All Forum Posts by: Chris DeMello

@Diana Muresan I say "Hawaii" because we have more favorable interest rates for HELOCs than the mainland. People are not interested because they don't understand how it works. As a society, we are trained to OBEY and follow the banks’ rules/advice (like they have our best interest at heart). We are taught to play it safe by sticking with fixed rates. We are taught to look for lowest interest rate possible and comfortable monthly payment. Just because it’s comfortable doesn’t make it right.

You, personally, may not choose to offer HELOCs because of the vulnerable position it leaves the bank/you. At the end of the day, banks are businesses and are in the business of making money. Simple interest revolving lines puts the bank at a higher risk, being they have no control over how much their customer chooses to use or pay into the line. Conventional fixed mortgages offer security for the banks being they are able to front load the interest and know exactly, down to the penny, how much they’ll make off that particular loan. HELOCs, when strategized properly, simply give the consumer the flexibility to decrease the amount of interest and time on a loan.

• Yes, your house is used as collateral, just like a mortgage!

• Yes, I personally prefer to SAVE on the amount of interest I payout on a home than take a tax deduction come year end that doesn’t payout more than what I could have SAVED simply by restructuring.

That's why financial education is so important! HELOCs, PLOCs and credit cards have a bad stigma due to lack of understanding. When used SMARTLY, these tools are excellent leveraging power that benefits us as consumers to significantly reduce the two biggest obstacles we all face…TIME and INTEREST.

I'm not saying HELOC'S are better than a mortgage. I'm just saying look at the numbers, what is your goal/objective, and the bigger picture of it all.

I’m on BP to learn and grow as an investor. I'm not trying to offend you or your job. I sincerely would like to know why this way isn’t more efficient than going the traditional/conventional way to you?

Mahalo,

@Diana Muresan Here in Hawaii, we have great teaser rates. My HELOC rate is 2 yr 1.75% interest only payments. I would have paid $20k in interest over the past 2 yrs. Instead I paid $7k in interest, and still had access to money while paying down over $50k in that 2 yrs. Thats why I didn't refi cash out. I just extended my HELOC one more yr at 2.5%, and yes, its a variable rate that can go up to 20%.. But, it can't go up more then 2% per yr. So it will need to get up to about 12% before I start paying the same in interest as a 4% amortized mortgage.

I'm sure you know that the word mortgage means "death pledge". LOL..  I think mortgages is great, and I wouldn't be a home owner without it. I just don't like sticking to the amortized "death" schedule. I feel I have more control over my debt, and I have my money working harder for me! 

@Lane Kawaoka Yes, that would be great! I'd love to get more info, and learn to earn more passive income. 

@Diana Muresan First position HELOC's are based on LTV, not on the equity. Here in Hawaii, banks allow HELOC's ranging 80%-90% LTV. Should your property appraise more than what you owe, you can get a first position HELOC and buy out the existing mortgage, taking it off the conventional amortization schedule. HELOC's are simple interest revolving loans which monies may be used towards real estate transactions (down payment, etc.).

Example of my first home:

• Purchase $245k USDA loan. (Mortgage $1400) Value $250k
• Lived in for 1 yr. $10k rehab
• HELOC for $270k 1st position. Paid off $237k mortgage. Value $300k. 90%= $270k
• Took $18k for 5% down on second home.
• First home rents for $1800. HELOC interest only payment is $300 per month, so $1500 a month pays down my HELOC. We also bank out of these lines, and we're on target to pay it off in 5 years.

Here’s a quick video on why we do what we do: 101financial.com/peace

@Francisco Escobar are you looking to get a HELOC in the 1st or 2nd position? My wife and I are kind of in a similar situation. We have two homes in Hawaii, and we’re planning to move to Las Vegas in the summer. I could sell my currant home and make $130k and avoid capital gains because we lived in it for two years. Or keep it, and put a HELOC in the first position. We wIll have $90k cash available. I can put 20% down on our vegas home. Monthly “interest only” payments on HELOC will be $500 a month, and will rent it for $2200 a month. I did this on my first house and used HELOC money for down on second home. I know most people won’t agree with me on a 1st position HELOC, but if you have a plan and know the numbers, it’s a great tool. I’d keep the house, and leverage off of it.