Use velocity banking to pay off mortgage

HELOC is usually higher interest rate than the mortgage. So ideally best way I find is to set up for a 1 year renewal. Get higher payments, the do doublespeak payments if possible. Then once renewal time, you can drop any amount of lump sum. Then renew for one year again. I been doing double up payments then dropping 20-40k lump sum each year

how you pay mortage with a credit card? would that be treated as cash advance?

A HELOC and mortgage are both credit instruments that are secured against the house. A HELOC usually carries a higher interest rate and is amortized monthly whereas a mortgage has lower interest rate and is calculated semi annually.

The best thing is to take advantage of the mortgage prepayment options. As mentioned above if you can pay more than the mortgage allows, select a lower term as you can pay anything at the end of the term.

Velocity banking works in the following scenarios

1) You have enough prepayment privileges or it's an open mortgage
2) you have positive cash flow at the end of the month
3) You usually have balances in a checking/savings account that are just sitting their idle

You can get even better results (due to the spread in mortgage rates vs HELOC rates) if you are VERY diligent and put a large portion of your excess cash flow to your mortgage each month, or a couple of times a year.

I personally like the Velocity banking method because It uses 100% of excess cash flow to reduce some sort of debt (thereby interest savings) rather than earning 0 in a savings/checking account.

I am in the states and a lot of the affluent people I know use some semblance of this technique because it allows them to mobilize their cash to either paying down the house or other investments. They don't use a traditional checking/savings account.

You kids have different names for everything now.
I'm too old I guess.
We used to just call it paying off debts when you had extra cash.

I am located here in BC, Canada. My father in law uses this “Velocity method” to pay off his mortgage quickly. He has a line of credit with his bank. Even though he has a traditional mortgage, every year he is able to apply a good chunk from his line of credit to his mortgage (lower interest rate). There is an amount that you are allowed to advance your payment in your mortgage every year without getting penalized.

I have been looking in this this as well, but I am not understanding how it can be executed practically.

One of the key statement I hear on those videos is, use your HELOC like a chequing account + have your incoming deposited into the HELOC. This is not practical because most of the direct withdraw / direct deposit cannot go into the HELOC. For example, I looked into having my car payment withdraw from HELOC, and the financial company specifically says it does not do withdraw from a line of credit account. And I cannot link my HELOC to PayPal or Tangerine, for example.

This means I have to move money from my HELOC to my chequing account every month, which means I have to keep a balance in the chequing account to prepare for the withdraw and there is a monthly fee (unless a minimum amount of money balance is kept) on the chequing account.

How do people do it?

xxgosokxx wrote: ↑ I have been looking in this this as well, but I am not understanding how it can be executed practically.

One of the key statement I hear on those videos is, use your HELOC like a chequing account + have your incoming deposited into the HELOC. This is not practical because most of the direct withdraw / direct deposit cannot go into the HELOC. For example, I looked into having my car payment withdraw from HELOC, and the financial company specifically says it does not do withdraw from a line of credit account. And I cannot link my HELOC to PayPal or Tangerine, for example.

This means I have to move money from my HELOC to my chequing account every month, which means I have to keep a balance in the chequing account to prepare for the withdraw and there is a monthly fee (unless a minimum amount of money balance is kept) on the chequing account.

How do people do it?

Then you have an extra step. If your direct deposit can not go directly into your line. You just set up an automatic recurring transfer to go from your checking account into the HeLOC. Most bills can withdraw from Heloc if your car payment does not just keep enough in there to cover that payment and a little bit extra just in case.

So if you get paid 5k monthly net land you car payment is 300 a month set up an automatic transfer of $4700 to go from your checking account to your Heloc. Set it up recurring on the day after you get paid so you’re just missing out on saving 1 day of interest.

You have a few options regarding the fees for your checking account. First get a no fee checking instead, two: if you want to keep your account and have to maintain the minimum balance, treat that as your Zero and just no you are keeping $5k in there to save the fees, or three: know that by throwing that $5k against your principal will save you more in interest costs then the bank fees itself.

I’m in the states and Wells Fargo waves the fee as long as I have a direct deposit into that account. Even if I only have it for 1 day. So I have my direct deposit going into my Wells Fargo account and then automatically the next day being transferred into my Heloc.