Has anyone ever used the Velocity Banking Strategy?

341 Replies

I searched for Velocity Banking but did not get anything to return except for some lenders using that name. I just was introduced to this strategy this week and was curious if anyone has done it and what their experience with it was.

If yuo don't know, the basic concept is to use a line of credit from the bank and use it like a checking account so you put yout income into it but get a LOC for like $10k, add in your income for that month, and use the $10k to pay the principal, and then pay your other expenses from that account and as long as you are spending less than what is going in, you build that LOC back up again so you are able to pay back the $10k LOC and then use it again to pay toward the principal. So if you save $1k each month, then every 10 months you can use it again or get an increased LOC and use a larger amount. Doing this strategy gets a 30 yr loan paid off in about 7 years and saved tons of interest. The LOC calculates interest on an average daily balance, so as you have money going into it each month, you are creating less of an amount to charge interest for. So over the course of a year, for that $10k LOC, assuming $4k income and $3k expenses, for a $250k mortgage at 5.25%, you pay about $13k in interest on the mortgage payments (first year of mortgage) vs only a few hundred dollars on the LOC.

The only down-side I can see is opportunity cost. That money that you are saving each month could be deployed to purchase other properties rather than helping to pay off any specific loan. But if you have enough other sources of income and strictly use the rental income for any given property to put back into its own LOC, then theoretically, you can have full 100% cash flowing properties in 7-8 years, depending on how much you are saving each month. You could even use it for your primary residence.

I just bought my first 4 plex this week, literally closed the same day I was shown this strategy, and it blew my mind. I want to use it with this property since it will be cash flowing about $700/mo and if I can get it paid off much sooner and save a lot of money in interest, that would be awesome.

Don, Yes I have heard of it and used it. I had a 252k first mortgage and used this strategy to pay it off in just under 7 years. You have to be really good about not using the heloc for anything else.... IE big screen TV ūüėÄ

I am trying to understand the difference between the velocity banking method as described and a savings account where I simply save up and then pay down the mortgage. I understand, obviously, with a LOC you can make your first 10k payment earlier, but beyond that what's the advantage?

@Jon Ree I suppose besides getting that first payment earlier, and helping your credit by repaying the LOC, I believe the other "advantage" is that you then have those funds available for any other unforeseen emergency that you may not have enough funds saved for yet, like to replace broken furnace or something. But also by repaying the LOC and helping your credit, you will likely be able to increase the LOC which you could later use for cheaper financing on rehabs potentially, rather than a hard lender.

I guess one could use their savings account. But by using the heloc and not your savings account, you are able to keep your money. Once you spend the money in your savings account it is gone. Then you have to wait to save it up again . It can be a bit unnerving to spend your savings. When you use the heloc, you are not using "your money". You leverage the equity in your home to pay the primary mortgage. You also still have access to the money if you need it. When I did it, I took a heloc for 20k but only used 10k of it. It made it nice to have a little cushion their.

@Don Spafford ,

It's actually taught as part of basic financial education in some countries - not the U.S. 

What you have to remember with this Velocity banking stuff is that it really isn't this golden goose brilliant idea that some people make it out to be. If it was, everyone would be doing it. It's also the reason why smart people can't understand what is so "brilliant" about it, because it isn't brilliant or that helpful. People advertise it as a way to pay off a mortgage in 7 years etc blah blah blah it all sounds good to the ill informed or financial illiterate, but in all honesty, you could actually do that with any mortgage you want, you just have to be disciplined. The Velocity banking is more of a way to force you to diligently pay something off quickly. Another trick they like to talk about is how much interest it saves you, they typically show you how much interest you would pay over 30 years on a mortgage and take that entire interest amount as a % of the loan or house value, which is not a true % interest you are paying lol. And of course if you pay off a house in 7 years, you "save" a lot in interest, but you can do the same by paying off a mortgage in 7 years conventionally (albeit you would still pay a little more interest). This Velocity banking is more like one of those credit card hacking people where they have a slightly better rewards package on their credit card, sure they make a few bucks more, but the effort and time it takes to do it is not worth it to some people. Yes the method is probably slightly better than just using a conventional way of paying, but it's not absurdly better or genius. This is why it's so hard to try and understand why it's so much better, it's just not. Trust me, I'm a CPA and work in corporate finance and  I've sat through a demonstration on this.

You make a very good point about opportunity cost with the HELOC and it's a huge detractor from this method. Why would you seriously care to pay down a 4-5% mortgage quickly if you are an investor and can earn 8-20% on your money. I posed this same question to the person on stage in a 40 person presentation on Velocity method and the presenter gave some ridiculous response that didn't make any sense.

I'm not saying this is necessarily a bad idea or a scam, but rather not some crazy good thing. The benefit from a HELOC is that it allows you to front the payment for a month, which lowers the average amount you owe on your loan throughout the month, and thus the interest you pay is lower, whereas if you didn't have the HELOC, you would have to wait a month to see that decrease in interest. They then say to take that interest savings and put it against your mortgage again and keep doing that and you have it paid off in 7 years. Ok sure, why would I want to do that if my mortgage rate is 4.2% lol, why not take that savings and invest it. They target peoples emotions "pay off your mortgage in 7 years WOW!!!" when in reality it's probably not the smartest financial advice.

@Don Spafford this is not a new strategy although it may be a new name for it. At the time I  first heard about it, it cost $3,000 for the software to tell you when  and where to move the money. At the time it was also a multi level marketing product.

What they don't tell you is to pay off a 100K mortgage in 7 years you still have to pay at least 100K. There is no magic bullet that makes the debt go away. All their demonstrations assume you make substantially more than you need to  live off of, and use all of that extra money to pay down the mortgage. You can pay more towards your mortgage every month without anyone's help.

@Don Spafford ,

@Ned Carey makes a good point. The whole point of debt acceleration, "Sweep Strategy", "Velocity Banking", or whatever you want to call it is NOT to reduce the principal paid back. It's to reduce the amount of interest you pay over the life of the loan.

For example: $200K at 5% for 30 years ...

Initially, your payments are mostly interest. 

Making only the scheduled payment, that doesn't turn around until roughly the 195th payment (16-1/4 years - past the half-way point in the life of the loan). By that point, the total of payments is already in excess of the original principal balance - roughly $202K. By the end of 30 years, the interest amounts to nearly $187K, meaning it's a 93.5% loan, not 5%. Amazing what compound interest can do, eh?

By accelerating that to the tune of an additional $15K of principal per year (if you can manage it), the payoff comes closer to the 10 year mark and the total interest paid is closer to $52K or 25% of the initial loan balance. Big improvement.

@Ned Carey Yes, it still is part of a "guru" type course. I was just presented the method at a local REI group meeting and then the guy took some appointments to have another meeting I went to showing how to save taxes by paying your kids, which I already knew. Then invited those that attended to another meeting saying he is part of a company he works with that can teach more. I looked up some things based on the info given, no company name provided or cost for this information, but found what I believe is the company that shows the quick paydown method and their training is anywhere from $2k-$20k.

And yes anyone can just pay more on their monthly mortgage, but I do understand the reason for doing it in larger chunks because it then puts you farther ahead enough to the point that your monthly payments increase the principal payment and reduce the interest amount so that each monthly payment is therefore also paying more toward the principal rather than at the end of the loan term.

However for me, in thinking about it more, in my case where I want to invest in more properties, the opportunity cost is too great. I would rather use those funds early on to acquire more rentals than just pay down one. Granted, once that one is paid down you have a much larger cash flow which can also be used to save up faster to acquire more properties as well. It comes down to your priorities and goals.

@Don Spafford ,

Yes - it's targetted more at people who are not investors (yet) and want to reduce their debts. Those who don't distinguish between "good" debt and "bad" debt just want to get out from under it. They feel better about their financial situation and sometimes that can give them the confidence to venture into REI.

Yes - I've done the presentation you attended. I also have two more that I do: Credit Literacy and Debt Strategies.

Credit Literacy dispels a lot myths around credit, credit scores and credit repair. It also pisses some people off when they learn that some cases of "identity theft" are actually identity confusion on the part of the credit bureaus.

Debt Strategies addresses Debt Acceleration, Debt "Snowball"-ing (something promoted by Dave Ramsey and approved by the JD/CPA you saw in that presentation, Mark Kohler) and Debt Reduction (without bankruptcy). These address those who have more income than bills, people who live paycheck-to-paycheck and those who have too much month left at the end of the money for whatever reason, respectively.

Thank you to everybody who has made any contribution to this. From reading all the responses I think it is safe to say that it is a good strategy for someone who wants to reduce their debt or create more equity at a faster pace, but not necessarily the best route to take for an investor who wants to expand their portfolio quickly since those saved funds could be deployed to purchase more properties. It may still be worth exploring to do it at a slower pace on a new purchase. Maybe don't constantly do it every so many months as that amount builds up but once every other year or something to still make a significant impact in getting the loan paid off but not leaving you without funds to invest during that time. Just my thoughts I guess, I see the positive and negative of it but I am still curious to give it a try.

@David Dachtera you say that you have taught this presentation. From your perspective then as somebody who I presume understands it in and out, have you yourself used this strategy on an investment property. Or would you suggest it to a new investor to use on their first or second investment property while they still intend to try to buy more properties? Or would it be better to get those properties established and have dependable cash flow to use toward it before implementing this technique? I still would like to learn more in-depth details about it without having to pay thousands for the training.

@Don Spafford ,

As I noted earlier, this is intended for debt-averse consumers or for people who just want to get out from under their home loans and other amortized / installment debt in less time and pay less interest over the life of the loan.

I'm not sure it would even make sense for any investment which is valued by its income production. I suppose it might for those who own their income properties in their own name (MAJOR NO-NO!) and have  the wherewithal to accelerate such debt using this type of method. I would think those financial resources would be better used to acquire income-producing property. Certainly any property financed with short-term commercial loans (balloon due in 5 to 10 years) would pose a serious cash challenge.

That said, of course, if you have large chunks of cash coming into your business in spurts from whatever source, using that to increase the equity positions in your income properties could be useful so that when those balloons "pop" (come due) you'd need to bring less or no cash to closing on the refinance if the amortization on the loans is too long (s/b 20 years or less, ideally).

The debt acceleration class is only 1 of about 50 representing 7 separate curricula and some 460+ hours of on-line classes available 24/7 covering everything from setting up your business to self-directed retirement plans, attracting and engaging private lenders, finding deals, fix-and-flip, buy-and-hold, tax liens and deeds, seller financed notes, commercial real estate, raw land development, credit management and repair, and more.

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Just chiming in my 2 cents worth. It is a good concept that requires strict discipline and avoiding the temptation to use it for purchases of unnecessary and depreciating assets. We had one prior to the real estate market crash, it was called a HELOC (Home Equity Line of Credit) much like a home equity, accept it was for the full appraised value of the home.

The financial institution at the time and just like many others "froze" our account when the real estate bubble burst in 2008. That created a major cash-flow issue for us since we were basically dumping all of our income and spare cash, and we couldn't all of a sudden access any of it. We had to scramble and stop the direct deposits into our HELOC, and make regular mortgage payments as needed, and rebuild our cash on hand.

Our goal was to have had it paid or substantially reduce the principal within a predetermined time period of 10 years, but due to the crash it didn't work as we had planned.  Since it was a 10 year interest only, with principal & interest starting after the 10th year, we were going to whittle down the principal to a manageable amount when the 10 years were up.  

So as stated, it is a good tool and offers a lot of flexibility, but it has to be managed very carefully, and hopefully you won't run into the same issues we had.

@Don Spafford

@David Dachtera

Run the numbers people!!!

My head is spinning and my brain is mad.

Original home mortgages Pre-1934 were on average 7 year loans. The payments were interest only until at the end of 7 years you made a balloon payment of the entire principle. Most homes were foreclosed on especially when the great depression hit. In response, the amortized loan was created. What the amortization does is say you give me the length of time you want to borrow this money and I will even out the payments so you will know what is owed for the next 15 or 30 years. Let us not forget that at the beginning of the loan you are borrowing a larger amount of money than you are at the end of the loan. They charge you so much interest at the beginning because you have a huge principal amount out. You pay the same APR the entire time of the loan. The amortization part is that they adjust your principal payment so you know you can afford the payment and so it will stay the same. You can't be mad that a bank has given you $300,000 and wants interest on that entire amount. How else would you have them do it? That also means that as you pay the principle down you will pay less in interest, because the bank has less money out. I guess they could amortize the loan so you pay more principle up front and then you are upside down on interest at the end of the loan. That is what would be atrocious and a crime against math.

Don't compare percentage of interest paid with interest rate. (My brain is getting mad.) Yes, you pay 95% interest when you borrow 300,000 over 30 years, but that is not the rate of interest. That is the total amount of interest we pay divided by the principal. We use APR so we can compare apples to apples. It is a standard. That is like if I were to buy $5 in bananas, and $20 in chocolate then say taxes on bananas is only 4% while taxes on a chocolate is 80%. Is that true? Well, all the food is taxed at 4%, but if I take the total amount of taxes paid $1 and $.80 is for the chocolate, then 80% of my taxes go to chocolate. You can't compare APR to 30 years of interest paid turned into a percentage of the principal. They are not the same thing. This is the smoke and mirrors. I have seen a guy tell someone with a 15 year loan at 5% interest to trade that in for an 11% heloc. Run the numbers, people. If you pay the same extra payments on both loans no matter how you cut it, you will pay more for the 11% interest loan, even with simple interest.

The magic is in the extra cash. They say it is in the simple interest (I have also heard simple interest compared to amortized interest, which is not a type of interest, it is a type of loan) that holds the magic. It is not. Run the numbers. When I say run the numbers, I mean pull out an excel sheet and see what happens in your personal scenario. Look at your loan terms. The difference in interest type and APR only slightly accelerates the pay off. The huge payoff occurs with the cash. You still have to pay the principal down. It doesn't go away without cash. In any scenario where you pay $200,000 off in 7 years means (200,000/84) you need to be paying $2080 in principal plus the interest, be it 5% or 11% calculated according to your loan terms. So, if you have a $1500 mortgage payment and you think there is some magic that will pay that off without adding more cash to that payment, you are up in the night. Notice, in the scenarios given you have $4000 in income and $3000 in living expenses. Where do you think the extra $1000 is going?

I must say another part of the magic is just refinancing. You are refinancing your other debt to have more cash to pay off principle. The ones that are best helped by this strategy are those with high interest debt. $20,000 in Credit cards and car loans at 15% refinanced at 10% can save you about $100 in monthly interest, which can then be added to your principal payoff. Even then, cash is king. That extra $1000 is still doing most of the work.

Another note:

You are not saving $1000 a month. $10,000 at 5.25% is only $50 a month in interest. No matter how you cut it, even if you borrowed that $10,000 at 0% interest, the most it would save you is $50 a month. The $1000 is the $1000 extra from your paycheck that you aren’t using ($4000 paycheck and $3000 in expenses). 

@David Dachtera

@Don Spafford

I have run the numbers in so many scenarios and in NO scenario is it better to borrow money at a higher interest rate to pay down a loan with a lower interest rate. 

I am so glad you sent me this scenario, because it confirms what I have asserted. 

I have returned to you what you get when you run the numbers. All I am saying is run your numbers and see if it works for your particular scenario. The numbers will change if you have a 0% interest credit card or LOC. That would work, if your interest is less, you will pay less.

First of all you put the excel sheet together wrong. When you take out a HELOC, you would begin your loan payments with the $15,000 dollar payment. It would be paid on the first month, the thirteenth month, the 25th month, and so on. You borrow the $15,000 and put it towards the loan, then make payments on the HELOC to pay it off. You have the HELOC getting paid off before you apply the $15,000. If you compare my sheet against the sheet you sent, it pays off 8.8 years instead of your 9.17 and the interest paid is only $49,866.22 instead of $52,073.75. Next, you have paid the $15,000 each year, but have only calculated the $15,000 being borrowed once. It would need to be borrowed every year. You borrow, pay it off, borrow, pay it off, and so on. You would need to borrow that $15,000 nine times.

Now, with the numbers in your scenario run correctly, you can compare to the numbers ran if you take that same $2375 payment ($1073.64 Mortgage payment + $1301.36 HELOC payment) and just pay that each month on your 5% loan.

Without going through the hoops of a HELOC, the loan is paid off in 8.7 years (instead of 8.8), making 104 payments (instead of 106), and the real kicker, paying $46,829.06 in interest (instead of $49,866.22).

In conclusion, yes, if you pay an extra $15,000 a year towards your mortgage you will pay it off much sooner than if you don't, but NO you will not save money using a higher interest HELOC to do it. You will actually pay almost $3,000 more.

Perhaps my excel sheets will help illustrate my frustration of what is being taught. 

Corrected Loan Acceleration

Run Your Numbers

Hopefully, my links will work.  I am new to Bigger Pockets so I am not sure how you did that cool attachment to your excel sheet.  This is my work around.  I hope you consider reposting the corrections. 

Thank You. 

Originally posted by @Liz Baldwin :

@David Dachtera

@Don Spafford

I have run the numbers in so many scenarios and in NO scenario is it better to borrow money at a higher interest rate to pay down a loan with a lower interest rate. 

I am so glad you sent me this scenario, because it confirms what I have asserted. 

I have returned to you what you get when you run the numbers. All I am saying is run your numbers and see if it works for your particular scenario. The numbers will change if you have a 0% interest credit card or LOC. That would work, if your interest is less, you will pay less.

First of all you put the excel sheet together wrong. When you take out a HELOC, you would begin your loan payments with the $15,000 dollar payment. It would be paid on the first month, the thirteenth month, the 25th month, and so on. You borrow the $15,000 and put it towards the loan, then make payments on the HELOC to pay it off. You have the HELOC getting paid off before you apply the $15,000. If you compare my sheet against the sheet you sent, it pays off 8.8 years instead of your 9.17 and the interest paid is only $49,866.22 instead of $52,073.75. Next, you have paid the $15,000 each year, but have only calculated the $15,000 being borrowed once. It would need to be borrowed every year. You borrow, pay it off, borrow, pay it off, and so on. You would need to borrow that $15,000 nine times.

Now, with the numbers in your scenario run correctly, you can compare to the numbers ran if you take that same $2375 payment ($1073.64 Mortgage payment + $1301.36 HELOC payment) and just pay that each month on your 5% loan.

Without going through the hoops of a HELOC, the loan is paid off in 8.7 years (instead of 8.8), making 104 payments (instead of 106), and the real kicker, paying $46,829.06 in interest (instead of $49,866.22).

In conclusion, yes, if you pay an extra $15,000 a year towards your mortgage you will pay it off much sooner than if you don't, but NO you will not save money using a higher interest HELOC to do it. You will actually pay almost $3,000 more.

Perhaps my excel sheets will help illustrate my frustration of what is being taught. 

Corrected Loan Acceleration

Run Your Numbers

Hopefully, my links will work.  I am new to Bigger Pockets so I am not sure how you did that cool attachment to your excel sheet.  This is my work around.  I hope you consider reposting the corrections. 

Thank You. 

Mmmmmm, no. It's not intended to illustrate a scenario where acceleration is done from day one. Realistically, that is unlikely to happen.

The most likely scenario would have the home owner discovering mortgage acceleration having already taken a 1st mortgage on a home. I'm working on adding calculations in so the acceleration can begin anytime, not just starting year 1. Haven't quite worked that formula out yet.

So, no - your "correction" is incorrect. The changes highlighted at the top of  the "1st Mtg" worksheet are also incorrect.

Your "Run Your Numbers" spreadsheet is simply a re-iteration of the scenario I explained showing the difference between "periodic chunks" and additional principal on each payment. So, I've already done and discussed that, albeit in another thread. You can do that by simply entering the additional principal amount as the "chunk size" on the HELOC worksheet so it carries over to the 1st MTG worksheet. Then, ignore the other numbers on the HELOC worksheet (which is why your "correction" is incorrect).

Sorry ...

"...in NO scenario is it better to borrow money at a higher interest rate to pay down a loan with a lower interest rate."

...except in this one. It works, and you can prove it for yourself.

Whether you begin on day one or not, you still paid $15,000 9 times and never included in your scenario the interest that must be paid to the repeated HELOC loan that must be taken out for you to have $15,000 to pay in chunks every year. You only included the interest that was paid for the first 12 months. If you are saving $15,000 through the year to pay it at the end of the year, that hardly makes financial sense. You also didn't show how long it would take for that $15,000 at the end of the loan to get paid off. The 1st mortgage gets paid off in 110 payments, but there are still about 10 more payments due on the $15,000 HELOC (it would reduce to about 5 payments if you use the $1073 that was going to the 1st now that it is paid off). My correction is correct because whether I put the additional payment on the HELOC page or on the 1st mortgage page the interest calculation is the same and it is less when you do it without the HELOC.

How are the numbers on the top incorrect?  The spreadsheet is there for proof. 

It just boils down to what you are trying to say is debts can be paid off quicker paying in chunks borrowing from a HELOC rather than just taking that same money and just making extra payments to principle to your current mortgage holder. I am saying if the HELOC is at a higher interest rate the chunk method is not only more expensive it is slower. That is what my spreadsheet shows.

Originally posted by @Liz Baldwin :

...

It just boils down to what you are trying to say is debts can be paid off quicker paying in chunks borrowing from a HELOC rather than just taking that same money and just making extra payments to principle to your current mortgage holder. I am saying if the HELOC is at a higher interest rate the chunk method is not only more expensive it is slower. That is what my spreadsheet shows.

I'm saying that by accelerating payoff of the 1st mortgage the total interest paid is greatly reduced to the point that the annual interest of the HELOC is of little significance, in this case, circa. $616 a year or $6,160 total. Even the difference between "chunks" or additional principal each payment is less than 1% of the total 30 year pay off.

Rather than repost everything I posted before, here's the link to the thread:

Use HELOC to paydown mortgage fast

Perhaps that will explain it better (349 posts, over the course of a year+). Lots of mistakes made there, also. Best to start near the end and work back.

It's too easy to get hung up on the whole HELOC thing. Any place to "store" money will do, really - a deposit account, a mattress, ... you could even use another stream of income.

There's no "magic" to a HELOC, in this instance or any other. It just has certain advantages for your taxes and your credit profile which may justify the interest expense.

@Liz Baldwin is right on. My 4 year old will tell you that if you apply more money towards you debt, it's paid down dramatically faster with less total interest paid.

If paying 4 or 5% bugs you and you can't put excess funds to work to make at least that much, then by all means use the cash to pay down principal. But if you can't do better than 4-5% then this isn't the site for you.

Originally posted by @Cody L. :

Liz Baldwin is right on. My 4 year old will tell you that if you apply more money towards you debt, it's paid down dramatically faster with less total interest paid.

If paying 4 or 5% bugs you and you can't put excess funds to work to make at least that much, then by all means use the cash to pay down principal. But if you can't do better than 4-5% then this isn't the site for you.

There is no "magic" to a HELOC ...

... but, if there were, it would be this:

If you have equity but not cash, you can still get started with loan acceleration as long as your monthly net income exceeds your expenses by at least the monthly pay-back on HELOC chunk or the amount of additional principal you wish to apply to your first mortgage payment every month. You can borrow it out, pay it back, borrow it out, pay it back, ... or, apply that amount to your first mortgage payment as additional principal until the first mortgage is gone which then improves your monthly cash flow by the amount of that payment. If your insurance and property taxes are escrowed, you'll still need to set funds aside for property taxes and arrange to pay your homeowner's insurance some other way.

You will, all the same, be in a much better cash position much sooner than taking the loan to its full term as scheduled.

You can then employ the Debt Snowball or something else to knock out your remaining debts - if any - in 4 to 5 years or so.

... and no, you don't have to buy anything from anyone to do either of those. It's all right here on the web.

If your monthly net income does NOT exceed your expenses and you're living paycheck-to-paycheck, use the Debt Snowball first to free up cash flow for mortgage acceleration. Between the two, you will get your debts paid down much sooner than if you don't. Again, not rocket science.

So, get your loans and debts paid down much sooner or keep arguing about what works and what doesn't. It's up to you (the reader). It's YOUR choice.

Originally posted by @David Dachtera :
Originally posted by @Cody L.:

Liz Baldwin is right on. My 4 year old will tell you that if you apply more money towards you debt, it's paid down dramatically faster with less total interest paid.

If paying 4 or 5% bugs you and you can't put excess funds to work to make at least that much, then by all means use the cash to pay down principal. But if you can't do better than 4-5% then this isn't the site for you.

There is no "magic" to a HELOC ...

... but, if there were, it would be this:

If you have equity but not cash, you can still get started with loan acceleration as long as your monthly net income exceeds your expenses by at least the monthly pay-back on HELOC chunk or the amount of additional principal you wish to apply to your first mortgage payment every month. You can borrow it out, pay it back, borrow it out, pay it back, ... or, apply that amount to your first mortgage payment as additional principal until the first mortgage is gone which then improves your monthly cash flow by the amount of that payment. If your insurance and property taxes are escrowed, you'll still need to set funds aside for property taxes and arrange to pay your homeowner's insurance some other way.

You will, all the same, be in a much better cash position much sooner than taking the loan to its full term as scheduled.

You can then employ the Debt Snowball or something else to knock out your remaining debts - if any - in 4 to 5 years or so.

... and no, you don't have to buy anything from anyone to do either of those. It's all right here on the web.

If your monthly net income does NOT exceed your expenses and you're living paycheck-to-paycheck, use the Debt Snowball first to free up cash flow for mortgage acceleration. Between the two, you will get your debts paid down much sooner than if you don't. Again, not rocket science.

So, get your loans and debts paid down much sooner or keep arguing about what works and what doesn't. It's up to you (the reader). It's YOUR choice.

I currently have $30,613,750 in outstanding loans, and payments of (damn, can this be right?) $181,604.50/month.   Trust me if I could find a way to make that better I'd have a lot to gain  :)

Oh, how misinformed the people on this thread are! Don, the presentation you sat through might not have effectively demonstrated this strategy. Because it absolutely does work, and if you understand the difference between simple interest and compound interest, it will make more sense. I've been in the Mortgage business for over 15 years and I understand this strategy. NO, you don't have to be more disciplined. It's all about a paradigm shift. We have been brainwashed into thinking the traditional way of banking and the traditional mortgage is normal and acceptable. Everyone is most interested in obtaining the lowest rate. The velocity banking strategy is so much better. You can pay your 5-6 yr auto loan off in 5-6 months. The 30 yr mortgage off in about 7  years. It's not about making extra payments. What happens when you make extra payments on your mortgage? That money is gone. Unless you refinance. You can't swipe your mortgage to pay for gas or groceries if you need it... And yes, there is an education that goes along with it. You can do it for $1997, which by the way, is 100% tax deductible. It's a business write off. It's funny, people are quite alright paying around 3% in closing costs on a traditional mortgage, but balk about the cost of the education that helps you save HUNDREDS OF THOUSANDS OF DOLLARS! 

AND, once you have your debt paid off, all of those payments equal 100% cash flow. Plus you still have that line of credit...what do you do with it? YOU USE IT TO BUY INVESTMENT PROPERTIES!!!

Any of you please feel free to contact me and I would be happy to help you understand it and make this strategy work for you! 

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