Has anyone ever used the Velocity Banking Strategy?

Has anyone ever used the Velocity Banking Strategy?

Don SpaffordPro Member
Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes

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.

10Reply
2,590 views

Most Popular Reply

Rental Property Investor · Pasadena, CA · Member since 2016 · 164 posts · 149 votes
9y

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.

See this reply in the discussion

356 Replies

Jump to latestLatest
  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Jeremy Z.:

    @Brian Cardwell

    I'm not trying to open up another can of worms here... but I have another question and I am genuinely curious to hear your thoughts.

    We have established that funneling your funds through a HELOC will cost more* than paying those funds directly to your mortgage. If you were to do this again, would you still funnel your funds through the HELOC, or would you only use the HELOC if you needed access to the money? And if the former, why?

    *This assumes the HELOC has a higher rate of interest than the mortgage, as in Brian's example.

     Knowing what I know now, I would ....wait for it....try it the way you discussed. If I felt comfortable with it I would continue to do it. But if I felt uncomfortable I would go back to the way I did it. The peace of mind may be worth the small cost.

    That makes sense. I think when I posed the question I was curious if you would stick to using the HELOC due to the ease of knowing how much money is left over after expenses each month. But thinking it through a bit further, that would probably be easy to track either way.

    Hope you have a Happy Easter. Cheers!

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Jeremy Z.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Jeremy Z.:

    @Brian Cardwell

    I'm not trying to open up another can of worms here... but I have another question and I am genuinely curious to hear your thoughts.

    We have established that funneling your funds through a HELOC will cost more* than paying those funds directly to your mortgage. If you were to do this again, would you still funnel your funds through the HELOC, or would you only use the HELOC if you needed access to the money? And if the former, why?

    *This assumes the HELOC has a higher rate of interest than the mortgage, as in Brian's example.

     Knowing what I know now, I would ....wait for it....try it the way you discussed. If I felt comfortable with it I would continue to do it. But if I felt uncomfortable I would go back to the way I did it. The peace of mind may be worth the small cost.

    That makes sense. I think when I posed the question I was curious if you would stick to using the HELOC due to the ease of knowing how much money is left over after expenses each month. But thinking it through a bit further, that would probably be easy to track either way.

    Hope you have a Happy Easter. Cheers!

      Have a Happy Easter too.

  • Real Estate Investor · Flushing, NY · Member since 2016 · 210 posts · 77 votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Jeremy Z.:
    Originally posted by @Brian Cardwell:

    Jim you are incorrect. It is ok though. If everyone understood how this works and used it, the banks wouldn't allow it.

     BS sales line alert! "Banks HATE him! Find out how Brian Cardwell does it using this one simple trick."

    Anyone else ever notice how R. Marcella Poole pipes in around the same time with zero helpful information?

    Oh yeah, I'll say it again. This CAN work, if you have a lot of money you don't intend to invest elsewhere (probably $20K-50K+ to make it worth it). Or... you could most likely just take out a HELOC when you need it!

     Lets not sling false information Jeremy Z. I am not selling anything. The math works if done  correctly. Can it be done with out a heloc? Yes it can. Do most people do it ? No. If you have not used this method correctly you wouldn't know that it works. Just because YOU don't understand how it works doesn't mean it doesn't work. It is just a tool to help those who understand. Don't Bash things you don't understand. There are correct calculation in this two year old Post. Learn from it. If you choose not to learn from it, don't confuse the issue here with false accusations. Again I am not selling anything or using some kind of trick. The math works. Can it be done a different way? Yup it can. This is just another option that works well.

  • Don SpaffordPro Member
    OP
    Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
    7y

    Thought I'd throw this in here since I started this post a couple years ago. I just listened to the "Get Rich Education" podcast # 240 in which a Mortgage Lender that offers investment property loans is offering a new product that basically sounds just like this. They call it a "Home Select Loan" through Ridge Lending Group. Here's a link to the show if it doesn't get removed:

    https://www.getricheducation.com/episode/240-new-1...

    While listening to the explanation of how it works, it sounds a lot like this but the only difference is they include it into the loan somehow, so it is a 1st lien loan. A little difficult to explain  guess but the point is to save long-term interest and pay off your house sooner even though the interest rate is higher. 

    I just thought it was interesting that a lender is now offering this as one of their specific products and thought everyone on this thread would be curious to learn about that no matter which side you are on for your opinion on this topic.

  • Member since 2019 · 5 posts · 2 votes
    7y

    Hi. I learned it through an education program that I enrolled in. Bottom line, it works if you have the discipline. I used it on personal loans and on real estate investing deals. Ya don't need to increase your income or refinance to pay off a typical 30 year mortgage in about 7yrs.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y

    @Richard Saling

    Generalized statements claiming a typical mortgage can be paid off in "about 7 years" using this method are misleading. The actual time depends entirely on how much extra money someone can put toward the debt. If a person only has enough monthly income to cover their expenses, this payoff method won't help them much (it may even prolong the payoff a bit). Conversely, someone with a large amount of disposable income could pay it off in 1 or 2 years. And everything in between. The heloc doesn't accelerate payoff - it's the extra money paid toward the debt.

    People should be aware of that before starting this method. Better yet, they should use online calculators or spreadsheets to model out how long it will take them to pay off the loan based on the extra amount they anticipate being able to pay toward the debt each month.

  • Member since 2019 · 5 posts · 2 votes
    7y

    Of course there are factors that go into it, but it CAN be done. I have seen it in action, even with people on a tight budget. And of course I am generalizing because I am not giving a class on the subject and getting into every person's individual situation. readers should be able to understand that. 

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Jeremy Z.:

    @Richard Saling

    Generalized statements claiming a typical mortgage can be paid off in "about 7 years" using this method are misleading. The actual time depends entirely on how much extra money someone can put toward the debt. If a person only has enough monthly income to cover their expenses, this payoff method won't help them much (it may even prolong the payoff a bit). Conversely, someone with a large amount of disposable income could pay it off in 1 or 2 years. And everything in between. The heloc doesn't accelerate payoff - it's the extra money paid toward the debt.

    People should be aware of that before starting this method. Better yet, they should use online calculators or spreadsheets to model out how long it will take them to pay off the loan based on the extra amount they anticipate being able to pay toward the debt each month.

    JZ, come on man. No one is saying, with a Heloc alone,  one can payoff ones first mortgage early. We are only saying the method works. Even you have admitted that. 

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Jeremy Z.:

    @Richard Saling

    Generalized statements claiming a typical mortgage can be paid off in "about 7 years" using this method are misleading. The actual time depends entirely on how much extra money someone can put toward the debt. If a person only has enough monthly income to cover their expenses, this payoff method won't help them much (it may even prolong the payoff a bit). Conversely, someone with a large amount of disposable income could pay it off in 1 or 2 years. And everything in between. The heloc doesn't accelerate payoff - it's the extra money paid toward the debt.

    People should be aware of that before starting this method. Better yet, they should use online calculators or spreadsheets to model out how long it will take them to pay off the loan based on the extra amount they anticipate being able to pay toward the debt each month.

    JZ, come on man. No one is saying, with a Heloc alone,  one can payoff ones first mortgage early. We are only saying the method works. Even you have admitted that. 

     He didn't just say the method works. He repeated the same sales pitch that always gets thrown around with this method, that the typical mortgage can be paid off "in about 7 years". Based on what??? The average U.S. mortgage amount and the average U.S. discretionary income? Notice those details are never included in the pitch. It's a sales tactic. Richard may not be selling something, but at a minimum he is repeating a sales pitch. It's mumbo jumbo when the other variables are left out. Incomplete info. Misleading.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y

    Ah, but alas, a quick Google search shows that he IS selling something. Not a surprise there.

  • Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    7y

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Jeremy Z.:

    Ah, but alas, a quick Google search shows that he IS selling something. Not a surprise there.

     JZ yup caught another one selling this method. If they see it here though, there should be enough information for them not to have to pay anyone for it.

  • Member since 2019 · 5 posts · 2 votes
    7y

    I am not interested in selling anything to anyone in this forum. That goes against the policy, right? I  never said take my class, or that I even offer a class. 

    And a person CAN pay off a 30 year mortgage in about 7yrs without increasing their income or refinancing. Ya use a simple interest product like a HELOC and make chunks of principle only payments to the mortgage. Believe it, or don't believe it. Its up to you. There are no secrets. It's not new. It works on any amortized loan. I used it on my car loan for example. Others have used it on student loans.

    Rather than accusing someone of trying to sell something, Google how the strategy works.  I sat through a 2 day course explaining it.  It can't be learned or fully explained in all the details in a blog post.

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Richard Saling:

    I am not interested in selling anything to anyone in this forum. That goes against the policy, right? I  never said take my class, or that I even offer a class. 

    And a person CAN pay off a 30 year mortgage in about 7yrs without increasing their income or refinancing. Ya use a simple interest product like a HELOC and make chunks of principle only payments to the mortgage. Believe it, or don't believe it. Its up to you. There are no secrets. It's not new. It works on any amortized loan. I used it on my car loan for example. Others have used it on student loans.

    Rather than accusing someone of trying to sell something, Google how the strategy works.  I sat through a 2 day course explaining it.  It can't be learned or fully explained in all the details in a blog post.

     I am glad you defended yourself. My apologies. I shouldn't have jumped to the conclusion that you were selling something.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

     I have read that Renatus is one of the biggest promoters of misinformation on this topic, but I hadn't really seen it with my own eyes. This poster has a photo of himself posing with the CEO of Renatus!

    I'm not certain if the promoters of this "strategy" are purposely misleading people, or whether they are being misled themselves. Probably a bit of both.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y
    Originally posted by @Richard Saling:

    I am not interested in selling anything to anyone in this forum. That goes against the policy, right? I  never said take my class, or that I even offer a class. 

    And a person CAN pay off a 30 year mortgage in about 7yrs without increasing their income or refinancing. Ya use a simple interest product like a HELOC and make chunks of principle only payments to the mortgage. Believe it, or don't believe it. Its up to you. There are no secrets. It's not new. It works on any amortized loan. I used it on my car loan for example. Others have used it on student loans.

    Rather than accusing someone of trying to sell something, Google how the strategy works.  I sat through a 2 day course explaining it.  It can't be learned or fully explained in all the details in a blog post.

     If you read through this thread, or any of the other threads on this topic, you will see that the heloc isn't necessary. You could take out a heloc, but not use it and pay your discretionary income toward your mortgage instead. Or don't even take out a heloc until you need it. The results are essentially the same.

    My intention is not to attack you personally. The promoters of this strategy spread a lot of misinformation, and I only respond to try and dispel that misinformation.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

     I admit that a heloc CAN be used, but I also consistently state that it isn't necessary. You yourself have acknowledged it isn't necessary, and that you might try doing it without using a heloc if you were to pay down your mortgage ahead of schedule in the future.

    People like myself and Bill F. don't speak up just because we like to be combative. We do it because we see investors and potential investors being misled with statements like:

    • Mortgages are front-loaded and designed to keep you in debt
    • Helocs allow you to tackle the debt faster due to differences in the way the interest accrues
    • The typical mortgage can be paid down in about 7 years using this strategy (I just explained above why this is an incomplete soundbite)

    People use these soundbites to sell courses on this topic that you yourself acknowledge are unnecessary. And unwitting targets shell out money that could be used to better themselves elsewhere. When are you going to come to the light, and start dispelling all the myths that are used to promote this topic rather than defending the dark side?? ;)

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Jeremy Z.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

     I admit that a heloc CAN be used, but I also consistently state that it isn't necessary. You yourself have acknowledged it isn't necessary, and that you might try doing it without using a heloc if you were to pay down your mortgage ahead of schedule in the future.

    People like myself and Bill F. don't speak up just because we like to be combative. We do it because we see investors and potential investors being misled with statements like:

    • Mortgages are front-loaded and designed to keep you in debt
    • Helocs allow you to tackle the debt faster due to differences in the way the interest accrues
    • The typical mortgage can be paid down in about 7 years using this strategy (I just explained above why this is an incomplete soundbite)

    People use these soundbites to sell courses on this topic that you yourself acknowledge are unnecessary. And unwitting targets shell out money that could be used to better themselves elsewhere. When are you going to come to the light, and start dispelling all the myths that are used to promote this topic rather than defending the dark side?? ;)

     JZ I am your father 😉 Darth Vader voice.

     I am not defending the sale pitch but I do defend the method. The method is just one of many ways to accomplish the same goal. 

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y

    @Brian Cardwell - Ha! 🤣

  • Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

    This should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

    Master Brian, Supreme Overload of things Velocity Banking Related, I've read this entire thread, twice. May I please comment now sir?

    I never said this doesn't work. I said the practitioners attempt to overcome the laws of algebra with their explanations.  Those two statements are not the same thing.

    Sure the math shows it works, but the same math shows that paying off the note and forgoing the HELCO works better. 

    I'm not looking to take another spin around the merry-go-round with you on this issue. I don't mean to be insensitive, but I truly don't care what asinine things you do with your money. You like paying the bank more interest, that's cool. I'm sure I spend money on things you find foolish. 

    The difference is I don't spend hours trying to convince people and rationalize to myself that these sub-optimal choices are in fact optimal.

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Bill F.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

     should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

    Master Brian, Supreme Overload of things Velocity Banking Related, I've read this entire thread, twice. May I please comment now sir?

    I never said this doesn't work. I said the practitioners attempt to overcome the laws of algebra with their explanations.  Those two statements are not the same thing.

    Sure the math shows it works, but the same math shows that paying off the note and forgoing the HELCO works better. 

    I'm not looking to take another spin around the merry-go-round with you on this issue. I don't mean to be insensitive, but I truly don't care what asinine things you do with your money. You like paying the bank more interest, that's cool. I'm sure I spend money on things you find foolish. 

    The difference is I don't spend hours trying to convince people and rationalize to myself that these sub-optimal choices are in fact optimal.

     Well @Bill F. I enjoy your New England sense of humor. 

    You need to define "better". Now this method is optimal compared to paying off the mortgage as scheduled by a 30yr mortgage. Oh and btw one could pay all cash and not pay the bank any interest 😉. One could argue that this is the "better" way to buy a house. So let's not split hairs here. The bottom line is this method works well. Why try to discredit the method by making your "Algebra" statement?  If you were not trying to discredit then please clarify your "algebra" statement. Then maybe we could avoid the HOURS of conversation.

     One more thing I was giving you the benefit of the doubt that you didn't read the whole the thread. I would think that someone who read and understood what was written wouldn't make the comments you made. My bad!

    P.S.  I probably shouldn't have made that last statement. 

  • Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

     should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

    Master Brian, Supreme Overload of things Velocity Banking Related, I've read this entire thread, twice. May I please comment now sir?

    I never said this doesn't work. I said the practitioners attempt to overcome the laws of algebra with their explanations.  Those two statements are not the same thing.

    Sure the math shows it works, but the same math shows that paying off the note and forgoing the HELCO works better. 

    I'm not looking to take another spin around the merry-go-round with you on this issue. I don't mean to be insensitive, but I truly don't care what asinine things you do with your money. You like paying the bank more interest, that's cool. I'm sure I spend money on things you find foolish. 

    The difference is I don't spend hours trying to convince people and rationalize to myself that these sub-optimal choices are in fact optimal.

     Well @Bill F. I enjoy your New England sense of humor. 

    You need to define "better". Now this method is optimal compared to paying off the mortgage as scheduled by a 30yr mortgage. Oh and btw one could pay all cash and not pay the bank any interest 😉. One could argue that this is the "better" way to buy a house. So let's not split hairs here. The bottom line is this method works well. Why try to discredit the method by making your "Algebra" statement?  If you were not trying to discredit then please clarify your "algebra" statement. Then maybe we could avoid the HOURS of conversation.

     One more thing I was giving you the benefit of the doubt that you didn't read the whole the thread. I would think that someone who read and understood what was written wouldn't make the comments you made. My bad!

    P.S.  I probably shouldn't have made that last statement. 

    Better has already been defined multiple times in this thread, but you already knew that, Supreme Overlord of all things Velocity Banking; holding things equal when comparing the HELOC strategy to applying excess funds directly to the note, the latter costs less money by an ever so slight margin. When the interests rates are set to market (where HELOC rates are higher than mortgage rates) the direct pay down method wins hands down.

    As for the algebra statement, for those that understand the Equated Monthly Installment {EMI=[P*r*(1+r)^n]/[(1+r)^n-1]} and Time Value of Money { FV=PV*(1+r)^n} formulas, the meaning is clear.

     For those that don't get it, well you know how they say "if you have to ask the price, you can't afford it".... it's  sort of like that. 

    I know right now you have at least a dozen straw-mans, red herrings, glittering generalities, and false analogies you can't wait to type out so I'll give you the last word.

    I get it Brian, you need to defend your position with the utmost passion and verve in spite of the facts laid before you because the alternative is admitting to others, but really yourself, that you were not right in this particular instance and the thought of that being the case repulses you to the very mantle of your being. 

    The floor is yours. Happy rationalizing

  • Brian CardwellPro Member
    Investor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
    7y
    Originally posted by @Bill F.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:
    Originally posted by @Brian Cardwell:
    Originally posted by @Bill F.:

    @Jeremy Z. HAHAHA great find!!

    I've been following his thread for awhile and have gotten used to the practitioners of this strategy trying to explain how this method overcomes the laws of algebra, but now we have a a real live educator in out midst. 

     should be good!

     Well @Bill F. with all due respect. The method works. JZ your educator will admit as much. Indeed the other guy may be selling something but don't come on here and make a statement that this doesn't work. It works, I am not selling anything. The math shows it.  Read the thread before coming here and making an incorrect statement as you have made. 

    Master Brian, Supreme Overload of things Velocity Banking Related, I've read this entire thread, twice. May I please comment now sir?

    I never said this doesn't work. I said the practitioners attempt to overcome the laws of algebra with their explanations.  Those two statements are not the same thing.

    Sure the math shows it works, but the same math shows that paying off the note and forgoing the HELCO works better. 

    I'm not looking to take another spin around the merry-go-round with you on this issue. I don't mean to be insensitive, but I truly don't care what asinine things you do with your money. You like paying the bank more interest, that's cool. I'm sure I spend money on things you find foolish. 

    The difference is I don't spend hours trying to convince people and rationalize to myself that these sub-optimal choices are in fact optimal.

     Well @Bill F. I enjoy your New England sense of humor. 

    You need to define "better". Now this method is optimal compared to paying off the mortgage as scheduled by a 30yr mortgage. Oh and btw one could pay all cash and not pay the bank any interest 😉. One could argue that this is the "better" way to buy a house. So let's not split hairs here. The bottom line is this method works well. Why try to discredit the method by making your "Algebra" statement?  If you were not trying to discredit then please clarify your "algebra" statement. Then maybe we could avoid the HOURS of conversation.

     One more thing I was giving you the benefit of the doubt that you didn't read the whole the thread. I would think that someone who read and understood what was written wouldn't make the comments you made. My bad!

    P.S.  I probably shouldn't have made that last statement. 

    Better has already been defined multiple times in this thread, but you already knew that, Supreme Overlord of all things Velocity Banking; holding things equal when comparing the HELOC strategy to applying excess funds directly to the note, the latter costs less money by an ever so slight margin. When the interests rates are set to market (where HELOC rates are higher than mortgage rates) the direct pay down method wins hands down.

    As for the algebra statement, for those that understand the Equated Monthly Installment {EMI=[P*r*(1+r)^n]/[(1+r)^n-1]} and Time Value of Money { FV=PV*(1+r)^n} formulas, the meaning is clear.

     For those that don't get it, well you know how they say "if you have to ask the price, you can't afford it".... it's  sort of like that. 

    I know right now you have at least a dozen straw-mans, red herrings, glittering generalities, and false analogies you can't wait to type out so I'll give you the last word.

    I get it Brian, you need to defend your position with the utmost passion and verve in spite of the facts laid before you because the alternative is admitting to others, but really yourself, that you were not right in this particular instance and the thought of that being the case repulses you to the very mantle of your being. 

    The floor is yours. Happy rationalizing

     Wow . My mistake for believing that you actually read the thread. You have demonstrated that you DID NOT read the thread. If you had, you would not have made the statement that you just made. The comparison was not velocity banking vs. paying more to the principle. Had you actually read the thread, you would have known that. You really should check the mirror before being condescending.  Please don't project your issues on me. 

    Part of the problem or part of the solution. Which one are you?

    Bottom line : Velocity banking works. Like it or not. If you don't agree don't use it. No sleep lost here. 

    I am not here to be right or wrong. I am here to help.  The OP asked a question about something I have experience with and I answered the question.  No more no less. 

    Oh yeah and had you read the entire post you would have seen my answer to JZ and his question. I listen and learn. 

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y

    @Brian Cardwell

    It's evident that LOTS of people come here with misconceptions about this topic.

    You say you are here to help. Which is more helpful?

    Simply saying "it works", and allowing those people to continue thinking the heloc is faster than paying the extra amount directly toward their mortgage?

    OR...

    Clearing up those misconceptions and letting them decide if the potential increased costs of the heloc are worth it to them?

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