topic Re: Quick Mortgage Paydown Scheme. Anyone do it? in Mortgage Loans

Quick Mortgage Paydown Scheme. Anyone do it?

Anonymous — Fri, 14 Jun 2019 01:37:09 GMT

Hey myFICO. Anyone try one of those quick mortgage paydown schemes? I just got approved for a $30k HELOC and i'll be attampting this as soon as it finalizes. I'm only 3 years into my 30 year mortgage. About 90% into the mortgage balance; made a few extra payments totalling about $10k in addition to the regular payments. This puts me at about 25% equity if you factor the property value gain. I'm generally a bit skeptical about these "money schemes", but i figured i'd try it cause i'm not incurring any additional debt, i'm only transfering it $30k at a time from mortgage to HELOC. Any tips or advise would be greatly appreciated. Thank you.

P.S. FYI there are several videos on Youtube regarding this. I'm not associated with any of them. But i found Laura Pitko's explaination was the easiest to understand. Where it really clicked for me was when she presented her "line of credit" chart around the 23 minute mark. You can see her video here: https://www.youtube.com/watch?v=4GonTct2WMk

Re: Quick Mortgage Paydown Scheme. Anyone do it?

chiefone4u — Fri, 14 Jun 2019 02:40:20 GMT

While it looks good the way she wrote it, she rounded the numbers to look good.

She failed to show the roughly $700 in interest you'll pay during that six months.

She failed to show/ mention cash advance/ balance transfer fees.

She failed to show/ mention the fees you'd pay to use your credit card to pay mortgage and auto payments.

In my opinion, if you have the $1,400 a month of extra cash she stole from her savings to pay the credit card; you would be money ahead to make an extra "principal" payment on your mortgage every month.

For example my $139,000 30 year loan at 5.65%apr will be paid off in 24.5 years by paying an additional $72 a month, and costs me nothing extra in additional fees.

If I was to double my scheduled monthly mortgage payment, my 30 year loan would be paid off in about 11 years!

Re: Quick Mortgage Paydown Scheme. Anyone do it?

Anonymous — Fri, 14 Jun 2019 05:16:02 GMT

-She failed to show the roughly $700 in interest you'll pay during that six months. If were talking a total of $700 in interest, i think that money would be saved on the first month. I could be wrong, but i think there's a lot more than $700 in interest savings with this scheme.

-She failed to show/ mention cash advance/ balance transfer fees.  There's zero fees to a HELOC.

-She failed to show/ mention the fees you'd pay to use your credit card to pay mortgage and auto payments.  You can't use a credit card to pay a mortgage or auto loan payment. This scheme requires a HELOC or PLOC. HELOC is more idea cause the interest rate is much lower.

-In my opinion, if you have the $1,400 a month of extra cash she stole from her savings to pay the credit card; you would be money ahead to make an extra "principal" payment on your mortgage every month. For example my $139,000 30 year loan at 5.65%apr will be paid off in 24.5 years by paying an additional $72 a month, and costs me nothing extra in additional fees. If I was to double my scheduled monthly mortgage payment, my 30 year loan would be paid off in about 11 years! The whole point of this scheme is to pay down the mortgage with no additional debt or expenditure. It's based on interest savings by leveraging your HELOC to pay down the high interest at the beginning of a amortized mortgage.

******Just trying to understand this better. Please elaborate these points. Thank you

Re: mortgage

NC_Mtg_Loaner — Fri, 14 Jun 2019 04:44:54 GMT

A good growth and income fund can generate anywhere from 8-12% rate of return relatively consistently.

I think most financial advisors would suggest you max out investments in those type of vehicles before you spend extra money on your mortgage which would only give you a rate of return of about half that amount, but it does seem to be a diversified plan and eliminating mortgage debt does feel nice...

Re: mortgage

Anonymous — Fri, 14 Jun 2019 05:21:48 GMT

@NC_Mtg_Loaner wrote:
A good growth and income fund can generate anywhere from 8-12% rate of return relatively consistently.

I think most financial advisors would suggest you max out investments in those type of vehicles before you spend extra money on your mortgage which would only give you a rate of return of about half that amount, but it does seem to be a diversified plan and eliminating mortgage debt does feel nice...

I'm not actually spending any extra money towards the mortgage. Same amount of debt, only transfering some debt from the mortgage to HELOC. Same payments. And i'm still able to put money towards investments. The video linked above explains a lot.

Re: mortgage

Shooting-For-800 — Fri, 14 Jun 2019 10:06:15 GMT

OP. Here is what I would do...

Pay mortgage min

Pay HELOC min

Pay car min

Pay student loans min

Pay credit cards 3x min

Pay loans min

Pay savings acount $100-$1000 per month

Then...

Pay highest interest loans and credit cards

Pay extra towards home and car when you have $0 credit card and loan debt (excluding student loans)

IF you are really really really concerned about your home payment, simply calculate your 15 year payment and make than payment every month as it was your required payment. Budget accordingly.

Today's mortgage interest rates are so low that there is no advantage to paying more than required on a simple 30 year fixed loan if you have ANY other debt at all.

APR is APR.

GL!

Re: Quick Mortgage Paydown Scheme. Anyone do it?

chiefone4u — Sat, 15 Jun 2019 19:13:22 GMT

[Quote] She failed to show the roughly $700 in interest you'll pay during that six months. <b>If were talking a total of $700 in interest, i think that money would be saved on the first month. I could be wrong, but i think there's a lot more than $700 in interest savings with this scheme. </b>[/ Quote]

The problem with your assumption about saving $700 in interest the first month is the fact you still have to make your monthly mortgage payment, which will still have the largest portion being interest.

If you pay your mortgage monthly with your HELOC, you are basically being charged interest on an interest payment.

While it is possible to pay off your mortgage in fewer years using this method, you can achieve similar results by making an additional principal payment each month.

[Quote] You can't use a credit card to pay a mortgage or auto loan payment. This scheme requires a HELOC or PLOC. HELOC is more idea cause the interest rate is much lower.[/Quote]

Actually there are services (Plastiq for instance) that allow you (for a fee) to pay monthly expenses with a credit card, including auto loans and mortgage/ rent payments.