Sir,

Have you explored the method of keeping a Home Equity line in lieu of a mortgage?

The home equity occupies the first position.

Here is what caught my attention after scratching the surface. It is my understanding that you take all income and apply it to your home equity as payments, then pay out only your bills when they are due.

This has a net result of less interest being paid. I haven't found any comparison calculators. (This also accounts for higher rates being charged on the home equity product).

What has my attention is that people write that the common mortgage as we know it is evil in comparison. I need to see the numbers in front of me.

I've accepted the mortgage as the norm - missing totally that there may have been another way of borrowing monies.

The quest for more information begins. Have a nice weekend

Hi Smoke! Thanks for asking an interesting question.

I may not be 100% understanding your proposed scenario, but if I am somewhat in that ballpark you're asking why don't I get a HELOC on my home and use that to pay off higher interest ate debt on mortgages. I'm going to assume that for now, but correct me if I'm not following.

Here's why I would never do that.

1) This is the year we pay off our house. 42-years-old with a paid off house....mmm...how sweet that will be!

2) If disaster strikes, I'd rather lose rentals than my house.

3) While I would save some interest, the amount is trivial. We're talking about a 1.5% spread between my home mortgage loan and the majority of our rentals. Maybe a thousand here, a thousand there. Sure, if you send me the check I'll cash it, but not in exchange for missing out on points 1 and 2 above.

I know, I know, I know...someone is going to come along here and chide me for being "unsophisticated" about leverage and not "managing good debt." What they continually fail to realize is my calculator and spreadsheets do math just as well as theirs, I've seen the differences, and I still choose to pay off my home.

They may not agree. That's fine...I can live with that.

Now if you're talking about those HELOC "mortgage acceleration" gimmicks where you swap short term debt around and have to pay $3000 for the privilege of having their software optimize your spending.... I too have look at those. I stand by my initial impression: they're gimmicks.

No chiding here. I've done my chiding with you and we both know where each other stands.

I don't have a heloc on anything, ESPECIALLY my own house.

Commercial loans (debt) on rentals are an excellent tool if managed properly and kept small as possible.

For example, to pull out original capital in only or even less than your original capital in, leaving some of it in the house.

Not to refi for 75-80% ARV and pull 75-80k because the bank says your house is worth 100k and you should pull 80k, but you only need 30k.

Nope nope,

I'm asking whether you know of this method. I imagine there are people who will sell you a program, but I'm not looking for that. I don't buy lists. I do the work myself.

I'm mostly wondering if I could use a home equity as a bank account and benefit more than using a 15 year note.

I can't find any calculators which would compare the two. Remember a home equity has the right to go up some points during its life. This is fascinating to me.

Like you, I pay off four notes in these next 12 months, however I need to address more debt after that.

(Unlike most, I found it better to mortgage my primary residence to the gills and leave the rentals free and clear. My thinking was that if you were having troubles the banks would only lend on your primary residence.

The checks and balances were also in play. You would need to live modestly and not overspend on your home. If I could, I would take all of my debt and put it all on the back of my principle residence in a heartbeat).

NE, thanks buddy. I know we've had our differences and each hold to our view....respectfully. Fresh air!

Smoke, thanks for clarifying. As you mention, there are Pros and Cons to debt against your home. Some states have more legal protections for primary residences vs. rentals if, as you say, the SHTF. I am aware of those, and I still am working our plan to pay off this year.

I know folks get tired of hearing this...so if they don't like "Bible stuff" they can skip this paragraph. I truly believe what Proverbs 22:7 says about the borrower being a slave (servant) to the lender. As a person who believes in Almighty God and his word as the TRUTH, there is no arguing with that. Interest rates, man-made laws, "common wisdom" all that other stuff takes a subservient role when God speaks to me via Scripture. It doesn't work that way with everyone. No fuss, no foul. As Lindsey Buckingham sang, "You can go your own way." But I will always try to live my life according to that word.

Sid,

Congratulations on paying off the primary residence. Will this make you 100% debt free?

Roy, thanks buddy!

Unfortunately, we're not to 100% debt free. Still have rentals. Per my mentor's advice, we're doing things in order: our house first, rentals second.

Smokowana - the folks who "sell stuff" were all touting this maybe 15ish years ago. I forget what they called it. It takes A LOT of due diligence to pay your bills in the right sequence. One time I looked and the savings were minimal compared to the effort I was not willing to expend.

Congrats on the pay-off this year, Sid! We're in about the same boat -- just did the payoff on our own mortgage at the end of last year and our only debt at all is our rentals. And those will likely also be done around age 50 for us. (Unless we get some more -- which is ok with me if I still have a couple with mortgage past that if the other 12 units are paid off at that time!)

Rock on! :)

- John...

Ken, I'm one who absolutely believes in managed debt and your description doesn't fit me, at all. I think, as in most things in life, everyone has a different viewpoint and comfort level.

Let's say I have $100,000 in cash and a building worth $100,000 mortgaged to full value. If I take that cash and pay the house off, I have zero liquid funds. If I am hungry next week but don't have any money coming in, I can't put gas in the truck to go to the store to buy a bag of potatoes. If I keep my $100,000, I can pay the bank $700, go buy $10 worth of gas and $25 worth of groceries, and I still have plenty of money to get me through.

The "take the tools out of the truck" philosophy so that you can then spend your time searching for the next deal won't help ... if you have that same $100,000 free and clear building but nothing to buy the next deal with.

do I think someone should go out, buy and incur significant debt on properties but have no cash to fall back on? Of course not.

So the Home Equity monthly bank book idea doesn't produce large savings?

Rats...

I have four shacks with a combined debt of 44,000. Chase holds most of them. I wanted to contact them and see if they would take less if I paid them off now...or sooner.

Private lenders would do this in the past.

But even if I just let them run their coarse they will be done soon.

But a have a scattering of debts here and there which I would like to combine. Probably not worth it. When these first four are done, I'll have $138.08 a day to redirect towards other debts. So I can just knock them out one by one.

Hmmm, I'm always thinking. I thought this HELOC method could speed things up.

I don't mind debt, but as of late I am allergic to all these bank statements. Too many envelopes, too much wasted papers. Everything for me will be on-line only here on out.

I like cash...easy to reconcile.

Sid is being polite. The watered down version of the scripture, to not offend people, says SERVANT.

The original says SLAVE, as in the master holds the slave’s ear to the doorpost and stabs an awl thru the earlobe into the wood doorpost. This identifies the SLAVE (proves ownership) by matching the hole in the earlobe to the hole in the wood.

I always think of this when I see guys with pierced ears.

I wonder how mich money folks would borrow if they had to wear the bank’s name on their earlobe.

The Great Recession is far enough in the rearview mirror that folks habe forgotten it or newer investors started after it.

During that time house were NOT liquid. Couldn’t sell anything. Valies dropped 50-80% almost “overnight” meaning we could not sell the pay off the mortgage.

I’ve never seen a paid for house go into foreclosure.

Side thought after listening to Ramsey on the radio today...he had 2 young widows. The deceased husband had left a mountain of debt which ate up almost all the life ins she had hoped to use to rebuild her life. Sick husband could not keep up with the business so imcome was already low for a period of time, the who runs it after he dies and the court takes a year to settle the estate, meanwhile the kids still need to eat.

BRAD

Smoke I think I know what you're talking about.i posted something here to the effect of saving interest payment and pay off debt faster by using that method. I started doing that about 2 months ago. It takes discipline as many said.

To the part about interest savings, to my surprise, your fixed mortgage interest potion is calculated the same way simple interest HELOC is. Google it. The difference is, HELOC is daily average, vs fixed Mortgage is monthly. To elaborate , let's say your net income is projected 10,000 and you want to use that to pay down your debt. If at the beginning of the month, you use HELOC 10,000 pay towards your mortgage, your revenue trickle in. The mortgage interest saved is through less interest payment due to lower HELOC daily balance.

We all need Rerserve to run our business, I used to have almost 100k sitting in the Bank as reserve. Now I have over 100k HELOC to carry me through if ever I have unexpected large spending. Where did the money go? Pay down the debt.

Elliot, did you prepay mortgage using your emergency funds and treat HELOC as emergency funds?

Are you using this emergency money for monthly transactions or not touching it unless it will be a real emergency?

Luba, correct. emergency fund/reserve is something I don't need until urgent situation arises. So, it was silly of me to let money depreciate in bank while paying the mortgage interest. I am still paying, but aggressively paying them down..

Got it. Thank you!

Got it. Thank you!