All Forum Posts by: Don Spafford

@Dusty Hulet Welcome to the BP community! Congrats on wrapping up your documentary, I'm sure that is a very fulfilling feeling. If you've listened to all the podcasts then you certainly have learned a lot. The podcasts are an excellent resource to learn from every aspect of REI and learn from others mistakes and successes to help ponder the path you want to take and then have actionable steps to get there. If you ever make it back up to Idaho Falls we can meet up and discuss your plans and what you're looking to do. Jackson Hole is a very expensive market right now. If there's anything you need in and around the surrounding Idaho Falls area, I'm here to help. Best of luck on your journey!

Can a secondary lien holder start a foreclosure process? If I were to loan some money to use toward a down payment while a bank finances the rest, so I am a second or junior lien holder, would I be able to foreclose if I don't get paid? I'm pretty sure I've heard of this being done in some podcasts where somebody buys the second note, but I want to know for sure as I am considering lending some money to help someone with a down payment, but after speaking with the bank they would take it but I would be considered a second lien. So just in case I don't get paid I want to know what is my recourse. Thanks knowledegable BP members!

@Ryan E. Hey, I'm in Idaho Falls. I'd like to get your friends info as well. You never know when that could come in handy.

@Megan Faulkner I'm sure as mentioned, @StacyA McBain or, @Jonna Weber would be able to help you.

@Benton Rooks Hello, Welcome to BP. And hopefully welcome to Idaho Falls! Yes, my wife is a Realtor out here. She would be glad to help you. I know she already has a couple of appointments for late Tuesday evening, but I'm sure if you're here all day we could find something for you. PM me and I can give you her info and maybe try to find what you are looking for to get some ready for you.

That's interesting. Please share if you are aware of what places give the 0% LOC. I have not heard of that being possible since we recovered from the recession.

@Hardeep Singh  Yes sorry, I was thinking $4k, but that is the amount I will be using. Sorry for the confusion. Yes you are correct.

@Hardeep Singh Yes, that's the basic concept. Your math looks to be a bit off, where you say you are at 4.5k, then use $500, (puts you at $4k) then use $2k for the principal (then you are down $2k not $1k as you stated). But essentially yes, you are just using some and paying it back each month with your savings, or maybe a longer term if you take out $2k but can only save $500 per month, it may take you a few months to get it back up, but that's why you plan to start with more than what the LOC level is. Don't get a $4k LOC and then use it all to bring it to 0, you first add more to it so it is above the level they gave you, then borrow from it. And yes, of course you can also add more to your principal each month as well. That will only help speed up the process even more. Then when you have it all paid off, that LOC is still there to use for other things such as rehabs or your mortgages, etc.

I'm hoping other, more experienced, knowledgeable people will chime in to correct me or clarify more if needed.

Let me know how it works out for you and share with others if it is successful for you. I will do the same.

@Hardeep Singh The idea behind the LOC is to not pay as much interest if it is done properly. Again, I am no expert and have never done it this way, I am just sharing what I learned about it. The assumption is that you are saving a good amount of money each month from your earnings vs expenses. So, you open a LOC, but don't take anything from it just yet. When you get your paychecks or whatever money you earn, instead of putting it in your checking or savings account, put it into the LOC account. You will then use the LOC acct like a checking account. So, now you have a LOC of $3k plus you added in a check say for $2k, now it is up to $5k. You then take out $3k to pay toward your car principal. Your LOC is now only down $1k that you will pay interest on. But as you get paid again you add it to the account and make your other normal monthly expenses from it like you did with your checking account. That way the LOC balance is constantly fluctuating and should never get to 0 so that you are not paying interest on the full amount and basically you are constantly paying it back as well so that you are building credit at the same time. And then the principal on the loan gets paid down quicker as well. Like I said though, it takes a big change in our normal way of thinking about loans and such. Once you can grasp the concept it makes complete sense. The big question is if you are able to do it. Since most people don't or can't save money each month, it may not be a good solution. I will be testing it out myself very soon. I am taking out a small car loan and a LOC to test it and see how it goes. If it does work well I want to implement it into my mortgages as well. Again, I am no expert in this, which is why I started this thread to find out more and ask other BP members who have done it and are much more familiar with how it is to be done properly.

@Hardeep Singh It works the same as the mortgage strategy, just on a smaller scale. @Renee Bridwell can probably explain it much better, but think about this. With any loan payment, you are paying almost all interest in the first half of your payments. 4 yr loan, the first 2 years are like 95% interest and very little going toward principal. So if you have say a $10k loan and use that LOC for maybe $1-2k, pay that at the beginning of your loan toward the principal, then that jumps you way ahead in your payment schedule so that when you make your next monthly payment, you are now paying maybe 60-85% toward the principal so it gets paid down sooner. And your LOC you deposit your normal paychecks into that acct and make your normal other living expenses from it like you would your checking acct and the LOC gets built back up so you are paying very little interest on that amount you "borrowed" from it. This is one of those things that are simple but complicated, like many have said it is all about a mind shift on our way of thinking about finances.

Again, thanks to all who have contributed thus far, i never expected it to go on as much as it has and I am grateful. I know I have learned a lot and others have too. or at least have caused them to think a bit differently on it.