Nvalt national velocity5/26/2023 However, the debt reduction isn’t as simple as it sounds, and different factors determine the final results. Depending on how you use this strategy, the calculations say you can fully pay off your home quickly, usually between 5 – 10 years. The strategy includes variations such as opening a 0% interest credit card and moving balances of debt from other liabilities to the credit card and then paying off the credit card fast, using a home equity line of credit (HELOC). The best way to make the most out of this concept is to pay off the highest interest rate debts first, effectively reducing the interest rate payments due. In conclusion, when using velocity banking, you live off the HELOC, with the balance increasing every time you withdraw the funds and the balance lowering every time your paycheck gets deposited. If you deposit your entire paycheck into HELOC, you will lower the remaining balance. Once you execute the withdrawal, the balance to repay the loan goes up by the same proportion. HELOC functions in a way it enables you to withdraw (it’s also called chunking) and deposit money into LOC in the same way you would do with a bank account. Any bills or significant debt payments will be made into this account, which means that the mortgage won’t be paid directly, but through HELOC or LOC. This eliminates the need for a savings account since all free cash flow will go toward the mortgage via the HELOC. HELOC is used as a primary expense account instead of a checking account. In most cases, this strategy relies on a Home Equity Line of Credit (HELOC) or a LOC. The concept is based on utilizing a line of credit to help use cash flow and extra money to cover the expenses and go toward paying off the mortgage. Velocity Banking - also known as the “HELOC Strategy” - is a personal finance approach that uses a home equity line of credit (HELOC) to leverage disposable income to pay down your primary mortgage while saving the amortized interest. Still, on the contrary – the velocity banking strategy is what you can use to pay off the entire mortgage and gain financial freedom.Īre you interested in finding out more? Let’s dig into this complete guide to velocity banking that will help you learn how to use the home equity line of credit (HELOC) for debt reduction and total mortgage payment! What is Velocity banking? You might be thinking that this is another financial service provided by the bank. Some people will tell you that it’s a great way to pay off your 30-year mortgage in 5-7 years, while others would protest, claiming it’s a scam. Once you become a homeowner, there is a higher chance of hearing about velocity banking. This concept is already well known in countries like Australia or UK, but it’s just starting to become famous in the USA. Lately, there has been a growing interest in the concept of velocity banking.
0 Comments
Leave a Reply. |