Equity Optimization/Mortgage Acceleration?

[Zaphod]

rmecc001 wrote:

WallStreetPhysician wrote:

 

http://www.wallstreetphysician.com/debunking-mortgage-accelerator-program/

 

Click to expand…

Thank you for that link. Great post!

 

I was intrigued when he talked about it but I think I agree with your talk.

 

Jordan was an interesting guest but I can’t help but feel that he was too focused on promoting his affiliate companies.

Click to expand...

Really? Was it the truth in equity dot com?

[Zaphod]

Someone on here talked about it once, sounded fishy and didnt make any sense compared to just dumping all your cash into your mortgage. Not ideal for a doctor to worry about their mortgage anyway. You lose some of the imputed rent income value by what amounts to basically prepaying your living arrangements years in advance. Also lose your currency short, etc...

[rmecc001]

WallStreetPhysician wrote:

 

http://www.wallstreetphysician.com/debunking-mortgage-accelerator-program/

 

Click to expand...

Thank you for that link. Great post!

 

I was intrigued when he talked about it but I think I agree with your talk.

 

Jordan was an interesting guest but I can't help but feel that he was too focused on promoting his affiliate companies.

[WallStreetPhysician]

hightower wrote:

So, I read through the transcript of the WCI podcast this morning.  Jordan Goodman from Money Answers talked about this concept of Equity Optimization/Mortgage Acceleration.  I don’t quite follow how this would help pay off a mortgage?

From what I understand he’s suggesting that you open a HELOC on your mortgage and pay down your principle with this balance?  I don’t see how shifting debt around like that will help anything?  He says basically to open a new heloc, write a check for the entire balance of the HELOC and use it to pay down the mortgage balance.  Then, start paying off your HELOC over the next 9-12 months or whatever?  From what I remember, HELOC rates are usually a fair bit higher than mortgage rates, so how will this help you?  Why not just spend a year making 50k in extra payments to your first mortgage from your checking account?  Am I missing something?  Forgive me if I am.

Seems like he’s just trying to sell us on his affiliate’s product.

This concept seems pretty much the same as opening up a credit card that offers 18-21 months of zero interest, using it to pay something off (like high interest student loans) and slowly pay off that balance over the interest free term?  That’s what I did with my remaining 6.8% student loans last year.  I guess the only downside to using credit cards is you can only have so many and it’s kind of a one time thing (they don’t let you repeat the interest free period again later).

Click to expand...

You're not missing anything. The trick is that you use your HELOC as a checking account where you send your paycheck into the HELOC and pay your bills out of the HELOC. That way, all extra savings goes to the HELOC/paying off the mortgage instead of other things (investing in taxable, paying off student loans). Some people may want to do that, others may want to split their money manually (send a little bit of extra money to mortgage, a little extra money to student loans, a little bit into VTSAX in taxable, etc.)

Jordan isn't the first person to talk about mortgage accelerators. I heard it on another personal finance podcast probably a year ago at this point, and had to investigate it further because it sounded too good to be true. I wrote up a description and my criticisms of the mortgage accelerator in a blog post about 2 months back:

http://www.wallstreetphysician.com/debunking-mortgage-accelerator-program/

Looks like WCI will be giving his take on the subject in a few weeks based on his comments in the main blog post.

-WSP

[q-school]

hightower wrote:

q-school wrote:

star trek doc posted about this a little while back.  his heloc was like 1.5.

I suggested he pay off his mortgage with it.  his heloc had 3-4 mo limit (roughly from memory).

so some heloc have very low rates.  if you can keep getting the super low rates, I guess it makes sense.

 

 

Click to expand…

Wow, well yeah with a 1.5% rate, that would make sense.  What’s this 3-4 month limit?  3-4 months before you have to make any payments?

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had to be paid off in 3-4 mo

that's why he couldn't do it.  (i'm continuing to assume star trek doc is a he)

 

 

[hightower]

q-school wrote:

star trek doc posted about this a little while back.  his heloc was like 1.5.

I suggested he pay off his mortgage with it.  his heloc had 3-4 mo limit (roughly from memory).

so some heloc have very low rates.  if you can keep getting the super low rates, I guess it makes sense.

 

 

Click to expand...

Wow, well yeah with a 1.5% rate, that would make sense.  What's this 3-4 month limit?  3-4 months before you have to make any payments?

[q-school]

star trek doc posted about this a little while back.  his heloc was like 1.5.

I suggested he pay off his mortgage with it.  his heloc had 3-4 mo limit (roughly from memory).

so some heloc have very low rates.  if you can keep getting the super low rates, I guess it makes sense.

 

 

[hightower]

So, I read through the transcript of the WCI podcast this morning.  Jordan Goodman from Money Answers talked about this concept of Equity Optimization/Mortgage Acceleration.  I don't quite follow how this would help pay off a mortgage?

From what I understand he's suggesting that you open a HELOC on your mortgage and pay down your principle with this balance?  I don't see how shifting debt around like that will help anything?  He says basically to open a new heloc, write a check for the entire balance of the HELOC and use it to pay down the mortgage balance.  Then, start paying off your HELOC over the next 9-12 months or whatever?  From what I remember, HELOC rates are usually a fair bit higher than mortgage rates, so how will this help you?  Why not just spend a year making 50k in extra payments to your first mortgage from your checking account?  Am I missing something?  Forgive me if I am.

Seems like he's just trying to sell us on his affiliate's product.

This concept seems pretty much the same as opening up a credit card that offers 18-21 months of zero interest, using it to pay something off (like high interest student loans) and slowly pay off that balance over the interest free term?  That's what I did with my remaining 6.8% student loans last year.  I guess the only downside to using credit cards is you can only have so many and it's kind of a one time thing (they don't let you repeat the interest free period again later).