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  • Sajimone
    replied
    I've brought this up before a year or so ago.. but I believe I backed away from the idea just due to the hassle factor and I wasn't completely convinced.   Plus I'd rather use the HELOC on standby to find a good real estate property deal if I needed to do a quick cash purchase without traditional financing.  The last podcast has reignited my interest?!

    If you're early in paying the traditional 30year mortgage.. then mortgage interest is amortized where you're paying nearly all interest upfront and very little principal.  Yeah.. you can pay a extra each month but you can accelerate your mortgage by a couple of years of payments with a large HELOC payment.   Now.. your same monthly mortgage is paying more principal and less interest.   You'll argue about paying the interest on the HELOC.. but that's simple interest payments as oppose to amortized interest.  Then make your extra payments each month against the HELOC which is a simple interest only loan until its paid off along with your monthly mortgage.  Then do it again.  You're still paying interest on the simple loan but I imagine the simple interest payments are going to be less than the interest paid on the mortgage especially in the first half of the amortization schedule???

    You have to have positive cash flow each month.   You have to make extra payments each.   Do we have a math wiz that could run some numbers and make an apple to apple comparison of PAYING EXTRA TO THE MORTGAGE PRINCIPAL- Amortized interest VS PAYING EXTRA TO THE HELOC - Simple interest... what would be the interest saved with either scenario be?

    Leave a comment:


  • barelybarefoot
    replied
    Seemed like there might be a way to game the system. The late dr. Wisemoney was able to graduate with 0 student loans gaming system with 0% credit cards so my thought was this was something similar.

    Yes, there's leverage to keeping a mortgage, but there's also being too comfortable with debt. I could keep accumulating debt at 'low interest' but it's still debt and we all have our ceilings (I hope). Being in a VHCOL area, I have plenty of coworkers who have > 2+ MM in debt, but hey, it's low interest and some are 'good' debt so it's ok. Not my mentality.

    Leave a comment:


  • LizOB
    replied




    I’m interested to hear WCI chime in on this as I just learned about this method from a podcast and I was intrigued.  They claim you can pay off your mortgage in 5-7 years, using their HELOC (of course).  I agree with the lot here that it would only make sense if you get a really low rate on the HELOC – I have a doctor mortgage with 3.7% fixed interest rate with no PMI and no HELOC rates I could find in a quick search come even close to that…  Also, why bother with the fuss, why not just make additional principal payments?  Lastly, I can find other places to throw my money at the current time, like my 6 figure 4% variable rate refinanced student loans on which I can’t deduct the interest (at least they aren’t 6%! thanks WCI!!) So I guess I’m not paying off my mortgage until thats gone. Overall it seems like a sales pitch for them to sell their HELOC product…

    This is my first post!  I can’t end it without leaving a huge thank you to Jim Dahle.  WCI has been a godsend to me since I found it in residency: I scour the website all the time, I’ve read your book and many you’ve recommended, I listen to the podcast- I can’t get enough!

    I’ve recommended WCI to everyone I know. Thanks so much!!!
    Click to expand...


    Welcome!

    Leave a comment:


  • Zaphod
    replied
    It must have some small benefit, which I think was done thoroughly by Wall Street Physician on his site (havent read it). If you take into account the company costs its probably makes little cents.

     

    Leave a comment:


  • DMFA
    replied
    ...can someone please tell me why I want to pay off my mortgage aggressively in the first place? And once you do that, please tell me why I can't just, you know, like, pay it?

    Leave a comment:


  • barelybarefoot
    replied
    I always got to mortgage professor for all my mortgage questions and he's chimed in on these accelerated mortgage payoff programs as well. Again, you not only need a HELOC but also excess cash flow (so making larger monthly payments) to make it work as well as it seems.

    We have a 1 MM mortgage so am always looking for a way to pay down faster so was checking out and researching this 'scheme' as well. If anyone is successful on their own (without needing to purchase these kits) please share your excel spreadsheet!!!!!

    Leave a comment:


  • Overlap12
    replied
    I was going to give Truth in Equity a call just to have them try to explain how this works.  It seems like it they just help you manage your cash flow to make extra payments on the loan, which I can do on my own.  What I'd rather see is an analysis where they compare their "system" to simply making extra mortgage principal payments, and see if that somehow saves you interest.  Notice in the materials they say "at the current level of income" but they don't mean "at your current mortgage payment".

    To me, substituting one debt for another (probably @ a higher interest rate) doesn't work unless you're able to "cash float" up front, meaning you use cash to pay down the primary mortgage, while deferring interest owed on the loan you used to pay it down.  They seem to ignore the fact you have this other loan accruing interest on a daily basis.

    Leave a comment:


  • sallazar
    replied
    What about paying your monthly cash flow after expenses and opening a 30-40k HELOC that you don't touch as an emergency fund to give you the liquidity back from the large cash flow dumps your putting into the mortgage?  This way your paying down your principle fast but you got the money dumped into the mortgage in backup credit that you won't need to access unless for emergencies.  I have been researching this topic for the last few weeks.  There seems to be 3 major companies that do this:

    TruthinEquity:  offers do it your self kit with software for 337, lifetime consultation for about 2 grand

    Speed Equity: offers a software program for about 1000 dollars.  CEO has a book on the subject.

    MagicMortgageSystem:  offers software and support for software for 40 dollars per month or lifetime fee of $475

    The proponents of the these systems claim you will save a lot more interest and pay down your mortgage faster than just applying monthly cashflow to mortgage b/c whole paycheck is applied to HELOC then expenses come out of HELOC instead of checking.  This makes sense in theory, however, when I run the numbers of applying my leftover monthly cash flow into a mortgage amortization calculator, I get a very similar payoff period of my 30 year fixed mortgage paid off in about 8 years.  I am interested to hear from others who would dispute or support my though process.

    Leave a comment:


  • mmorris1986
    replied
    I'm interested to hear WCI chime in on this as I just learned about this method from a podcast and I was intrigued.  They claim you can pay off your mortgage in 5-7 years, using their HELOC (of course).  I agree with the lot here that it would only make sense if you get a really low rate on the HELOC - I have a doctor mortgage with 3.7% fixed interest rate with no PMI and no HELOC rates I could find in a quick search come even close to that...  Also, why bother with the fuss, why not just make additional principal payments?  Lastly, I can find other places to throw my money at the current time, like my 6 figure 4% variable rate refinanced student loans on which I can't deduct the interest (at least they aren't 6%! thanks WCI!!) So I guess I'm not paying off my mortgage until thats gone. Overall it seems like a sales pitch for them to sell their HELOC product...

    This is my first post!  I can't end it without leaving a huge thank you to Jim Dahle.  WCI has been a godsend to me since I found it in residency: I scour the website all the time, I've read your book and many you've recommended, I listen to the podcast- I can't get enough!

    I've recommended WCI to everyone I know. Thanks so much!!!

    Leave a comment:


  • StarTrekDoc
    replied







    He most days

    our HELOC offers teaser rates x1-2 a year lasting 3-4 months at below market rates.  The most recent was 1.9% until April.  No fees.   Less enticing with the reform on HELOC, but still great way to use as a short term float — just like the teaser 0% credit cards when they offer zero loads–usualy Discover Card.

    This helps around the edges, but mostly with the holiday cashflow surge as we talked about in the other thread.

    You can do this with mortgage flux overall if one wants to pay off the mortgage early anyways — it’s just a cheaper way of doing it on the floating a portion of it.
    Click to expand…


    Heh. This post reminds me of the now closed fatwallet finance forums. Those were fond memories.
    Click to expand...


    Totally.   SIS was my hero.   Off to Slickdeals now which is a totally different flavor from FW-FF.

    Leave a comment:


  • Overlap12
    replied
    I was intrigued enough to get the free eBook and read a few other forums on this subject.  The only way this can work is if the interest on the HELOC is calculated differently than the interest on the mortgage, so that when you make a payment on your HELOC it is paying down principal faster than when you make that same payment (in dollars) on your mortgage.  I actually have a $200k, unsecured business LOC @ 4% and this sounds intriguing to me with a $950k mortgage.

    Leave a comment:


  • Ryan
    replied




    He most days

    our HELOC offers teaser rates x1-2 a year lasting 3-4 months at below market rates.  The most recent was 1.9% until April.  No fees.   Less enticing with the reform on HELOC, but still great way to use as a short term float — just like the teaser 0% credit cards when they offer zero loads–usualy Discover Card.

    This helps around the edges, but mostly with the holiday cashflow surge as we talked about in the other thread.

    You can do this with mortgage flux overall if one wants to pay off the mortgage early anyways — it’s just a cheaper way of doing it on the floating a portion of it.
    Click to expand...


    Heh. This post reminds me of the now closed fatwallet finance forums. Those were fond memories.

    Leave a comment:


  • StarTrekDoc
    replied
    He most days

    our HELOC offers teaser rates x1-2 a year lasting 3-4 months at below market rates.  The most recent was 1.9% until April.  No fees.   Less enticing with the reform on HELOC, but still great way to use as a short term float -- just like the teaser 0% credit cards when they offer zero loads--usualy Discover Card.

    This helps around the edges, but mostly with the holiday cashflow surge as we talked about in the other thread.

    You can do this with mortgage flux overall if one wants to pay off the mortgage early anyways -- it's just a cheaper way of doing it on the floating a portion of it.    One can really make fun by rotating ~400k through different brokerages and get bonus dollars off those every 4-6 months and earn some free dollars for kicks and giggles.

    Leave a comment:


  • Hatton
    replied
    Good article on Wsp.  I just made extra payments.  I see no advantage to using a heloc if you are disciplined.

    Leave a comment:


  • Lithium
    replied
    I wish I'd known about this.  Took me about half an hour to figure out how with a HELOC you're paying less interest and more principal than a regular mortgage payment would dictate.  I paid off my mortgage pretty aggressively anyway, so not sure how much this would have saved me in interest charges.  I'll probably try it with my next mortgage though.

    Leave a comment:

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