I was at a Renatus meeting last night and they did a presentation on velocity banking where you use your lines of credit to pay off mortgage(s). The presentation was done well, but it went to quick to actually do the calculations. Has anyone ever been involved with Renatus or velocity banking and has verification that it works or not?
There’s a whole thread on this If you use the search function
I do this and I have been very happy with it. The reason it "works" is because you are paying extra principal toward your mortgage, so you can simply do that instead, but I think that misses out on some of the other benefits. First of all, most people try to save and then end up having an emergency or buying something they want or need and the money doesn't get paid toward the mortgage. Secondly, your money is sitting around in a checking account waiting to be paid toward bills and groceries and that's really inefficient. When you do this velocity setup all of your extra cash goes on the mortgage and your checking account goes to zero (hopefully you keep a bit of a rainy day fund in savings), so your funds aren't sitting around - they are working for you all the time. Lastly, you're paying the same amount of money in a different, more efficient way. Most people never consider how slowly they are chipping away at their principal, but when you look at an amortization table it usually takes about 2 years and $20,000 in interest to pay down $10,000, for example, in the typical fashion. When you move that same $10,000 to a HELOC now you can put all of your income toward it and still have access to it in order to pay bills and $10,000 takes 6-10 months and under $1000 in interest to pay off. Again, you can just make extra principal payments, but while you're saving up to do it I've already dumped my checking account and $10,000 from the HELOC onto the mortgage and well on my way to paying it back, so the strategy makes a lot of sense, in my opinion.
Obviously, you have to make more than you spend for any early mortgage payoff strategy to work, but yes, this one works. The thing I always find amusing is that if there was a mainstream mortgage company that did low, fixed rate HELOCs that you could put all of your income toward and still pay your bills, I think people would jump at it, because it's obviously more efficient to have your money working for you automatically. But since you have to sort of jimmy rig a small HELOC together with a mortgage anyone who does it is an idiot and so on and so forth. Anyway, good luck if you end up trying it.
@Todd Blank Velocity definitely has the right idea. I love my HELOC, and got to make some big moves with this strategy. I can take that one step further and show you how we do it at 101 Financial. Leveraging your money and utilizing innovative banking strategies is such a great way to get ahead a lot quicker then conventional banking.
101financial.com/peace is a quick video giving you the gist of what we do.