Velocity Banking vs Sending In Extra Payment | Which Is Better?

Velocity Banking vs Sending in Extra Payment... Which is Better? What does the math say? and How? In this video, we're going to break down the difference between Velocity Banking Vs Sending In Extra Payment. We'll talk about how both can save money but we'll see which one comes out on the top in terms of saving MORE money and time in terms of interest. So let's do the comparison, Velocity Banking vs. Sending in Extra Payment... Which is Better? Enjoy!

Okay, so let's get to the bottom of Velocity Banking vs Sending In Extra Payment comparison. Which is better... The Velocity Banking Strategy? or simply doing extra payments into the mortgage principal. Well, we can tell you that both can possibly save you some money and time. The velocity banking strategy has many names. We call it "Accelerated Banking" but some people call it the heloc method, heloc strategy, heloc to pay off your mortgage, debt acceleration, mortgage acceleration, or pill method. Let's dive into how the strategy works... velocity banking strategy explained.

The way that the Velocity Banking Strategy works is that we're changing how our interest is first being calculated. The first main difference between a traditional mortgage and a HELOC is that a HELOC uses simple interest (average daily interest) and a mortgage uses amortized interest (interest accrued based on monthly balance). That's the first difference when we're looking at velocity banking vs sending in extra payment. The next big difference is that we're sending in ALL of our income and savings into the HELOC to lower the average daily balance. Which ultimately means that we're paying less of interest since the principal balance is lowered. On the flipside, sending in extra payment only causes us to save money by what we actually send in... not by the full income amount. That's the next big difference when it comes to comparing velocity banking vs. sending in extra payment.

A HELOC also allows us to draw the money whenever we want in a matter of seconds. Whereas with a traditional mortgage, we're unable to do so. This is why we can send in all of our income into the HELOC and still be able to use the HELOC to pay for our expenses and accidentals. That's HUGE when it comes to the difference between sending in extra payment vs velocity banking.

Also with a HELOC, you can almost treat it like a savings account where by parking your excess cash can save you 3-6% interest on the HELOC vs. trying to earn money on a savings account that may pay out 0.5 ~ 1.5% APY. (this is really low).

So those are some of the comparisons when it comes to velocity banking vs sending in extra payment. When done right, velocity banking can help you save more money and time when paying off your mortgage faster.

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---DISCLAIMER--- The suggestions, advice, and/or opinions that are given by Sam Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold Sam Kwak, Novo Elite, Inc. and the Kwak Brothers brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based upon experience.

[trinitron]

If you choose weekly mortgage payments, the savings are greater. Just use a mortgage calculator to see the difference.

[jjvillian]

No matter how many times I watch videos on this, I still don't get it.. I umderstand the concept but don't umderstand how to apply it..

[whasian]

I love how he's like "look at this screenshot" of some FB post. Wow if it's posted on FB it must be true, i'm sold lol what a joke

[RCrider]

VB $13000 over 6 months is better than not paying extra or only paying $500 every month for 6 months. But the real point is why pay 2 different interest rates over 6 months, when I could just pay $13000 extra on my mortgage over 6 months with out the HLOC and straight out of my Cashflow and save the HLOC for an emergency?

[Breezybree]

This is a great video…
You must know when the Credit card interest is calculated. My payment is due on the 3rd but, interest is calculated on the 9th.
On the other card - payment is due on the 24th and interest is calculated on the 17th.
Keep that in mind when spending and paying.
Personally, VB sounds fantastic- reality is I won’t keep up with the dates.
This is what separates successful from the not so successful. I know I don’t have the commitment nor fortitude to do VB banking.

[kupfer]

This only works on the first month you exercise this idea - from the second month on, you will always have a revolving payment going out for the credit cards every month. So it's not wrong, it's just not complete information - that interest saved in month 1 is $X for your situation - you can do the math and know what you're getting into. This strategy is ONLY for those with tremendous discipline on money & spending.

[chaliquedesigns]

I noticed in these videos that they tend to use the same figures and numbers of generalizing that you have $5, 000 monthly income coming in your house each month. In my opinion the standard household, especially those who may live paycheck form paycheck most likely don't have 5, 000 monthly income coming in. If you're going to give out some suggestion use a variety of scenarios with different income scenarios. This scenario would not work for those with income less than 5, 000 monthly when it comes to velocity banking. If you're going to try to give this "financial advice", consider multiple scenarios of lower income. I know this is just a video, but unfortunately some people will look at this video and run off and do it instead of doing their own reseach.

[markf.]

This is essentially a consolidation loan srategy with a complex and confusing way to pay it back. It will work if you are committed to using all your cash flow to pay down this debt but could be dangerous for those with a credit card spending addiction, which may be why they are in unmanageable debt to begin with.

[dieterichscanner]

You can't borrow your way out of debt.

[jesinu]

7:02 "Right now the inflation is about 2%..."
Me: *pauses video, checks upload date "Ah."

[eldnah]

How do you make mortgage payments with a credit card? I understand there are those that will take your CC payment and send checks for you, but for a fee. Seems like a lot of work paying power bills, water bills etc with credit card whereas for years I've had my bank do all that automatically.

[trainerskulbd]

I also find that when I use the Credit Card, I do less discretionary spending....and getting the credit card in the mix improves your credit score...provided you average daily balance is under control....

[raiden]

Talking about Average Daily Balance is a hilarious sleight of hand to convince people they are saving on interest when they are actually spending more on interest because a checking account is free.

[emiliovargas]

Can I set AUTOMATIC payments from the Heloc account to pay
1. credit cards
2. Home Loan
3. electric bill
etc.?

[jdean]

... so instead of using your income to pay off credit card so that you pay 0 interest, you’d rather pay 30 days worth of HELOC interest on those expenses? No thanks.

[RamTough]

So, by the theory applied in velocity banking, if you have a mortgage at 3% interest of $100, 000, borrow a $50, 000 heloc at 7% to apply directly to the mortgage, you will have a mortgage of $50k at 3% and heloc of $50k at 7%, and you will somehow save money despite a higher interest rate on the Heloc… yeah, all I have to say to that is a Judge Judy quote “if it doesn’t make sense, it isn’t true.”

[thearmyify]

I want to see the actual savings calculations for the hypothetical situation where one is saving more because of the 30 days and 1.5% cash back credit card rewards vs just making extra payments.

[antech]

Here is the problem with using your HELOC to pay down your principal. You forget there is still a monthly mortgage you still need to pay. Nobody mentions this. He says put your entire pay check to pay down HELOC. What the heck, how about your monthly mortgage you still need to pay for?
I get it. A 10k HELOC withdraw at 4% works out to be around $400 in interest per year. It's still cheap money to use solely to pay down your principal. But by telling people to pay the entire HELOC with their monthly income makes no sense. Makes more sense to pay $1500 monthly if you can towards HELOC until it's paid off. Then go ahead and do another 10k towards principal.

[jjvillian]

So if I throw all my income into the HELOC, how do I pay for some of those auto draft for some of my bills (like auto insurance, phone bill, etc.)..?!?!

[Beyond_bank_notes]

What about margin withdrawal or sbloc? Why no one mention these? Basically a secured credit card with potential of equity appreciation in stocks etfs etc