I learned about this new (old) approach towards aggressively paying down your mortgage.. It might benefit some of you who has similar kind of needs.
My monthly mortgage payment is around $18K.. plus quarterly tax payment of $22K plus $10+K monthly credit card bills. Imagine, the amount of cash reserve I would need to run the business smoothly.
Then I learned about the mortgage interest is compounded, HELOC interest is simple interest yearly/average daily balance based. (It may hurt your brain if you are not sure about math) Here is my approach,
Instead of letting huge sum of money sit in bank losing value, I dump all of them into existing mortgages less a small reserve. I have 2 HELOCs so far. I just maxed out one to purchase another investment property, I am keeping the 2nd one as my reserve. The moment I pay off a mortgage, I request another investment HELOC from my local bank. It's at 5% currently.. Cheaper than hard money lender if I see another deal.. At the same time, I don't have to stash away $50K+ reserve as would needed conventionally..
I am tweaking the amount paying towards mortgage each month and look out for any pitfalls.. The application Mint comes handy to have a holistic view of all the debts and cashes..
So, at the end of the month, I borrowed from my HELOC to pay all the expenses. As soon as the money comes in, it gets put back to the HELOC, the daily balance gets reduced. The interest payment gets lowered.. My fixed mortgage gets paid off quicker..
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