Mortgage VS HELOC – Is Not Knowing The Differences Causing You To Pay More?


Hey folks. Michael Lush. I wanted to talk
to you today about the baseline differences between a mortgage and a home equity line
of credit. Again, a mortgage tends to be a compounding interest loan where a home equity
line of credit’s really no different than a credit card. It’s simple interest meaning
you’re paying interest on that day’s balance. If the next day’s balance is lower, you’re
going to pay less interest and a lower payment. Let’s take 2 examples here. Let’s take a traditional
mortgage, 4.25 on a 30 year loan at $300,000. The payment is going to be $1,475. Let’s take
that same debt and let’s transfer it and think of it as a home equity line of credit. Now
in a home equity line of credit you have $300,000 so the same as that mortgage right?
Here’s what we’re going to do. Instead of using my strategy, just to show you an apples
to apples comparison, we’re actually going to make the same payment of $1,475 because
again that’s what your payment would have been on the mortgage of $300,000 anyway at
4.25%. We take our $300,000 [inaudible 00:01:03],
pay $1,475, and guess what? You actually pay it off in 24 1/2 years. The reason why I’m
telling you this is right off the bat you can see that a home equity line of credit
is far superior than a mortgage. Using the home equity line of credit, like
your checking account, you’re going to accelerate it even further. On average, 5 to 7 years.
Again, that’s not changing anything about your budget. If you’re accustomed to taking
all of the money that you earn and depositing it into a checking account, and at the end
of each month you’re paying your bills out of your checking account, that’s all we’re
asking you to do with a home equity line of credit.
Instead, don’t use the checking account, use your home equity line of credit. It doesn’t
force you to pay more or less or change anything about your budget. You’re keeping your budget
the same. You’re just changing where you’re cash goes.
If you like this video, be sure to like below, subscribe to our channel. Again, thank you
and God bless. Thanks for watching the video. If you liked
that one, I actually picked out 2 more for you that you can watch right here.
Speaker 2: Other way. Point the other way. Michael: This way?
Speaker 2: Yep. Michael: Actually, I picked out 2 more for
you that I’d like for you to watch. When you get done, I’d also like you to subscribe to
our channel. Take care.

Paul Whisler

15 Comments

  1. love to see see that you respond to your viewers questions will be subscribing to your channel!

  2. Can you do a break down on how interest is calculated differently? I'm not understanding the math here… in other words… can you show your work? Thanks…

  3. What is the HELOC interest rate in your model? How do you pay your credit cards or any additional mortgages with a HELOC?

  4. Hi there, can you explain why you can pay off a $300k HELOC in 24.5 years and mortgage payment will take 30 years. Often time HELOC has a higher interest rate than mortgage, therefore, will pay more or take longer time to pay off than mortgage. thanks in advance.

  5. it's not really clear how it will reduce the payments from this video at least 🙂 MyHeaven

  6. Is it easy to qualify for a HELOC? Which national bank would you recommend? Thx!

  7. What happens when you don’t have any equity on your mortgage, would a bank give me a HELOC for the entire amount I owe?

  8. Instead of taking a lump sum loan (heloc) and applying that to your mortgage payment (as an extra principle payment), why not just put extra toward your principle and pay it down just as quick???? Ex. Heloc gives you a line of credit for 25k and you use 20k to put toward your mortgage principle. You still pay all of your normal bills from the heloc (because you have to pay back the 20k that you just borrowed some how, and that's why it's used as a "checking account"). Once that 20k is paid to 0, you then bowwor the 20k again as another lump sum to your mortgage and keep repeating this process. Or you can just save 20k and make a lump sum every time you have that amount. Or you can pay extra to principle every payment that would equal 20k. No secret to a heloc. Just another way to rob Peter and pay Paul. The heloc is a way for people who are not disciplined enough to pay extra.

  9. How about using this from a revenu propriety and take the money to pay personal home?

  10. The hemlock rate is variable great in today's environment, what happens as rates continue to rise?

  11. I watched your video and I am a little confused. Forgive me if I heard you wrong. But you said in the video, instead of taking out a mortgage loan for $300,000, take out a HELOC of $300,000. Isn't a HELOC based on the Equity you have in your home? So, how can you take out a $300,000 HELOC without any equity?

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