All Forum Posts by: Steven D.

PMI % is based on the original amount borrowed, it does not decrease as you pay down principal.

Oh man it's just amazing. Don't get caught up on the math that actually explains what is happening, just focus on my hypothetical situations. I got this money and skipped a bunch of mortgage interest payments. But you had to pay back that money + interest? Don't focus on that that's irrelevant I skipped interest payments. 

@Joshua S. You are borrowing money that you are paying interest on to pay down another debt that your are paying interest on and then claiming you are saving all this money on interest when it is just not true. Taking from one source to claim great savings on some other source without actually calculating what you are paying in total for that money. How many times did you state "Look at the calculators I posted, they don't lie" I did look at them, they don't lie or explain anything which is why we tried to post more in depth calculators showing total payments for both loans proving your strategy did not work and there were no "savings" that you keep referring to. 

@Joshua S. Your definition of "savings" is about equal to someone with no money and 0 net worth taking out a 1 million dollar loan and then calling themselves a self made millionaire. The Loan calculators you posted literally show nothing except that making principal payments reduces the term and total interest paid. You didn't even include the dollar amount prepaid in the calculator posted. 

It really is just comical at this point, but as a final statement. Math and logic don't work so I doubt basic common sense will but worth a shot. This is a website dedicated to real estate with real estate professionals ranging from newbie, amateur, pros, to full out full time millionaires from real estate. People talk of ROIs ranging from possibly 6% - who knows 50%. They literally make a living doing this and tell you that your math is flawed. However, you have this method that people have read returning ROI of 100% that you actually believe works. No one else is doing it even though HELOCs are broadly available. Wonder why people dealing with loans and interest rates everyday don't take advantage of this crazy ROI? Could it be that it actually isn't as advantageous as you make it up to be? Most of us know the answer but something to ponder...

This is really starting to remind me of a story back in college. A friend went to a poker game and we asked him how he did.

Him: "I cashed out for $12 so I won $12."

Me: "What did you buy in for?"

Him: "$30"

Me: "So you lost $18?"

Him: "No I won $12"

Me: "But you bought in for $30 and only cashed out $12 so you lost money????"

Him: "But I cashed out $12 so I won $12."

Me: "Ummmm that's not how math works"

Him: "I won $12"

This is all true but obviously the seller has to accept the offer of 80k. Best of luck 

Let's call your checking account your emergency fund when you have no HELOC. If you drain your checking to pay your mortgage down and run into trouble your mortgage is still due. If you use your HELOC as an emergency fund and use that to pay your mortgage, when you run into trouble your HELOC and your mortgage are still due.

The only things that I would add is that this property is not cash flowing at ~$600/month. You said rent of $2500 and PITIAS of $1950. There are many other factors that you need to add in here to calculate actual cash flow. Feel free to search but here is a plethora of information here and available in free calculators.

In regards to the payoff, what is the 210k doing right now? Money borrowed at 3.75% is pretty low and can you make better use of that 210k somewhere else? Very Likely. However, maybe that money is sitting in a checking account at .05% interest with no plans to invest it or buy other properties. If that is the case there maybe an argument being made to have that money "earn" you a return of 3.75%, as stated you could always get some of that back with a HELOC or cash out refi.

Maybe the missing piece is that you don't realize that the money you pay on the HELOC is interest + principle. In order to "save" the interest as you put it you have to take a HELOC. All of the HELOC payment is more money that you wouldn't have had to pay if you didn't take the HELOC for pay down. Here are 2 loan calculators for you easily available in excel. For ease $10000/12 months is $833.33/month.

If you just pay extra on your mortgage:

Please not the amount of early payments, this is the money out of your pocket that you are paying extra $116,666.20.

Your yearly HELOC:

So every year on your HELOC you are paying a total of $10273.29 out of your pocket.

To match just paying your mortgage you have to do this every year for ~11.75 years (141/12 how long your mortgage takes just paying the extra direct) . So $10273.29 x 11.75 = $120,711.18. That is extra money out of your pocket that your are paying if you did not take a HELOC. That is more than $116,666.20 that you would have just paid extra direct to the mortgage for early payoff. There is no savings and it is actually a little worse because you are borrowing money at 5% interest to pay money at 4% interest.