Using a HELOC to start investing and velocity banking

[Jesse Dickens]

I am a new investor from Denver looking for my first deal (probably out of state). I don't have much in the way of personal funds to start investing, but I probably have around 75k available if I were to take out a HELOC. I would like to start the process of velocity banking simultaneously to pay off my mortgage quicker with less interest paid. Has anyone ever used this combined strategy of using a HELOC for both of these strategies? Any suggestions on how to find the right HELOC or a calculator that helps guide through the velocity banking process?

Thanks

Jesse Dickens 

[Rick Hart]

I know this strategy *very well* because I've been doing it for years. The confusion all stems from people's inability to understand amortized interest. Keeping it very simple...think of time, balance, and interest rate or you will very quickly take the first wrong turn that leads to that crazy neighbor that shoots randomly at people who dare drive down his road.

The HELOC strategy is basically making extra principle payments on the debt and at the same time remaining liquid with your available equity. The 2nd part is why you have to jump through a few extra hoops. Forget everything you think you know about a percentage of return vs amortized interest, you will not even be in the same town let alone the ballpark. In an amortized loan you're just not paying 4% interest, you are paying 4% interest FOR 30 YEARS, front loaded. Let me give you real numbers to make it clear (use any amortization calculator that has the schedule attached)...a historical average of 6% interest on a 30 year loan of $200k. You make a $12k principal payment from the HELOC to the mortgage. With a $2k cash flow you will have paid the $12k completely off in 6 months. How much did you save on mortgage interest? $46,785.93 mortgage interest elimination! Plus 4 years of debt elimination (30 yrs - 4 yrs = 26 years of pending debt). The HELOC debt will have cost you $1,260 EVEN AT A 21% HELOC INTEREST RATE. It's all about the time, balance, and interest rate.

So what is your yield on that! My God, people will not listen to reason and are almost completely illiterate in financial matters. I blame the school system for not teaching people this and the banks and government for making fools out of the whole lot of us.

This technique really is the biggest no brainer in history. I have many more advanced techniques to freely give to anyone without cost, without selling anything to anyone. I just want to help people.