All Forum Posts by: Mike Landry
Mike Landry has started 61 posts and replied 351 times.
Post: HELOC as alternative to conventional fixed mtg...
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Post: HELOC as alternative to conventional fixed mtg...
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
https://www.biggerpockets.com/forums/49/topics/329076-use-heloc-to-paydown-mortgage-fast?page=1
Post: HELOC as alternative to conventional fixed mtg...
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Someone must be pushing some serious advertising dollars at this scheme.
The only benefit it provides is if the interest rate is lower on the heloc.
3% interest costs you the same weather its a heloc, 30yr ect, 15 yr, ect. You only pay interest on the balance. So the only reason you "think" this works is because you are paying extra every month towards principal. Transferring your debt to a heloc does nothing magical to pay off the debt. Your heloc is just acruing interest the same way.
Ill try to link to the other thread that disproves this scheme.
That being said there are other good reasons for helocs.
Post: Before you became a Rehabber, you was a what?
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
just a habber!
Post: Use HELOC to paydown mortgage fast
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Originally posted by @David Dachtera:
@Chris May, @Timothy Hillyer, et al,
I posted this 3 days ago...
"Thru 20 chunk payoff cycles, you'll pay $1,031 and change in interest to the HELOC (20 x $51.56).
Applying that to the total interest paid on the 1st mortgage produces a total interest savings of $34,612.05. (Note: That's a correction to last night's number which I re-used in error today. I was tired and my patience was wearing thin. I f-ed it up)."
Earlier than that, I posted that the process also reduces the payoff of a 30 year fixed-rate mortgage by 12-1/2 years to 17-1/2 years. Over the course of the tread, I've provided all the evidence to support those results.
So, go ahead and keep trying to prove that it doesn't work. The evidence will still stand, and there's enough info in this thread that ANYone can prove for themselves that it does.
Is this a joke? You're screwing with us... right?
After all this and EVERYONE trying to help you get this straight. Im not sure if you are intentionally being dense, screwing with us, or just dont comprehend what we are discussing. It's ok to admit you where wrong or dont understand. I mess up daily and my spelling sucks. The grammar police love me. No shame.
What process reduces the payoff by 12 years? Paying extra to your principal..right. No one is trying to prove that paying extra doesnt do this.
You keep bringing up this transferring of debt to a heloc and paying it off as if its accomplishing something. Then when someone mentions it you call it a red heading and say it has has nothing to do with it.
So i think you are in agreement that the only process that pays off your mortgage early is paying extra to your principal. And you agree that if you use a heloc you are negating any benefit because the debt is just transfered and it saves you no interest and does not help pay off your debt any faster.
Do you agree with those statements?
Post: Use HELOC to paydown mortgage fast
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Originally posted by @David Dachtera:
Here's another way to look at it...
Let's say you have a HELOC and a 30-year fixed 1st mortgage.
Take the entire available balance of your HELOC and apply it to your first. Then, pay down the HELOC while keeping up your payments on the 1st.
Everytime you get a big chunk available in your HELOC, throw it at the 1st.
Why it works:
The 1st mortgage is amortized. That means the early payments are mostly interest while the principal balance is high. The payment is fixed and not dependent on the balance owing - the payment always stays the same unless the interest rate adjusts. (Yes, this works for ARM's, also.)
The HELOC, on the other hand, is like any other revolving credit. The payment is determined by the balance owing or the average daily balance - check the terms of your HELOC to determine what it is in your specific case - plus the interest on that balance for the payment period.
If you can manage your HELOC payments so you're throwing big chunks at your 1st on a regular schedule you'll payoff your 1st much faster than making double payments or any of that.
I don't have the numbers or the charts right at hand, but yes - using this technique, you CAN payoff a 30-year fixed in as little as seven years ... nine to ten is more likely, however.
Note, however, that every time you take a big chunk out on your HELOC your credit will take a hit: the spike in utilization will lower your score and impact your credit profile. Sorry - no free rides.
David J Dachtera
Your first post here. The same results can be achieved by just paying extra. Having a HELOC will NOT help you pay off your debt any faster, you are just moving debt around. I think we are all on the same page now.
Post: Use HELOC to paydown mortgage fast
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Originally posted by @Joe Au:
I want to build equity with my primary home as soon as possible. And I came across a method using HELOC to reduce the interest paid to the mortgage. Does any one have experience with it?
This is the original post of this thread. It doesn't work. You are just transferring debt. Its still there and still accumulating interest.
Post: Use HELOC to paydown mortgage fast
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
Originally posted by @David Dachtera:
* Heart-felt Sigh *
I understand very well, thank you.
Nay-say if you will. Believe what you will. Think what you will.
I proved my point many times over. Mortgage acceleration using a HELOC DOES work. Period - end of statement.
Case - closed.
David, we keep thinking the case is closed then you come back and say " Mortgage acceleration using a HELOC DOES work." This is the what we are getting at. Sure you can pay off your loan all you want with your HELOC but it doesn't benefit you one bit. IT DOES NOT WORK at improving your financial balance at all.
Post: Use HELOC to paydown mortgage fast
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
We ALL agree that paying extra on a mortgage will pay a loan off faster and decrease the interest. The sooner the money is put towards it the less interest you will pay. There is no MYTH about this. IT is math not opinion.
The point we are all trying to make to you is that it has nothing to do with a HELOC. When you transfer this debt to a HELOC you are NOT saving ANY money. You are still paying the same interest if not more. In reality it is costing you more. Yes a HELOC does have other benefits but it does NOT benefit you financially by doing this debt transfer.
I'll make an example to show what you are trying to say.
Paying off house with HELOC will pay loan off sooner.
Why stop at a $10,000 HELOC. You live in a $1,000,000 house and are able to secure a HELOC for $150,000. You take that HELOC's $150,000 and pay off the mortgage. Congratulations you have just paid your mortgage off sooner with your HELOC. But have you gained anything? NO!!! That HELOC is accruing Interest at the same rate and if you paid $632.41 a month it would still take you 30 years to pay it off. And I guarantee the interest rates will go up between now and then.
MYTH: transferring debt to heloc will pay Debt off sooner
BUSTED! - it will only pay off the mortgage but leave you with the same or more Debt.
Post: Do you successfully use Mint as a budgeting software?
- Investor
- Montgomery, TX
- Posts 386
- Votes 151
I tried. Every time i would write a check it would categorize it as restaurants. We where spending thousands a month eating at Landry's restaurant I guess.
I didn't really like mint. I find it was truly easier to just do the dave ramsey envelope system.