All Forum Posts by: Account Closed

@wayne brooks 

Amortization loan 100,000 @ 5% Month 1 - Interest $417 Principal $120

Now, if you used a $5,000 LOC to take a chunk out of the mortgage, paid FULLY TO PRINCIPLE, you'd reduce your 100k loan to 95k and save all that interest. Which is roughly 12k.

Now, a LOC with an APR of even 12%, is the ANNUAL percentage rate of 12%, which means its a 1% MONTHLY percentage rate. This is where you originally went wrong, (You calculated your 6% which is an APR of 72% which is illegal) So, what is 1% of the $5,000 we used to save $10,000 in interest? $50.

It cost you no EXTRA money. You owed 100k, then broke it into a 95k and 5k debt. I think you would even agree to that point. So you save $10,000 , which is over two years in interest, simply by making that one payment with your LOC. Even if it took you a year to pay that LOC, the MOST it would cost is $600 (50x12) But since you are putting your income into the LOC it brings it down each month.

I rest my case.     -600>-12,000

You do not "pay extra". This is where it shows you do not understand the principle, and you should spend some more time actually learning the concept instead of dismissing that which you clearly do not understand. You put your money into the LOC yes, but that does not mean it stays there. You pay all your bills out of the LOC, and deposit all your money into it. Just like a checking account. If you need money for groceries, you pull it out. Need money for an emergency? You pull it out. Now, should you pay extra on your mortgage and run into an emergency, what are you going to do? Ask the bank for that extra $500 back?

And I'm sorry, I guess you are more successful that Clayton Morris.  I did not realize I was talking to someone so rich. Your professional picture hid this from me.....

@Wayne Brooks I’m sure Clayton Morris, multimillionaire real estate investor, has published a book and several videos of he and his wife telling how they love to use their heloc for this very purpose. And before you smartly retort it’s all to sell his book, I’m sure they don’t need the peanuts that the book gives them in income. So what’s the logic? Why would they do it? To get a kickback on all Helocs opened? Equally doubtful 

@Wayne Brooks you obviously don’t understand the principle. You chunk it. You don’t put the whole thing toward the mortgage. But if you did, it goes by average daily balance. So if you put money towards your heloc every week (paycheck) or a lump sum (rental income) its lowers your average daily balance and you pay less than the full percentage for the full amount. Just like how you can’t just put 1000000 in the bank on the last day of the month and still get the full month of interest. 

There are dozens of different calculators and spreadsheets. No need to rely on one persons fable of it. But hey. Stick to your way. The banks way. The way the bank wants you to think so they can reap the rewards. 

@Wayne Brooks amortized is not  the same thing as simple interest in any way shape or form. You can look at an amortization schedule, look at how much interest you will save by chunking off a huge sum with a heloc, and calculate the interest you’d pay in a heloc. Your first several months in an amortized loan are mostly interest. Several hundred dollars. A 100,000 house has you paying 3-5000 a year in interest. A 10% heloc costs a few hundred a year.

@Brandon Hausauer you need to research it more if it makes no sense. The key difference is the difference between amortized and simple interest. That is the key

@Wayne Brooks that’s not true. You’re missing many factors here to weigh it. You need to know the type of interest and the percentage. Without both, you cannot accurately gauge if it’s worth it.

@Richard Heineman personal line of credit

@John Warren but you’re not losing anything by doing it. You pay the exact same, saving interest. And a few years? You can pay off a house in less than 5 years with enough cash flow. And you can borrow against the heloc should a need arise. Also, paying down your mortgage faster would allow you to take out a larger heloc for emergencies.

@kenneth garret ahh. Thanks for the info!

@Kenneth Garrett i had a question about it. Can you do this as many times as you can afford? I keep hearing that banks only allow so many mortgages, this isn’t considered a new mortgage? Or is it different for a commercial loan?