HELOC Strategy MYTHS?! The Truth About The HELOC Strategy

hey what’s going everyone this is Sam
Kwak one of the Kwak Brothers and I’ve been getting a lot of questions about
our HELOC strategy our accelerate debt reduction strategy now if you don’t know
what the strategy is you’re like what is he talking about I’m gonna go ahead and
leave the the original strategy training video down below in the comments section
but this video is particularly for those who have checked it out you guys know
what the HELOC strategy is and I’ve been getting a lot of questions and I’m gonna
pin out three questions that I’ve gotten so far number one being well Sam why
don’t we just make extra payments to our mortgage then having to go through this
hopes HELOC strategy mess right that’s that’s a question that I get a lot the
second thing I get a lot is well Sam aren’t he locks variable don’t they have
higher interest rate well I’ll go and tackle that and respond to in just a sec
and a lot of you guys also said hey this stuff sounds risky like how do we
mitigate this hot like is there a way to go around like can we actually do this
so I’ll cover all three things before I do you guys go and subscribe to our
YouTube channel it helps us a lot to push out more videos out and give you
guys value and if you have if you have any questions go and leave them down
below I do pay attention and do respond to as much as I can so go ahead and
leave out any questions if you have so the first thing I get a lot this is like
number one myth slash is like skeptical questions is Sam why don’t we just make
extra payments to our mortgage instead of just doing the he laughing so I’m
going to show you guys why the HELOC strategy is far more superior than just
doing the extra payment number one when you make an extra payment on the he log
and that’s literally what you have left over at the end of the month what
happens if you have an emergency right what if what happens like you know
you’re you need a new roof or you need a new car tires blown out whatever don’t
don’t you want some backup right and you might be saying well that’s where the
savings come from well the idea here guys is you kind of have a dual effect
with the HELOC strategy your HELOC essentially becomes your new
quote-unquote savings and checking account and any extra payment you put in
to the he log you can always get it back for those emergencies all right so let’s
go and talk about the extra payment versus a HELOC strategy and this is
something that I get a lot so people ask me Sam why don’t we just put the f
money that we have and throw it into the mortgage right so two things I have to
say about that number one what happens if you like if
you make the extra payment and you have an emergency right if you guys are doing
the extra payment with everything that’s left over after expenses or paying the
bills and all you’re doing is taking that into the mortgage well what happens
there’s an emergency where your car’s blown out you need a new roof something
happens to these kids life happens right especially if you have a 30-year
mortgage okay anything can happen and within 1530
years so the beautiful thing about the HELOC is that a HELOC is an open open
term open revolving loan so you can go ahead and put the money into the HELOC
and you can take the money back out for later use a mortgage on the other hand
okay it’s closed ended meaning you throw you put the money into the mortgage you
can’t get it back okay belongs to the banks it’s gone poof okay so that’s one
reason why I’m not a big fan of the extra payment the second reason why I’m
not a big fan of the extra payment we think with the he laughs strategy what
we’re doing is we’re taking all of our income and putting it in the HELOC right
so you guys might be asking well why are we doing that the reason being is that
we do this so that we can lower the average daily balance on the HELOC when
we lower the average daily balance we also lower the amount of interest our
you have to pay so what we’re doing is we’re taking all of our money putting
the HELOC lower than the average daily balance okay but we still have access to
the HELOC to be able to pay for our bills or expenses and so on so there’s a
there’s a detailed strategy and there’s a detailed method for this I’m not going
to go into that today but if you guys want to check out more I’ll go and leave
the link down below for you guys to go and check out even more okay so that’s
the extra payment number two he lost their variable and tends to have higher
interest rate now not all he locks are created equal he locks are known as
non-qm loans which means it’s not it’s not regulated like a mortgage okay with
a mortgage it’s government regulated so there’s a lot of things that have to be
uniform they have to be same and banks have to offer very similar types of
features and functions with the hue ah it’s not regulated as such so that banks
have the more freedom as to what can offer you and what they don’t want
to offer you so you can go to Bank a baby bank see and they’ll all offer
different types of helots so when you guys are shopping for a HELOC make sure
you go you go and check out different places because you get you guys are
going to hear different things from different banks so that being said part
of that difference is that he locks can be variable but they can also be fixed
okay so a lot of people are exposed to the variable stuff that’s why they
believe oh maybe all he lost our variable well it’s not true he laughs
can be fixed now our he locks do he locks have higher interest rate sure
right but remember going back to my point one if you lowered the average
daily balance in such ways that the interest rate really can’t catch up to
the principal balance then you’re gonna actually end up paying significantly
lower amount of interest so the brain that the the bank’s got you got your
brain to think you know got you trained to think that interest rate matters a
lot well I’m here to tell you guys that yes it does matter but when you’re using
the strategy in the context of the strategy it doesn’t really matter as
much because you’re killing down the principal balance SuperDuper fast where
the interest rate really doesn’t matter at that point cool number three I get
Sam this he laugh stuff sounds super duper risky why do we want to get into
it well for one guys a lot of things like we do in the life is risky such as
driving flying airplanes so when you weren’t like say 12 13 years old driving
a car was risky right you have an impaired judgment you don’t really know
how to do it because you don’t know how to drive you weren’t supervised you
weren’t trained so much like driving the HELOC strategy is the same way okay the
more you learn the more you understand the more you understand the mathematics
behind a strategy it becomes significantly less risky okay so you
probably wouldn’t want your 12 year old or 13 year old driving around with your
car right well same thing here guys the 12 year old is later turn 1617 it’s
gonna go ahead and take driver’s education is gonna get supervised
driving time right all those things lead to your your kid that 16 year old
becoming less of a riskier driver does that make sense so with the HELOC
strategy the more you learn the more you get you dive into the details and you
Stan how the math works the HELOC strategy can definitely be a very
effective strategy to help you pay off your mortgage your student loans your
credit cards whatever loans you guys meant you guys have the Keelung strategy
is far far better it’s a superior strategy than anything that I’ve seen so
guys if you have comments questions if you’re still skeptical go and leave them
down below and I’ll be more than happy to address them and I’ll tell you guys
what I do see the the comments and if you guys want me to respond definitely
can and again just to remind you guys be sure to subscribe to our YouTube channel
give us a thumbs up I add in and I’ll go ahead and Eve some other videos down
below for you guys to watch about the strategy all right guys thanks for
watching and I’ll see you in the next video hey guys it’s Daniel and this is
Sam we are the Koch brothers I hope you guys enjoyed that video if you want to
see more content value that we put out like this what should they do Sam go and
hit the subscribe button and also hit the bell icon so you guys get
notification for our upcoming videos that’s right

8 thoughts on “HELOC Strategy MYTHS?! The Truth About The HELOC Strategy

  • If you could explain how taking out a helicopter than What happens to your mortgage payment ?? Is it I delete while you take the helicopter out ?

  • Do you have a preferred loan or debt that you will normally wipe out first? Would it be best to wipe out those to get the best/most cash flow or those that eats up the most interest? Thanks for your help in advance!

  • So with a HELOC, as it is a sort “personal” LOC against the equity in your home. You can go ahead and get an income producing property under your name. My question is… Can I transfer it into an LLC some months after, once the first lender sells the mortgage to the second one? i.e. the bank or what is the procedure to do so. May be find the LLC with the money pull out of the HELOC and then acquire it this way?

  • I shopped with 8 banks when I opened my first HELOC; and their stipulations were so varied, but none of them offered a fixed rate HELOC. Please show me what banks offer this.

  • What I don't understand is how this is better than investing the difference. In both scenarios, we are talking about having leftover income that can be put towards a mortgage as a principal payment or used to pay down the HELOC using the above method. Wouldn't you be better off taking that difference and putting it in a growth index fund or dividend paying stock that averages around 7% per annum realistically? You won't pay your mortgage down quicker but you will have way more money at the end of the amortization.

  • Question for those learning / starting / using the HELOC to pay down a mortgage faster:
    – Use the HELOC to pay down rental property first, freeing up more positive cash flow?
    – Use the HELO to pay down primary residence first?

    Primary has cash flow via a rental unit (granny suite / ADU). Rental property has positive cash flow after PI&TI, PM, and 10% for repairs, cap ex, and vacancy.

    I'm meeting with the bank within the next few days but trying to get more thoughts on which option is preferred most.

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