All Forum Posts by: Cliff T.

@shane did you ever dig in to this to understand what's unique to Japan's market?

Correct. Only items I see as missing: some lenders charge a one time set up fee for the HELOC (SDFCU charged $1500 I believe) and also some charge an annual fee to keep it open. I've heard in the $500 range.

Othet than that, great summary that I think many could benefit from!

Bumping this back up. @Adam Craig - did you find a solution?

Hey Scott,

One important point that your math omitted: you need to compound the interest on the "savings " that you noted in your first paragraph. In your example, the savings would be much greater than $3.12 bc that would be compounded over the life of the loan (e.g. 10, 20, or even 30 more years).

A simple way to think about it: if I have a 10 year loan for $1000 that I take out today and tomorrow, pay it off completely while it only accrues $1 in interest, my "savings" is much more than that $1. I wouldn't tell my friends that I "saved" $1 by paying off my loan early. I've effectively "saved" on all interest payments on the $1000 principal for the next 10 years.

To be clear, I'm not advocating for velocity banking and like many of you, I'm just starting to research & understand the topic before deciding if it's the right thing for me. It does look like it has some merits, although folks need to understand that it's not doing anything special (i.e. direct principal pay down with all your monthly cash surplus would do the exact same thing, and perhaps even better bc you wouldn't be paying interest on the HELOC). I'm actually nervous at all the advocates here who are posting it as "it just works" without being able to articulate the math and mechanics behind the strategy.

I'm still trying to wrap my head around all this but I think the salient points are these:

1. Total debt still remains the same regardless if you use the HELOC or not; this strategy is essentially moving money around from one loan to another and doesn't "magically" pay off one's loan more quickly; the reason why folks are commenting that their loan was paid off in X years is because they made additional principal payments

2. The strategy of simply paying off your first loan principal directly (without HELOC) should achieve the same result; however, with this strategy, you run the risk of having less cash on hand. If that's an issue, one can simply pull from the HELOC when he/she NEEDS the cash

To sum up, the only benefit to using the HELOC and applying it towards velocity banking, is that your entire cash balance is constantly working towards paying down principal (and thus, total interest). This would have the exact same effect if you paid down principal early each month with all your cash (but with this method, you run the risk of not having cash on hand when needed to pay bills, etc.)

Thanks for sharing this story Brian!

Bumping this back up. Any recent numbers for properties near the Coachella area?

Anyone with recent experience with Lightstream?

Bumping this up. Would love to hear everyone's feedback on FOA Commercial.

@Travis Wylie - thank you!