In our family business, we’re always looking to pursue avenues that allow us to meet our ultimate goal: purchasing buy and hold real estate. On today’s show, we’re sharing a strategy that we use in order to utilize our finances to the fullest.
On this episode, Natali and I are discussing how we use a home equity line of credit to pay our primary home mortgage. We’re sharing the specific strategy, and how you can utilize it. We’ll also talk about finding the best loan possible, and what you should avoid when shopping around. It’s all here on this episode of Investing in Real Estate!
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I first heard about this tactic when I was working as a news anchor in Philadelphia. I read an unpublished book that promoted a strategy that banks don’t want you to know. I found it fascinating that you could use a home equity line of credit to pay off your primary mortgage. I immediately utilized the strategy, and found that it worked.
Simply put, using a HELOC, or home equity line of credit, to pay off your mortgage is a way to create equity in your primary home. Doing so allows you to pay down your balance quickly. More importantly, it allows us to leverage our funds in order to purchase cash flowing real estate.
The reason this works is because the loan on your house is amortized, meaning the value of the home is gradually paid off. Typically on a mortgage, you’re paying off the interest for the first years of the loan. Principle is not paid off until later.
But if you’re able to put a large amount of funds from a HELOC toward your mortgage, you can designate that money to go specifically toward your principle balance. Then going forward, a larger percentage of your monthly payment can be applied toward principle, instead of primarily interest.
It’s important to note, this is a loan that has terms. You have to strategize, and use time and interest wisely. Banks want you to take out lines of credits, because as a result, they are making money on the interest rate. The first year is crucial, and it’s important that you read the terms carefully.
If you want to know how you can pay off your mortgage more quickly and efficiently, download our free worksheet! It’s a simple, intuitive spreadsheet intended to help you understand your payment schedule. Once you input the basic details of your loan, then you can determine the best way to pay it off!
We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- Typically, how much can you take out from a HELOC?
- How do you pay back your HELOC?
- What does it mean to think of interest rates as a teeter-totter?
- How can you use a HELOC like a checking account?
- And much more about real estate investing!