How to Pay Off a $350K Home in 6 Years - (HELOC vs Mortgage) — Transcript

Full transcript

1. 0:00You asked for it. Here it is. And if you
2. 0:02don't know what I'm talking about, go
3. 0:03back and watch the video that says how I
4. 0:04paid my home off in three and a half
5. 0:05years using a heliloc. Today, I'm
6. 0:08actually going to break this thing down.
7. 0:09So, in this video, I'm going to go line
8. 0:11by line and show you the difference in
9. 0:13interest and how it's calculated in a
10. 0:15home equity line of credit versus a
11. 0:17mortgage. And so, I'm going to throw
12. 0:18different rates in there. I'm going to
13. 0:20go get in the weeds today. So, let's do
14. 0:22this.
15. 0:26As we go through this, I want to really
16. 0:27just use a a pretty traditional example.
17. 0:29So, I'm going to pretend the family of
18. 0:31four during COVID bought their home, you
19. 0:33know, 2020 at 3.5% rate. Rates were
20. 0:36lower then. That's about the standard I
21. 0:38see. I do have some clients that have
22. 0:39had 2.25 and yes, they become clients.
23. 0:41Let's pretend you purchased a home for
24. 0:43$350,000.
25. 0:45You had saved up good money and you were
26. 0:46able to put 20% down. So, you get out a
27. 0:48PMI, which is fantastic on a mortgage.
28. 0:50You don't want to be paying that
29. 0:51anyways. That's just extra you're
30. 0:52paying. So 20% of 350 would be 70,000.
31. 0:55Take that 70,000 off of 350. Now you
32. 0:57have a principal balance owed of
33. 1:00$280,000. Okay. So now it's 2025. You
34. 1:03bought it in 2020. So what's happened?
35. 1:05You had 5 years of hopefully that home
36. 1:07appreciating. I'm doing a really low
37. 1:10appreciation for 5 years on a home that
38. 1:11was purchased during CO. Let's just
39. 1:13pretend the home is now worth 400,000.
40. 1:15If you're going to look at the principal
41. 1:17balance owed on this in five years on
42. 1:20the mortgage, I've already put this in
43. 1:21the calculator, you would now owe
44. 1:23251,151.
45. 1:26So it took you 5 years to pay off
46. 1:29$29,000 of interest, which just if you
47. 1:32don't realize this, that's not good.
48. 1:34That means that you're it's how way a
49. 1:36mortgage is lined up is it's frontloaded
50. 1:38on interest. You're paying a lot more
51. 1:40interest in the first 10, 12, 15 years.
52. 1:42Okay, so I'm going to plug these numbers
53. 1:44into this calculator. So the loan
54. 1:45amount, remember, is down to $280,000.
55. 1:49That's how much you owe on this
56. 1:50mortgage. Okay, let's also put the
57. 1:53mortgage rate, like I said, at 3.5. You
58. 1:55have 25 years left to pay it off because
59. 1:57you started again during 2020. The home
60. 1:59is now appraised for 400,000. Let's
61. 2:01remember that. And the if we let's do an
62. 2:03apples to apples. Everyone's wanting to
63. 2:05see kind of a comparison. I'm not going
64. 2:06to do apples to apples. I'm going to
65. 2:07make apples to oranges or whatever we're
66. 2:09going to say here. I'm gonna put the
67. 2:10heliloc rate higher to to continue to
68. 2:12try to prove a point and drive this
69. 2:14thing home. So, let's go high. I know
70. 2:17mortgage rates I believe are around 6
71. 2:18and a half 6.7% maybe 7%. But I'm going
72. 2:21to put a 8% heloc. Let's just go high
73. 2:23for for sake of illustration. Let's
74. 2:25assume if they were to do a heliloc and
75. 2:27we're comparing these two that they're
76. 2:29able to get a loan to value of 80%. So
77. 2:3280% is a loan to the value of the
78. 2:35current home. So the current home is
79. 2:36worth $400,000. just said it's appraised
80. 2:39now for $400. So that means the line of
81. 2:41credit would be $320,000.
82. 2:43Let's also assume that you have $20,000
83. 2:46of savings. So now that $280,000 balance
84. 2:49is sitting there 8% rate and we're going
85. 2:51to look at your monthly income between
86. 2:53two people. I looked at all of this are
87. 2:55averages, by the way. I looked at
88. 2:57average uh mortgages. I looked at
89. 2:59average income. I looked at average
90. 3:00expenses. So, instead of trying to
91. 3:01address people who have a $1.7 million
92. 3:04home and people have $120,000 home, I
93. 3:07did my very best to find a median
94. 3:09average. This couple is making $9,500
95. 3:11per month between two people. Okay, so
96. 3:13let me plug that number in there. $9,500
97. 3:15right here. Monthly income, $9,500.
98. 3:17That's their take-home. And then their
99. 3:19monthly expenses, which we want to
100. 3:20include everything, whether you tithe or
101. 3:22not tithing, groceries, eating out,
102. 3:24utilities, vacay fund, gas,
103. 3:27entertainment, retirement, all of this
104. 3:29stuff. All of that combined with the
105. 3:30mortgage payment is $6,800 per month.
106. 3:32This was the average that I found. If we
107. 3:35were to take what you need to understand
108. 3:36with a heliloc with a first lean helock,
109. 3:38which I've taught on in the other videos
110. 3:40multiple times, you no longer have a
111. 3:42mortgage payment. So, the mortgage
112. 3:43payment is gone. This first lean helock
113. 3:45has taken over in the first position
114. 3:47loan. This is not mortgage and a second
115. 3:51lean. I'm not saying that to be
116. 3:52condescending. I want to make sure that
117. 3:53you hear what I'm saying cuz people get
118. 3:55really hung up on this. like why would I
119. 3:57take a another loan out and keep my
120. 3:59mortgage? That's not what we're
121. 4:00advertising here. We're removing that
122. 4:03loan completely. There's no more death
123. 4:05pledge. So, the loan stays the same. No
124. 4:08big deal. But the way that the interest
125. 4:09is calculated is a major deal. And I'm
126. 4:12going to show you here in this video.
127. 4:13So, now we have a 9,500 income, 6,800
128. 4:16expenses. But where does that mortgage
129. 4:17payment go? It's gone in the HELOC. So,
130. 4:19in the illustration, the payment would
131. 4:21come down to 5,000 in expenses cuz there
132. 4:23no longer a mortgage payment. But before
133. 4:25you ask, what happens to escrow taxes
134. 4:27and insurance? I've calculated that for
135. 4:29the year as well. So, we're going to
136. 4:30include taxes and insurance of 3,600 for
137. 4:33the year. Divide that by 12. That's $300
138. 4:36in taxes and insurance that we need to
139. 4:38add back into the monthly expenses. So
140. 4:41now that gives us 5,300 in monthly
141. 4:44expenses, 9,500 income, 5,300 monthly
142. 4:47expenses, 8% heliloc rate if you go back
143. 4:50over here with a 3.5% mortgage. So,
144. 4:53there's no way that an 8% heliloc rate
145. 4:55could be to 3.5% mortgage, right? Wrong.
146. 4:58So, let me show you exactly how this
147. 5:00works. We're taking our $20,000 of
148. 5:02savings and we're going to dump the
149. 5:03whole thing. 20,000 on the loan amount.
150. 5:05That's 280. So, now the balance is going
151. 5:07to come down to 260. So, now you owe
152. 5:09$260 and all the terms have stayed the
153. 5:11same. 3.5% mortgage, 8% helock. If you
154. 5:14look at the summary over here, which I
155. 5:15will break down in just a moment, what
156. 5:17does it say? Clearly, you have 25 years
157. 5:19left to pay off the mortgage. You'll pay
158. 5:21$130,486.38
159. 5:24in total interest, which is a total of
160. 5:25$390,000. So you basically buy yourself
161. 5:28a house and the bank a half a house or a
162. 5:29house as well. With a heliloc, you'll
163. 5:32pay it off in 6.6 years. $68,859
164. 5:37uh.72 in interest, saving you roughly
165. 5:41$60,000 off the top just in interest.
166. 5:44But let's just say we just stopped right
167. 5:46there. If you literally say $60,000,
168. 5:49how much would that change your life?
169. 5:50That's a big deal. That should get you
170. 5:52excited if you're not already excited.
171. 5:54But more importantly, what I want you to
172. 5:56see, look at the timeline. We've gone
173. 5:59from 25.1 years to 6.6 years. That's
174. 6:02basically 19 years of your life back
175. 6:05where you're not paying the biggest debt
176. 6:06that you owe. You're going to hear this
177. 6:08over and over again. Time is the most
178. 6:10valuable asset that we have. So, if we
179. 6:12can manipulate time through the simple
180. 6:14interest program of a first lean helock,
181. 6:16why would we not do it? If we can
182. 6:18manipulate the time and the balance, how
183. 6:21do we do that? It's because of the way
184. 6:22that the interest is calculated.
185. 6:24Interest on a 30-year mortgage is
186. 6:27amortized. And all your interest rate
187. 6:29does, you can write this down, is
188. 6:31determines your monthly payment. So, I
189. 6:33don't care if you had a 2.2 or 9.40, it
190. 6:36doesn't matter. You're going to have the
191. 6:38same payment for the life of that loan.
192. 6:40The only thing that could change is if
193. 6:42you get a cash out refi, starting the
194. 6:43process over, paying closing costs and
195. 6:45paying equity out of your home again, or
196. 6:46you sell the home. You sell the home and
197. 6:48then you get your equity out of it.
198. 6:49Either way, your money is trapped or you
199. 6:50have to start the process again, which
200. 6:52the bank loves. Why do you think they
201. 6:53call you every 6 to 8 years saying,
202. 6:55"Hey, if you refinance, your payment
203. 6:57will come down." That's because they're
204. 6:58keeping your loan for another 30 years
205. 7:00on the mortgage. It's advertised
206. 7:02throughout the year divide by 12 the
207. 7:04interest rate and it's gonna that what's
208. 7:06going to happen each month you'll pay a
209. 7:08little can we zoom in on this a little
210. 7:11bit more of principal so a little bit
211. 7:15less interest a little bit more
212. 7:16principal but it's frontloaded like
213. 7:18crazy and you're still trapped you're
214. 7:20not liquid okay in a first lean helock
215. 7:24and I've said this till I'm blue in the
216. 7:26face and I I don't know if it's clicking
217. 7:27fully but I hope that I pray this clicks
218. 7:29today it is a 24-hour hour recast.
219. 7:32Meaning every 24 hours, this first lean
220. 7:35helock, not second lean helock in a
221. 7:36mortgage, but a first loan where it's
222. 7:38just as safe as a first mortgage, which
223. 7:39is actually a death pledge, is recasted.
224. 7:42It's going to look at the balance owed.
225. 7:44It's going to say, you know, Jim and
226. 7:46Jane have $260,000 that they owe on
227. 7:49their home. That's what we're going to
228. 7:51run the interest on today, on day one,
229. 7:54January 1st, and on January 2nd, January
230. 7:573rd. What if you put again, you could
231. 7:59put your $20,000 in savings in there. So
232. 8:01instead of paying on 280 and it
233. 8:03calculating your payments there, it's
234. 8:04actually going to calculate your payment
235. 8:05on 260. This changes things dramatically
236. 8:09because as you take the time to make
237. 8:10sure your money is going in on the right
238. 8:12time of the month and pulling it out at
239. 8:13the right time of the month, you're
240. 8:14manipulating the time and the balance
241. 8:16every single month. So that 8% rate that
242. 8:19we're running it at doesn't affect you
243. 8:21like you would think it does. But we've
244. 8:23been so programmed to go rate. So, I got
245. 8:25to get the lowest rate, which I
246. 8:26encourage you get the lowest rate, but
247. 8:28there's a lot of misnomers with that as
248. 8:29well. I know multiple banks who do
249. 8:31teaser rates and promo rates where you
250. 8:33can get lower rates. Well, Tyler, that's
251. 8:35great, but I hear that they're variable.
252. 8:37Okay, let's say it is variable. I'm
253. 8:38going to show you an illustration right
254. 8:39here. Again, we're looking at 25.1 years
255. 8:41and 6.6 years. Let's just take the rate
256. 8:43down from uh the HELOC. Let's make it
257. 8:45the same as the mortgage. Y I was told
258. 8:47do apples to apples. So, 3.5 years only
259. 8:51took us down one year on the HELOC. The
260. 8:53mortgage stayed the same because
261. 8:55remember we kept the same rate. I took
262. 8:56one year off. Why don't only take one
263. 8:57year off? Because time and balance are
264. 8:59more important, not the rate. Let's take
265. 9:00the rate up to 10. Let's do something
266. 9:01just crazy. I I've not seen in my time
267. 9:03at all. We took it up to 10. Went up to
268. 9:057.1 years. It added about a half of a
269. 9:08year to paying off at a 10% helock rate.
270. 9:11If that doesn't prove to you that the
271. 9:14rate is not the most important factor, I
272. 9:15don't know what does. So again, it's the
273. 9:18time and balance we want to manipulate.
274. 9:20So let me go back for the sake of
275. 9:21illustration to the 8% rate. I'm keeping
276. 9:23it real high. Even though I see people
277. 9:24getting promos all the time with zero
278. 9:26closing cost or very low closing cost
279. 9:29and you're not stuck on that loan for 30
280. 9:30years. Again, you could be in this promo
281. 9:32rate, this teaser for a year or two and
282. 9:34then go to another bank for a year or
283. 9:35two with very low to zero closing cost.
284. 9:38So, you're not stuck and you have a
285. 9:4010-year draw period. And on top of that,
286. 9:42let me say this, you have a larger
287. 9:43savings account because remember, we
288. 9:45have a $320,000 line of credit because
289. 9:47you get 80% 80 to 90% loan to value.
290. 9:50Let's go very conservative. loan to
291. 9:51value at 80%, you have access to
292. 9:53$320,000, you paid it down to $ 260, you
293. 9:55have a $60,000 emergency fund. You
294. 9:57started with 20, but now you have a
295. 9:58$60,000 emergency fund. So now, if you
296. 10:01were not to pay your payments for a few
297. 10:02months on a mortgage, a foreclosing,
298. 10:03it's gone. If you don't pay your
299. 10:05payments for a few months on a first
300. 10:06helock, it's an interestonly payment.
301. 10:08They're just going to take that interest
302. 10:09right out. That's not what we want to
303. 10:10happen. But if the worst case scenario
304. 10:12is you making it for a few months and
305. 10:14keeping your home, I hope you would all
306. 10:16say that's a much better worst case
307. 10:18scenario. Let's break this down. I want
308. 10:19to look at this line by line. In a
309. 10:21mortgage, the the principal 543 on the
310. 10:24on month one, August 2025. We're
311. 10:26starting today and then interest 758.
312. 10:28The balance is 260, right? Same same
313. 10:30apples to apples. Let's just look one
314. 10:32year into this from 543 to 562 of August
315. 10:36of 25 to August of 26. So what is that?
316. 10:40$19
317. 10:41extra is going towards principal in one
318. 10:44year. $19 extra is going towards
319. 10:47principal. So you are now you've paid
320. 10:50off $6,700
321. 10:52in a full year in your uh amortization
322. 10:55schedule in a heliloc. The interest has
323. 10:57gone up from $1652 in one year to 1443.
324. 11:01So that's $29 in one year. How much is
325. 11:04the balance? And you've gained $32,000
326. 11:09of equity. And you're like, "Well, yeah,
327. 11:11Todd, I'm just dumping all my money into
328. 11:12it." You have access to it. So, why
329. 11:15would you not dump your money into there
330. 11:16instead of putting in a checking or
331. 11:17savings earning you zero? Even if your
332. 11:19savings is earning you one or two, even
333. 11:21if you put in a CD earning you three or
334. 11:23four or five, you're saving more than
335. 11:25you're earning in those other funds
336. 11:27where it's liquid. So, we want to take
337. 11:28our liquidity and we want to put it over
338. 11:30here. We want to defer those payments.
339. 11:32This is how this works. This is how
340. 11:33banks are in business. This is how
341. 11:35wealthy people have been doing this for
342. 11:36years. I'm just trying to bring this to
343. 11:38you guys to help you out. Look at the
344. 11:39difference if we go into year two. So
345. 11:42now August of 27, the payment is down to
346. 11:451,200. That is $430
347. 11:49off more that we're paying towards
348. 11:50principal because all of it sitting on
349. 11:52top of it. And the balance has come down
350. 11:54to $193,000.
351. 11:56That is $67,000 more of equity you have
352. 12:00and you have access to the $320,000.
353. 12:02Again, this is before we do any of the
354. 12:04other strategies. This is literally
355. 12:06you're living on your same income, your
356. 12:08same expenses. is you're not going to
357. 12:09rice and beans like Dave Ramsey says.
358. 12:12You're living your same lifestyle and
359. 12:14you just paid off 70 grand of your
360. 12:15balance. So on the mortgage, 2 years in,
361. 12:18you've paid off 14,000 14,000 70,000 14.
362. 12:23I'm just saying the math don't lie. When
363. 12:25I say the math don't lie, don't lie.
364. 12:26You're like, "Well, I'm paying more in
365. 12:28interest." You might be paying more in
366. 12:30interest on the first month or two.
367. 12:31Let's Let's go back to the top. 68,000
368. 12:33in total interest versus 130,000 in
369. 12:36total interest. I'm really not trying to
370. 12:38be a smart Alec, but which one is more?
371. 12:40Like, you're not paying more interest
372. 12:42because the timeline is being decreased.
373. 12:44If the time saves you 19 years, that's
374. 12:4719 less years that you're paying those
375. 12:49incremental payments to the bank. And
376. 12:50you might go, "Well, Todd, I don't want
377. 12:51to put all my money in there." Well,
378. 12:52then don't. The other beauty of it is
379. 12:54you have full control. You are in
380. 12:56charge. You're in the driver's seat. You
381. 12:58remain liquid. You're becoming your own
382. 13:00bank. And I'm telling you, and I'll say
383. 13:01this over and over again, I have so many
384. 13:03other strategies outside of just getting
385. 13:05this little the the income and expenses
386. 13:07and deferring your credit card payments.
387. 13:09We've not gotten into interest arbitrage
388. 13:11or private lending or ways you can
389. 13:13mitigate taxes and help accelerate this
390. 13:15thing like crazy. It's how I literally
391. 13:18paid my home off in three and a half
392. 13:19years. That's not a brag. It changed my
393. 13:22life so much. That's why I'm doing this.
394. 13:23I backended my way into a business where
395. 13:25I'm like, the Lord did this in my life.
396. 13:27I got to share this with people. And I
397. 13:29will always tell you, I don't want or
398. 13:32need everyone to be like, I want
399. 13:33thousands and thousands of clients to
400. 13:34come. I want those who have a teachable
401. 13:36spirit, who want to learn, who those who
402. 13:38are seeking truth, and those that I can
403. 13:39help get across the finish line. And I
404. 13:41tell clients every day, if they're not
405. 13:43ready yet, you're not ready yet. And
406. 13:44that's okay. We're going to give you a
407. 13:46game plan to help you become ready. But
408. 13:48if you are ready, the numbers won't lie.
409. 13:50You're going to be able to look at this
410. 13:51thing and say, "Oh my gosh, we had 27
411. 13:53years or 18 years or 15 years. Now we're
412. 13:55down to three or four or nine, whatever
413. 13:57it is." We're going to make sure for
414. 13:58you. That's what we do at Hennessy
415. 13:59Consulting is we make sure that we are
416. 14:01conservative for you. That's why I'm
417. 14:03running this rate at 8%. And not 3%. I
418. 14:06don't want to do apples to apples. I'm
419. 14:07going to show my scenario with a higher
420. 14:09rate. Even if I can get you into a promo
421. 14:11rate at 4.5 or 6.25, even if I can do
422. 14:14that, I'm running the calculation at a
423. 14:16higher number cuz I want you to see that
424. 14:17the math simply works. All right, let me
425. 14:20show you one last thing just to continue
426. 14:22to hopefully drive this home. If we
427. 14:24actually to do apples to apples and we
428. 14:27were to take the mortgage rate up where
429. 14:28they are today, let's just go 6.7. I
430. 14:32didn't change the heliloc. I kept the
431. 14:33heliloc at 8. But let's take the helock
432. 14:34down to 6.7 cuz we're doing apples to
433. 14:37apples. You're going to pay $276,000
434. 14:42in total interest versus $54,000 in
435. 14:45total interest. When I tell you I have
436. 14:47clients literally jumping through almost
437. 14:49jumping through the Zoom camera going,
438. 14:51"Oh my gosh, you're about to save me
439. 14:52$200,000 or $53,000 for a guy the other
440. 14:55day." It's literally happening on a
441. 14:57daily basis.
442. 14:58>> You're charging to potentially save me a
443. 15:01half a million. I think I'll be okay.
444. 15:06>> Well, that thanks how you said that's I
445. 15:07love how you said that. But yes,
446. 15:08>> because we're empowering them, educating
447. 15:10them to become their own bank. So if we
448. 15:12actually do apples to apples of interest
449. 15:15and the same income, the same expenses
450. 15:17is a gamecher and I would love to help
451. 15:20you and your family. If you're willing
452. 15:21to learn this, I would love for me or my
453. 15:23team to sit down with you, help you with
454. 15:25pre-qualification, help you with a
455. 15:27strategy call and get you into a such
456. 15:29better financial position. The financial
457. 15:31illiteracy in our country is is due,
458. 15:34frankly, to a lot of people just
459. 15:35following the crowd and doing what they
460. 15:36think they're supposed to do. So, I'm
461. 15:38going to continue as much as I can as
462. 15:40the Lord allows me to try to help
463. 15:41families. That's my heart. That's my
464. 15:43team's heart. The Lord has brought team
465. 15:45members in who have the same values to
466. 15:46want to steward things as under the Lord
467. 15:48to build the kingdom to empower people.
468. 15:50I believe relationships are everything.
469. 15:52We want to make sure that we're we're
470. 15:53helping one another and using the gifts
471. 15:55that we've been given to bless those
472. 15:56around us. So, on our team, that's what
473. 15:58we want to do and we would love to help
474. 15:59you if we can. What I would ask from you
475. 16:01simply like, comment, subscribe. It
476. 16:04really helps us out as we can continue
477. 16:06to make these videos and I'll continue
478. 16:07to break them down the best that I can.
479. 16:09I would love to also meet with you and
480. 16:11connect with you in any way. So, all you
481. 16:12got to do is in the description there's
482. 16:13a link. You click on that link and
483. 16:15you're going to get connected with our
484. 16:16team and we will do everything we can to
485. 16:19treat you with the highest standard with
486. 16:21integrity to look at your numbers and
487. 16:23try to get you on a road to the best
488. 16:24success for you and your family. Thanks
489. 16:26for taking the time to watch the video.
490. 16:27God bless. Take care.
491. 16:31[Music]