This was an eye-opening breakdown of velocity banking! The way you highlighted the mistakes and provided a more accurate method really clarifies how to approach paying down a mortgage faster. Your practical insights on using a line of credit effectively make a complex topic much easier to grasp. Thanks for sharing such valuable information!
@HackYourCreditCards
7 күн бұрын
Glad it was helpful!
@Pstmstr
21 күн бұрын
Need to recalculate the LOC method and actual interest rate. Paying $1100 extra monthly straight to mortgage principle at 7.5% cost less than making $10000 chunks at 10 or 12%. At least you compared the 2 methods. Most VB advocates do'n't.
@Nommie050
4 ай бұрын
Love the explanation.
@HackYourCreditCards
4 ай бұрын
Glad to hear it.
@DrFinancialLiteracy
3 ай бұрын
Awesome!
@aaronjennings8385
3 ай бұрын
Honest assessment. Of course straight principal payments would be faster, but without the reversible loc no one will commit. Being able to back out when overextended is the advantage of the LOC.
@DrFinancialLiteracy
3 ай бұрын
Awesome!
@HackYourCreditCards
4 ай бұрын
7 Methods to Get Out of Debt, see which can work for you: kzitem.info/news/bejne/tKpvuYhjeohqdY4
@DrFinancialLiteracy
3 ай бұрын
Awesome!
@Nsmithq99
26 күн бұрын
So many things wrong with this, as with all of the other explanations about Velocity banking. 1) Most banks won't give you a home equity loan if you only have 10% equity. 2) It absolutely makes no sense to pay down a 7.75% mortgage with a 12-14% HELOC...he even says he doesn't know the rate. It is true that in the early years, the scheduled payment only includes about $100 of principal in each monthly payment, so just make an extra $1100 payment every month, and by the end of the year you will have paid down the mortgage by about $13k. No extra work, no extra interest. It's just dumb to use this strategy.
@HackYourCreditCards
25 күн бұрын
I have to respectfully disagree that there are “so many things wrong” with my explanation. My apologies if the video gave the wrong impression. I make it a point to never suggest any method but instead I attempt to explain how they work, just purely from a math perspective. I have many videos on multiple methods as I hope each individual would watch all the various methods and choose what may be most advantageous to them based on their situation. Regarding your comments, a couple points: (1) you mentioned in your first point that a bank may not give a heloc with only 10% equity, you may be right, so for the sake of this video just assume the home is not $150,000 but instead it is $180,000 with 25% down, then we have a 75% LTV and the calculations stay the same because the mortgage is still $135,000. Your first point, while it may be valid, does not change the calculations. (2) your second point depends on the math and that is what I am always trying to point out, different variables yield different outcomes. In some cases you can receive a positive benefit paying down the balance of a long term (ie 360 month loan) with a short term (ie 12 month loan) even though the 12 month loan has a higher interest rate. If you paid a 360 month loan of interest rate X with a 360 month loan of interest rate X+1 then yes it makes no sense, but that is not what is going on here. You can make a lump sum balance pay down with a higher rate loan (of substantial shorter duration) and receive a savings. (3) I think your third point was “why not just make an extra principle payment” , valid point as I have a video that discusses exactly that kzitem.info/news/bejne/yGZ3yJaBpV-nnWk , you can receive a benefit from the lump sum method shown in this video as opposed to the monthly method because obviously the lump sum decreases the balance on which interest is calculated all at once and persists for the entire loan where the monthly method pays the same amount down but over time. As I point out in this other video the additional savings is nominal and some may opt to forgo the small additional savings for the convenience of just sending in extra monthly payments I hope that clarifies my intent and for those reading your comment adds some context to your points. I don't suggest anyone uses the method, I just want them to understand what is actually going on.
@DrFinancialLiteracy
3 ай бұрын
Wow! This is incredible.
@GamersClipsinfinity
25 күн бұрын
If you put your income into a heloc then pay bills and expenses, yeah you release big chunks to be used but wouldn’t that mean you’re paying interest on things that don’t cost you interest like food, energy bills etc?
@HackYourCreditCards
25 күн бұрын
The Heloc will have interest as you noted, that is correct. So the question becomes will you save more in interest on the larger longer term loan than you pay on the smaller shorter term loan. In other words even though you pay interest on the Heloc you may save more on the Mortgage or other loan you are paying down. Interest Saved - Interest Paid = Savings (if negative then no savings). So take this video as a guide and plug in your numbers to see if it makes sense. The variables such as loan size, term and interest rate will effect the outcome and not all situations will save money. I hope that helps.
@Nicktexas_
26 күн бұрын
If I’m understanding correctly?the 10,000 LOC goes straight to the mortgage principal but you continue to pay your regular monthly mortgage every month ?
@HackYourCreditCards
25 күн бұрын
Yes you would still make the regular mortgage payments because they would not change.
@SP-fo6gc
2 ай бұрын
Would the amount of principle paid on each regular mortgage payment also increase once you make the initial 10k payment?
@HackYourCreditCards
2 ай бұрын
If I understand what you are asking, yes when you make a payment of any amount the next payments ratio of principal and interest changes. In other words when you make a $10,000 payment the total balance goes down, then interest is charged on that balance. So the interest would be less on the next payment due to the lower balance and therefore the principal would be higher. I feel like I made that answer too complicated but hopefully it makes sense 😀
@elliotcruz8510
Ай бұрын
In the example of VB, the entirety of the income was placed in the LOC, without subtracting the current mortgage/car payment. Would that be mistake #3 ?
@HackYourCreditCards
29 күн бұрын
Good question and good eye, glad to see people are looking at this critically. If they were using a credit card instead of an LOC then things like the mortgage would not be payable from the credit card (either not payable or would incur a large fee), however from an LOC you can typically write checks, possibly ACH, or other means to pay the mortgage and car.
@BeeBusy-f7x
10 күн бұрын
@@HackYourCreditCards ... or you just transfer the money back to the checking account when the mortgage and car payments are due. It's best if your LOC is with the bank you have your checking account, then there are no fees to transfer between the accounts and easily done through your online banking app.
@BORISUNAMI
Ай бұрын
If I make a larger mortgage payment, do I need to contact my bank to let them know I want the extra funds to go towards the principal or how does that work?
@HackYourCreditCards
Ай бұрын
Yes contact them to ask how you designate a payment as principal only to be sure it is not applied to your payments. If you pay online they may have an option to click and apply payment to principal.
@BORISUNAMI
Ай бұрын
@@HackYourCreditCards this might be a stupid question, but what if the extra payment goes towards the interest, would that be a huge mistake?
@janettecampbell9591
2 ай бұрын
Is the monthly mortgage included in the LOC PAYMENT?
@HackYourCreditCards
2 ай бұрын
If I understand your question correctly, you are asking if the mortgage in their example is paid from the LOC? If I recall correctly the answer is yes they are paying all the expenses, including mortgage, from the LOC. I hope I understood your question correctly.
@janettecampbell9591
2 ай бұрын
@@HackYourCreditCards yes thank you.
@bubblewrap4793
4 ай бұрын
since we're talking about mistakes I would say it's a mistake to talk about savings over 30 years because people rarely hold mortgages over that time period. More realistic is, say, ten years. I think the savings from either method are not that great.
@HackYourCreditCards
4 ай бұрын
You are correct, the average ownership is about 8 years and median is about 13. However looking at an ammortization schedule you will see the interest is front loaded so early additional principle still makes a difference and you never know how long you might stay or if you might keep it for investment purposes. Just another way of looking at it.
@DrFinancialLiteracy
3 ай бұрын
Awesome! I have held onto 3 mortages for nearly 20 years so far without any refinancing. I am a rare person.
@HackYourCreditCards
3 ай бұрын
@@DrFinancialLiteracy that's impressive, and I am sure it has served you well, congrats. I am big believer that instead of holding dollars that decrease over time, assets serve us better as an inflation hedge.
@wraith511802003
2 ай бұрын
Problem, most banks are not allowing LOC right now.
@HackYourCreditCards
2 ай бұрын
That's actually a good point, and even if some are it is more difficult in our current economic environment, lending standards are tight. I should do a video using alternate sources.
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