HELOC as alternative to conventional fixed mtg...

[Jeff Goddard]

This is a bit long so.... I am wondering if any of the BP members have heard anything about using a HELOC to replace a fixed or traditional mortgage??

I recently came across a u tube video of a fellow in Hawaii whose name is Santos Kidd.  He apparently has some kind of financial consulting company there.  He is also affiliated with the"Rinatus" organization....  Rinatus appears to be a  RE coaching organization...   There is another guy who is marketing what seems like a similar concept who has a nice video, I can't find his site at the moment....

The essence of the "program" as I understand it is to acquire a HELOC loan to replace an existing conventional fixed rate mortgage. The net effect of such a program is a drastic reduction in the term of the conventional loan due to many thousands of dollars otherwise paid in interest are saved as a result of the rapid pay down of principle. With several assumptions, such as, a positive personal income monthly, a property that is appreciating, and diligent adherence to the program an end result is a paid off mortgage is perhaps seven years vs. thirty years.

It seems that the primary benefit is derived by utilizing the floating or variable "average daily balance" which is used for computing minimum payments with an open ended HELOC product..... This allows one to avoid much of the front loaded interest on a conventional loan. The illustrations are very detailed, but I don't pretend to understand it fully, and the proverbial, "If it seems too good to be true it probably is." comes to mind....

Also considered are lower cost to create a HELOC, lower appraisal, escrow, origination fees, other fees, and no PMI.....

I talked with a friend who has been in the mortgage industry for twenty years and is an accountant as well....  He is highly skeptical....  

I appreciate any sage advice from my fellow BP luminaries.......  Knowledge gratefully accepted.