LOAN STACKING Payoff Mortgage in 1/6th the time and save 100k+

LOAN STACKING Payoff Mortgage in 1/6th the time and save 100k+

Bremerton, WA · Member since 2018 · 24 posts · 6 votes

I'm not sure if this is a legit term but I've thought about this before and then I ran the numbers and was pretty excited to see what I came up with. Perhaps many of you already know about this and I'm just behind the 8 ball here but here it is.

 Remember how it's normally not a good idea to start paying off credit cards with other credit cards. Instead we have a transfer balance for that now.In theory using personal loans to pay off mortgages can work with the right numbers and if you qualify for lower percentages but I'll give a basic example.

    If one uses a 100k loan at 4.5% interest rate and a standard 30 years the monthly payment would be 506 and an interest $375 a month at the starting date. Now taking out say a 20k personal loan well the interest rates will be higher than a home loan yes. However, you can take this loan and put it down onto the house immediately within the first month. I If you pay just the standard monthly payment the interest it would cost you is 40k extra to pay off that first 20k on the house loan. If she takes out a 20 k personal loan and makes monthly payments on that loan at 12% for say one year she would only pay an interest of 1.2k. Your monthly interest monthly payments for the home loan instantly drop from $375 a month to $300 a month. 

     You would have to ensure that you can consistently pay off the home loan and the personal loan at the same time as the initial 20k loan at 12% was around 1700 a month and with the house loan that would be a little over 2k a month. Manufactured homes have very low property taxes and insurance costs plus with the potential extra $2100 of extra income from renting out the place that alone could potentially cover both loans. If you continue paying with 4 20k installments of personal loans (personal loan interest rates will lower as you continues to prove that you can pay them off on time) you could potentially only pay an extra 15k in interest and have the home paid off in 5 years instead of paying off the home in 30 years and paying 82.5k in interest. That will save her a total of 66.5k. Now this doesn't include the mortgage insurance but that's taken off immediately after 20% of the loan is paid offf which is a law. 

    That would save around $50-$100 a month. Here are the links to the calculators I utilized to simulate these hypothetical scenarios. After the fourth installment You could just pay as much as possible each month with the 20k and only 4.5% interest. If anything this could be paid off in less than 4.5 years for sure with just an average salary job and rental property income.

     Obviously the higher the home cost the more you could potentially save with this method

Calculators used:

Personal Loan Calculator | Bankrate.com Amortization Schedule Calculator - Bankrate.com
1Reply
93 views

Most Popular Reply

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y

Taking out a $20 personal loan at 12% to payoff a $20 mortgage at 4.5% is not going to save any money...no calculators required.

There are people who save mortgage interest using interest free periods from credit cards promotions but that's a different strategy.

See this reply in the discussion

31 Replies

Jump to latestLatest
  • Bremerton, WA · Member since 2018 · 24 posts · 6 votes
    8y
    Originally posted by @Mike Dymski:
    Originally posted by @Travis Zuehls:
    Originally posted by @Mike Dymski:

    Taking out a $20 personal loan at 12% to payoff a $20 mortgage at 4.5% is not going to save any money...no calculators required.

    There are people who save mortgage interest using interest free periods from credit cards promotions but that's a different strategy.

    Thank you very much Mike. I was wondering if you've ever heard of business credit lines or credit cards that have 0% financing for the first 6 to 18 months? 

    Google "no interest credit cards" and you will find a bunch of sites which identify and review them.

    Thanks,

      I am actually using a 0% interest for 18 months balance transfer right now with Discover card. It has 5% cash back as well for utilities. Free money + paying me for things my tenants pay for. It's better this way.

  • Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    I wasn't saying don't do it, but the most efficient way to do it is get a card and max it out. Pay it off prior to promo and as you the balance goes down your score goes up then you take out another chunk and do it again. The reason it kills your credit is because you're using all available for that card... Target should be like 5-10%. 

    The only thing is it can impact your future (albeit for a limited time) but if you plan around it it's an efficient strargey. Banks are cutting down on cards but that's more aimed at those who chase bonuses and manufactured spend.

  • Bremerton, WA · Member since 2018 · 24 posts · 6 votes
    8y
    Originally posted by @Matt K.:

    I wasn't saying don't do it, but the most efficient way to do it is get a card and max it out. Pay it off prior to promo and as you the balance goes down your score goes up then you take out another chunk and do it again. The reason it kills your credit is because you're using all available for that card... Target should be like 5-10%. 

    The only thing is it can impact your future (albeit for a limited time) but if you plan around it it's an efficient strargey. Banks are cutting down on cards but that's more aimed at those who chase bonuses and manufactured spend.

    Correct the utilization is based off that specific card. However, having multiple opened revolving accounts minimizes the effect one maxed out line of credit has on your overall score.

    I'm still receiving a ton of bank credit card offers with 30K+ of credit and the 0% transfers. If they're cutting back I'll just attempt to take advantage of each opportunity while making sure I can either pay it off in full before the 0% monthly payment offer ends or have another card lined up for a balance transfer. These deals really work well, especially for manufactured homes with 3+ bedrooms that you can negotiate for under 50k. Then if you transfer all that onto one card like my father did that's free money plus you can make money by paying the monthly payments (1% on everything else).

  • Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    https://thepointsguy.com/guide/ultimate-guide-chase-5-24-rule/

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    8y
    Originally posted by @Travis Zuehls:
    Originally posted by @Wayne Brooks:

    @Travis Zuehls Just so you know, those BS "business credit lines with 0% for 12-18 mo.s" you see hawked by people on here are not cash credit lines....they are trade line type credit at places like home depot, office depot, etc, etc....pure crap, and they want to charge you (5 or so for the "credit lines" they "get for you".

    Regular credit cards allow balance transfers of 18 months 0% interest and some have a make credit line of 100k. You could basically just transfer nearly the entire home loan onto the cards then once the term of 0% comes close to ending just transfer to another credit card that has a similar offer.

    Why pay any interest when you can get the loan for free?

     This seems like a risky strategy for most people. A job loss could put a halt to their ability to transfer the debt to another 0% promotional offer, leaving them stuck making payments on a high-interest credit card. If you have the cash reserves to bail yourself out in this scenario then it might be worth the risk.

  • Bremerton, WA · Member since 2018 · 24 posts · 6 votes
    8y
    Originally posted by @Jeremy Z.:
    Originally posted by @Travis Zuehls:
    Originally posted by @Wayne Brooks:

    @Travis Zuehls Just so you know, those BS "business credit lines with 0% for 12-18 mo.s" you see hawked by people on here are not cash credit lines....they are trade line type credit at places like home depot, office depot, etc, etc....pure crap, and they want to charge you (5 or so for the "credit lines" they "get for you".

    Regular credit cards allow balance transfers of 18 months 0% interest and some have a make credit line of 100k. You could basically just transfer nearly the entire home loan onto the cards then once the term of 0% comes close to ending just transfer to another credit card that has a similar offer.

    Why pay any interest when you can get the loan for free?

     This seems like a risky strategy for most people. A job loss could put a halt to their ability to transfer the debt to another 0% promotional offer, leaving them stuck making payments on a high-interest credit card. If you have the cash reserves to bail yourself out in this scenario then it might be worth the risk.

    Very true, one must evaluate their probablity of their own situation and risks. Obviously having that money that is liquid is a plus. Or having a backup job or business. Having a permanent job combined with your own side business that you entend to be full time in plus a great ROI for the rental property and a sufficient Emergancy fund should pay wonders.

    If one is in a business which their income/job/business is way to unpredictable or just can't make triple the amount of debt within the same amount of time then it's too risky.

    I am fortunate to have the permanent long term job with stable income and starting two side businesses in rental property and Real estate agent along with tradeline commissions.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.