.
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?
It's easy way but in video made much complicated
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??
DISLIKE... Because he didn't show how it actually helps. Seems like you just switched into another... Higher interest loan
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).
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
*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.....
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.
You give a 25 minute fast sales pitch that doesnt really help understand how the mortgage decreased to 5-7 years, you never mentioned it. Never state why we are HELOC much higher than mortgage.
He is not explaining this accurately and his numbers do not make sense.
If you owe $200,000 on a home that appraised for $300,000. You will have $100,000 in Equity.
However, if an HELOC allowed you to access a credit line equal 90% of the homes appraised value ($300k). The HELOC will be $270,000 - $200,000 mortgage balance. Which means your HELOC will be for $70,000 NOT $270,000.
The question is, does this method work with a $70,000 HELOC?
Love this strategy but HELOC rate is over 4% and my home loan is 2%?? I have a 10 year loan.
Wow. Dumb. He doesn't even mention that I write off a good portion of my mortgage interest every year at tax time. Not even mention this? FAIL. When you pay off your mortgage with a HELOC, you get to write down exactly $0.00 of your HELOC interest. PLUS HELOCs interest. 5%??? DREAM ON. Here's the latest from US Bank: As of November 3, 2022, the variable rate for Home Equity Lines of Credit ranged from 7.95% APR to 11.70% APR. Can you get fixed? Yes, at a huge fee - that's if they even offer it. Such a dumb strategy. Just pay additional principle payments on your mortgage. Do it when you want, if you want. My interest rate is $2.79 fixed/30. I wouldn't touch this in any way.
When I heard HELOC, I facepalmed IRL lmao.
Doesn't make sense that you can borrow $270K when your mortgage principal is still $200K, it's EQUITY in HELOC. If the house appraised at $300K and the outstanding principal is $200K, you can borrow $70K (Appraised Value *0.90 - Outstanding Principal).
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 😂
It's great way to lose your home when they cancel your HELOC, jack up its interest rate or limit the total amount. He doesn't know anybody who had their HELOCS canceled? I know three that have! And fixed rate HELOC? Where? Show me the bank giving 5% fixed HELOCS. People: Don't get trapped by these pay off strategies. Even if you COULD borrow the full amount of your loan in a HELOC (which is actually impossible and against all banking lending rules as HELOCS are based on EQUITY in your home NOT home value), you LOSE your interest write off at tax time. How to pay off mortgage early: Throw as much as you can each month at your principle. Don't have extra this month? No problem! Throw it at your mortgage the next time you get cash.
Pay extra every month.
Next...
💯 exactly
I refinanced 4 months ago=$290,000.00 at 4.125% fixed 30 year. Interest is $992.65 for July. If I use the HELOC which is 5.25%, my monthly interest is $1251.00. It does not look like this will benefit me. I can make a few thousand dollars a month principal only payments on the 30 year traditional mortgage. Whatcha think?
In his example HELOC with a $13.69 daily interest, if you replace your checking account with the HELOC and put $6k into it like he suggests, you are saving 82 cents daily, amounting to $17.26 over 21 days or $24.66 over thirty days. Your time and effort might be better spent getting a cheaper phone plan, canceling a subscription, or buying less Starbucks.
The actual advantage I see to this strategy that I don't think he really explained is that you are paying off the loan much more aggressively than with the mortgage approach (higher monthly payments). This can legitimately save you money but is also risky in that you don't have any emergency savings, and would have to borrow money from your HELOC and incur interest on any money borrowed. (His implicit argument is that the HELOC interest rate is higher than your savings account interest rate, so you are saving money anyway by paying off part of your home loan faster.)
The other advantage, though the exact terms of this part are really not clear to me, is that you might be able to increase your loan balance during a period of hardship rather lose your house outright.
Ultimately you should just compare the interest rate and estimated duration of the loan of a HELOC vs a mortgage for your situation. If inflation is 2% and your mortgage interest rate is also 2%, then you effectively have an interest-free mortgage. If you can only afford a 30-year fixed mortgage rather than a shorter duration, it seems unlikely to me that you would be able to pay off a HELOC in 5-7 years.
The explanation truly motivates. Thank you for sharing.
Isn’t HELOC calculated based on 80-90% of home value - mortgage you still owe? In this case, I think the bank will only allow you to borrow $70,000, not $270,000 in your example.
Do you recommend a specific bank to get a HELOC … also do credit unions offer them? Thanks for the great info 👍
Maria Brisbane helped me secure HELOC with 650 credit score......
Please explain to me how the hell you can have an existing mortgage (which is in first position) and then have a HELOC in first position too? The beginning of this video made absolutely no sense at all. If you have a traditional 30 year fixed mortgage, that is in the first lien position. On a $300k home with a mortgage balance of $200k your borrowable equity is only $80k. (100k multiplied by. 80).
That would not be closed to being enough to pay off the existing mortgage. LTV for most financial institutions it 80%. I would not get my financial education from this guy.
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.
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.
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.
I did the math and it doesn’t work. Total lie. 6000 x 5% is $300 a year savings. May drop a few payments but not knock it down to 5-7 years
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.
I'm working two jobs 60 to 80 hours but with Inflation for food and energy is killing me can't get ahead 😩!!
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.
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 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
My bank won't give me a HELOC unless the mortgage is fully paid off. Huh?!
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
Despite the economy crisis, this is still a good time to invest in stock and crypto.
Her success story is at the top of every comment on UA-cam
Well this clearly doesn't work. You must know that. One can't get a HELOC at the beginning of your mortgage life due to the fact that you won't have much home equity. Also no one gets paid the 6k the 1st of the month. Regular people get paid biweekly. I could go on but I think I've made my point.
Ikr. The house is worth $300k and you owed $200k that means your equity is $100k and 90% of $100k is $90k. I laughed when he said you can get $270k HELOC
Those are second lien heloc, first lien heloc you payoff mortgage and that balance is subtracted from your heloc limit which is giving you credit based on value of home.
@@Revel4tions but how do you get a first lien heloc if you’re currently carrying a mortgage on the home?
@@jesseaharris You just apply for it. You are refinancing your home with a different type of loan. This is inherently a riskier loan so requirements are high.
@@Revel4tions what exactly are the risks? can they change the terms of the loan based on the current market value of the home?
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!
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
Here is a fix … find a rich friend - ask them to lend you the money interest free … then you are paying back your friend the full 1000 per month !! So your curve reduces your friend is a gurantor to you … so they hold the title deeds until you pay off your agreed loan with your friend … so this way you save and 90% interest rates at all !!
I believe the HELOC will not be of $270K if you have a mortgage of $200K already. It will be only $70K.
This is what I'm thinking. A bank won't give you a HELOC for full LTV unless you already don't owe any money.
Exactly! It’s maximum amount of loan (80-90% depending on bank) minus existing loan amount = HELOC limit amount you can borrow. Example with 80% LTV ratio...
$270,000 appraised value - $200,000 mortgage owed = $16,000 HELOC credit limit
Not with a 1st lien HELOC since it takes over the entire mortgage... What you guys are thinking is a CLTV (combined loan to value). So what you're referring to is a 2nd lien HELOC not a 1st lien.
Just pay off your mortgage. Yes and still in 5-7 years or what ever your timeline is. Get rid of ALL debt and live a better life.
Incredible information! Thanks
Glad you enjoyed it!
Hard one with a one house income, and my mortgage rate 6.7% and the mortgage I have is over 1/3rd of my monthly pay.
Won’t they only give you the heloc based on the equity? So on $300k appraisal and $200k owed, you’d get 80-90% of $100k?
It's loan to value. You would need at least 20% into the value of the home for this to work. If your house is worth $100,000 then the HELOC would be 80 to 90 thousand, thereby allowing you to payoff the mortgage entirely, which makes it a first lien and not a second lien heloc.
HELOC is a daily compounded interest which you don’t MENTION!!! The $100k surcharge $13 interest per a day, which your not going to pay it off every single day, so… it rolls over, which become $100.013. Next day you will pay interest on the $100k and on the $13 from yesterday’s interest. That’s a a daily compounding interstate and not a simple interest rate . Worse thing to do to your clients.
What if the bank that you have the heloc with decides they are no longer going to provide you with that line of credit while you are using it?
Exactly! Or if they call the note, then you have to come up with the money to pay it back, where is that going to come from? Scary.
Go to another bank and apply for one. Think out side the box. And this is if your credit is good. Secret: keep your credit in good standing. Do not over spend.
There are written terms on a HELOC. The bank can’t just change them at whim.
Ridiculous. Never showed how the mortgage is paid off in 5 - 7 years.
I saw your similar videos a few yrs ago but didnt quite grasp the fine details I would need to be clear on before actually using this method. Now I'm wondering since it is not a mortgage, whether the banks can demand payment in full at their leisure for a HELOC. In 2008 my credit card company demanded payment in full which I paid but no way would I have the funds to pay off the amount of my "mortgage"/HELOC
Not typical with a 1st lien HELOC
I've never heard of a credit card company doing that. May I ask which one?
@@TheKwakBrothers what lender would ever be ok with taking a 2nd position after being in the 1st and carrying the most risk?
@@holylabsMaria Brisbane helped me secure HELOC with 650 credit score
@@balletfolkloriconwicheck her out on Google or check her website
Invest bitcoin. I got 100K investment when it reaches to my mortage debt I am selling out.
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.
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
Thank you for explaining this! I struggle to understand financial information and you broke it down so easily. I do have a question though…. In this scenario of the mortgage being $200,000 and the heloc being $270,000…. Can you help me understand the benefits (maybe a different term would be more fitting?) to taking the excess of $70,000? If the goal is not to improve your home or take on some kind of project but to merely get out of the scenario of a 30 year mortgage would it work the same to take just 200,000 or even 206,000 to match the income in and out for this particular scenario….? Hope that makes sense. Thanks in advance for any answers and advice.
I *think* the 70k was existing equity in the home and the 200k was what was owed still on the mortgage. So the HELOC was the total value of the home possibly
@@justfelicitous5109Maria Brisbane helped me secure HELOC with 650 credit score
@@justfelicitous5109check her out on Google or check her website
The mortgage was 300k and 90% LTV was $270k from my understanding
The first part of your strategy doesn't work. Your HELOC doesn't give you $270,000 to work with. It gives you $70,000. Your LTV is your home's value x .9 MINUS what you owe on the home. If your home only has $100k in equity, you can't get a HELOC for $270k.
I thought it HELOC gives you 55,000.
-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.
I saw your videos and have been trying to figure it out. Have to admit it took me a bit. But, with your plan you are only gaining a month of interest. I have seen comments of people saying I'm paying $5000 on my house every month! No, they are paying $5000 a month on all their bills they added to the heloc every month including the heloc payment. The true ballance is only going down as much as the heloc payment is paying towards the principal each month minus the bills they paid off on the credit card with the heloc. Same as the regular mortgage payment.
A regular mortgage or a heloc at 3% it's not going to matter. Unless your knocking the house principal down with extra payments on either, you're not making difference.
Thanks for the video, I am in process getting Heloc
Hate to break it to everyone, but the part where this plan falls apart is where he explained the concept of LTV for a max HELOC balance. While he is correct about the % banks will let you borrow, (typically 85% or so), you have to subtract out your current mortgage balance as well. Using his numbers, you'd only be approved for $70,000 max on a HELOC, rather than the $270k he quoted.
If something sounds too good to be true, that's because it is. No such thing as a free lunch.
You're right with a 2nd lien HELOC.. but not with a 1st lien HELOC where the HELOC replaces the entire mortgage and therefore uses the ENTIRE LTV %
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
There is no way it's going to work in the practical world unless all the stars are aligned in your favor, well in that case, just buy a lottery ticket. Come on, which lender is going to give you almost 70-80% of HELOC within the first 7 years. It's possible only if your property is 'significantly' up, or you have reduced lots of the principal by paying down extra payments. In fact, in the second case where you reduced the principal, I am thinking isn't a better idea to continue with the same process to get rid of the mortgage. Because LOC is usually 2-3% higher than the original mortgage interest. I would definitely agree with this process after 10 or 15 years.
Getting rid of 30 years mortgage within 5-7 years, without putting in 'extra' payment, is not even theoretically possible.
You're right when it comes to a 2nd lien HELOC... But not with 1st lien HELOC which is what I'm referring to in the video
Thanks for such an informative video. I'm a bit confused about the difference between the HELOC, revolving credit facility and a redraw account. Are you able to explain the differences and why the HELOC may be better to pay it down faster?
They are both lines of credit. The heloc portion is carrying the remaining principle on your mortgage as the balance with the total value of the home as the credit limit.
I'm confused, can someone sum up how you payed off a 30 year mortgage in 7 years. There wasn't a example of how the number's work. Can someone help?
I think this is bogus. He never showed how to get the mortgage paid off in 7 years.