Should You Pay Off Mortgage Early with HELOC? - The Truth about Velocity Banking

In this video I give my thoughts on using Velocity Banking in order to pay off your mortgage early using a Home Equity Line of Credit (HELOC).

While velocity banking can be a good strategy for some people to pay off their mortgage faster if you have access to a HELOC, there are drawbacks that you should be aware of before pursuing velocity banking using a home equity line of credit.

HELOC Explained Simply- How to get approved for a Home Equity Line of Credit:

HELOC vs. Cash Out Refi Explained - Which is better?:

[JayCosta]

Buy my office and camera gear here:

[froman]

Sounds great except your mortgage payments does change as property taxes increase, so does your payments. The Amortization part doesn't change and all of the main stuff doesn't but when it comes to your wallet, the payments continue to go up and up every year. That is the part that no one tells you about and that makes a lot of difference too.

[ianthornhill]

Best review I’ve found. Appreciate the pros and cons. All the other videos I’ve found are either 100% for it and it’s the best thing since sliced bread or they make it out to be a complete scam.

[AlexStyers]

So, I have a fixed rate HELOC on my primary property at a 4.74% on a 5/10. I used this HELOC to pay down a higher interest mortgage (and the down payment) on an investment property. That said, our primary goal/exit strategy here is to pay off the heloc ASAP and then use that HELOC to put onto another down payment. Now, one of the investment properties is paid off (with the note now sitting inside of the heloc, and have 2 other investments now to do the same with.

[robi]

i'm no expert, but after 20 years my house is paid off and i accelerated it in the last five years by repeatedly doing RECASTs (where you put down a lump sum on the principal, and then keep the loan terms the same, but it lowers the monthly payment - people should do this NOT RE-FI, but you dont hear about this because a recast doesnt make the lender any money and a re-fi DOES)
so if this velocity thing were to work out, i'd think he wouldve said use the $100K to do a recast. seems like a no-brainer.
but again what do i know

[DenzelNapoleonRodriguez]

I appreciate your input and honest review on the velocity banking strategy.

[johnnycircus]

Thanks Jay- I watched a few of the Kwak Brothers videos on this and was beyond perplexed. This helped quite a bit.

[ashercreppel]

Really good points about why NOT to use the velocity method. Thx for your insights! But you forgot to mention buying BTC when talking about opportunity costs, lol! Cheers!

[takahawk]

I'm in the same opinion as velocity banking is a great tool but to pay off your mortgage in 7yrs or so, is a long time to put all your income in. In that 7-10yrs could invest your money in money making assets and improve your wealth. Now what I find interesting with velocity banking and what I believe is good in my favor is to pay off credit card debt, consolidated debt, personal loan debt, etc with this method. I'm looking into trying that.

[betitos]

If you can make more money than what you'll pay in interest by investing in those ten years then yeah more power to you. But make sure you invest because the bank keeps taking that interest every month from you 😉

[pcmantis]

Hi Jay. My bank offered me a First Lien HELOC that is Principal and Interest as opposed to interest only. Will that still work for velocity banking? Thanks for the informative video!

[rickyvoong]

Hey Jay, this is the first video I’ve watched a video of yours and I couldn’t finish it because you mention getting a 100k heloc in your example but realistically you may only get 50k as the standard for helocs are 80% of homes value minus your equity. Just wanted to throw that out there.

[iptvclub]

Thanks Jay for the video, but your explanation for opportunity cost is not correct. A HELOC is a two way instrument, so if you put all your paycheck into your HELOC you can pull it out for investments anytime. I do velocity banking, but DON"T use it to pay off mortgage, I use Velocity banking to invest in dividend paying stocks where they payout is higher than the interest rate on the HELOC. I chunk $30, 000 into my investment account, and all the dividends and my income get deposited into the HELOC, then i withdraw whatever i need for my living expenses as they are incurred. Once that HELOC is paid to 0 (which is in about 10 months), I then chunk another $30, 000 to investments. Now I have even more dividends (double the amount) adding into my income.

If the rates get too high, you have the option to stop chunking. Velocity banking allows you to use 100% of your income for your benefit, and ultimate flexibility (investments/debt etc)

[sdot]

So I owe $100k on my mortgage currently and have $230k in equity, would you recommend getting a heloc for $100 to pay off my mortgage? If you can even do that?

[jaypong]

So each month you have to pay for your heloc loan and mortgage loan ?

[briandeluca]

Your wrong when you say to take the 100k. You only use 30% of that. That's what the velocity strategy does

[dhmanalo]

Do you have a lender to recommend? I want to try it.

[BibleExposition]

Using HELOC to pay the mortgage is fine but if the mortgage balance still exists, one still has to pay the HELOC & mortgage. HELOC will cost $5-$10, 000 closing cost & the interest is higher than mortgage. To use HELOC, one just deposit one’s earning into it & withdraw as needed, correct? Thx

[bojiam]

I was gonna do this but after mortgage forbearance, Fannie Mae under my Wells Fargo mortgage offered a loan modification 2.875% 40 year fixed. My monthly now is $800 PITI, previously $2100. FREEEE MOOOONEYYY