Velocity Banking - They Are Lying To You

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[OperationRacecar]

How do you claim line of credit payments are 100% interest? I have one and about half of the monthly payment goes toward principal. Appreciate your response to help see if I’m missing something, or if you’re spitting false facts to help validate a false opinion.

[lmsysmatrix]

I think the difference is when you park your paycheck. So if you pay a 5K chunck and park your 5K salary on the same day, then the average daily balance is absolutely affected. You literally paid off your chunck in 1 day. So, the average daily interest calculation is 1 day averaged into 30.

Then, you put your expenses on a CC. Pay the CC off with your LOC when you get your paycheck. So again, it's the same thing. 1 day of daily interest average, then it gets paid off the same day. I think the mechanics of when and how you pay affect the average daily balance?

[benwhite]

Thank you for your video. Your example of a $100, 000 mortgage at 6% interest for 30 years. To pay off the first $10, 000 of the mortgage by just making the payments you would be looking at paying $33, 000 +/- in interest and roughly 70 months. Assume you have a heloc at 7.75% interest with a line of credit of $20, 000. You also need to assume you have $1000 positive cashflow (as any velocity advocator knows you need to have positive cash flow to allow this to work). You chunk $10, 000 on your mortgage bringing it down to $90, 000 and pay your heloc off in 10 ish months. Interest on your heloc is only $500 ish even at the higher rate. This is a SAVINGS of roughly $32, 500. This is with a higher interest rate. I personally have a 15-year mortgage at 2.625 and only 7 years left to pay. It still makes sense to add chunks to my mortgage at the higher interest rate. I would be happy to send you the charts that break it all down. Maybe I have some flaws that I am overlooking but I don't think so. If I do please let me know. Also I do know I can do this with cash and pay it down without the heloc. But I don't want to 'lose' the money. I also get commissions periodically throughout the year. I put those right on my heloc until I need to use the commission. It is not for everyone and is absolutely not for someone that does not have positive cash flow. Please let me know if this makes sense.

[ERFNED]

Seems like chunking payments from LOC only works if you deposit your paychecks into LOC and pay expenses from LOC. Obviously income needs to be higher than expenses so you can pay that LOC off and then chunk again.

[kingdomhubs]

I'm not sure I agree with the premise of this video. Maybe, I'm missing something? Yes, if two debt instruments are placed side by side with the same interest rates for the same length of time, there will be no difference. However, that is not the case. For example, Average Joe may open a LOC of say $10, 000 and pay that into his mortgage up front. The principle calculated thereafter is on Joe's mortgage balance is - $10, 000 for the remainder of the mortgage, on every calculation. That alone, reduces both the time and interest saved over the length of the mortgage. The saving can be substantial. Let's assume that Joe does not have the budget to put $10, 000 into his mortgage up front. The LOC gives him the ability to do so. He pays the off the LOC over say 2 years or 24 months. Yes he pays interest on the LOC for 24 months, but none thereafter, and he saves paying interest on the equivalent reduction of his mortgage for many more months until the end of the mortgage's lifespan. Let's say this results in a reduction of paying mortgage over 360 months to 240 months, then Joe paid interest on $10, 000 for 24 months on the LOC, but saved himself from paying interest on the $10, 000 higher amount of the mortgage for 120 months. What am I missing?

[jamp]

It would be much appreciated if you would kindly present a critique of velocity banking in the monthly living expenses context (e.g., Vanntastic channel). Also, please apply correct usage of "principle" vs. "principal" in the illustrations. Thank you.

[DonnaV-ojro]

What about the issue of comingling funds and tax reporting? I'm a hobby investor with two rental properties. I used the Traditional 2nd position HELOC from one property to buy the second property. Technically, neither property has a mortgage. Terms are 5/15 years, 3.99% fixed with the borrow period of two more years before expiration when full payment and the rate will convert from 3.99% to Prime plus Margin (likely 3-5). Notionally, the IOP is about $575 but I've been paying down aggressively $2300-$5000 every month this year but I'm paying that $575 every month to the tune of $6K already this year and almost $8K last year! It seems a 1st Position HELOC would help pay this off under 2 years where it may take closer to 3.5-4 years paying aggressively as I've been paying this year. Help me understand.

[garrywhite]

So, is it your contention that Velocity Banking is a scam, and will not pay down debt as advertised, or are you saying that, while it will pay down debt as advertised, as long as you are disciplined, it doesn't offer any real advantage over other means of paying down debt using traditional mortgage products?

[pillay]

I saw your credit card chunking hack years ago for property. Why did you delete that video? It was cool

[ThanhNguyen-iost]

Thank you for taking the time to both explain this as well as providing supplemental excel spreadsheets

[DenzelNapoleonRodriguez]

I’m happy to bring you on my channel and discuss the good, bad, and ugly on velocity banking.
Your $500 offer is impossible based on the standards you set as a velocity banking expert there isn’t a difference in the math. Same principle amount amortized loan or simple interest loan over the same time period the math is the same

[chrisvolk]

If you park you're paycheck, I think it makes sense. Still a bit blurry on this.

[bubblewrap]

Your premise on amort vs simple in velocity banking is wrong. No one saying under same principal amounts they are the same. What they saying is the principal pay down is faster under velocity so in the end the total simple interest paid for the same debt is lower than the amort interest over that period. In general paying interest at higher rate can be lower than amort interest if the balance is low enough to do it.

[mikeg]

Velocity bank is legit but you got to know what your doing. It doesn’t work for every situation. In some situations, it will beat the snowball strategy, etc.

[fortgrove]

Well, with a line; at least that money can move in and out compared to a mortgage.

[sarry]

So I have seen plenty of evidence in both camps; VB and extra payments/debt snowball. The main question I have, WHERE do you think extra principle payments get fit in, in terms of the payment schedule? Is it extra principle gets slotted where your currently at, in the schedule or at the end of the loan? That might be the answer your seeking. Also I have seen plenty of videos that have VB stopping when the amount of interest is less or similar to a normal pay of the schedule and swap to snowball.

[coreyjones]

Did I miss something? Where are the deposits from monthly income?

[betitos]

With all your education and experience why in the heck would you pay for the same length of time amortized interest and simple interest?? The point of simple interest is to pay it off very quickly. I guess it was my imagination when we paid off $40k in 10 months versus 56 months left on the original loan 🤣🤣🤣

[carlchristopher]

I completely agree Velocity Banking is a SCAM. However Compound interest and simple interest is different. I have a larger Scam I would like to share with you. I think you could present it better than me.

[Beyond_bank_notes]

Bro, I’m 13 minutes in. Bro saying velocity banking won’t save you money, is like saying paying off your home early won’t save you money. You’re not accurately modeling the way to use a line of credit in vb.