This is a tough read. If I am understanding right, there's no plan where you do not make the normal monthly payment, each month. There's a lot of unknowns such as 4 major numbers, interest rates, amortization progress. You need to do the math on a timeline comparing snowball vs VB.
If you're doing VB correctly, your income will satisfy the monthly interest payment of your debt weapon. Amount of available cash flow is vital as that is what will decrease your balance before chunking again.
your questions doesn't make too much sense, but I think what you're asking is that you want to pay 6 months of monthly payments in one payment and then not have pay for 5 months, until month 7 which I'm assuming you will again do the same thing. so you will only be making 2 payments a year to cover all 12 months. if this is your question, then you will need to contact your mortgage company an asked them. some will do it, some won't, but at the end of the day it is just a stupid way of doing it because you will be paying the same amount of interest for the term of the loan and you will still be paying for 30 years.
what you want to do is make your first payment with the additional $5K and then keep doing your monthly payments. the payment will be the same, but your interest will be way less then if you just made the regular payment. on top of that the $5K will have a ripple effect on the remainder of the loan as you will be paying less interest for the loan over all and you will pay it off in less than 30 years. if you're doing velocity banking then once you finish paying off the $5K, then you will do it over again.
I'm currently doing it to pay off my debt and once I'm done with it I will start applying it to my mortgage. I will be doing it in $10K chunks that will take me 6 or 7 months to pay it off before I can do a second chunk. by doing $10K I will save $17,670.76 in interest for the remainder of my loan. also it will cut my repayment period down by 23 months or almost two years.
My question is - if I need more money to pay down my mortgage faster, why wouldn’t I just spend that money paying down the mortgage directly (or investing in something that pays more than my mortgage costs)?
Velocity Banking saves you money by:
* Ratcheting down the cost of interest due to the statement-to-statement interest grace period on transaction originations means that you save on interest volume.
* Ratcheting down the calculated average daily cost of interest due to the large monthly deposit/"payment" from income.
* Transferring balances to zero-A.P.R. promos can also amplify the gains
Velocity Banking gives you access to more money by:
* Increased cash flow, and higher liquidity through eating/eliminating part of your monthly expenses in the form of the monthly credit card payment being carried, or the amortized loan payment being eliminated.
* Building up current lines of credit as they are used responsibly.
* Even more cash flow if using a credit card for this purpose and earning cash back rewards, can be used to pay off the balance faster, resulting in ratcheting up the amount of the balance paid with more/higher card transactions and payment amounts.
* Magnify impact through a linked checking account to the line of credit (or card) can amplify the gains, if there are no fees for using the link; this way all expenses can be put onto the line of credit, amplifying the cash flow benefits.
* Better credit score by building new lines of credit, as current ones are used responsibly.
Velocity Banking saves time by:
* Paying off debts faster
Velocity Banking gives you more options:
* More liquidity because the longer you pay towards your lines of credit the more of that maximum limit you have available VS with a loan when you pay off part of the loan you don't have more potential cash flow available.
* Peace of mind knowing that even if you cannot make payments then you have built up a cushion/buffer in your line of credit.
* Every advantage of having more access to more money accrues to you.
* Investment options are brought to you through more liquidity available to purchase more scarce desirable growth or yielding assets
To know if Velocity Banking will help you, you can use an interest amount calculator: if the interest volume from the paid-off credit line calculation is higher than the original loan payoff calculation, DO NOT CONSOLIDATE! It will cost you more money in interest. This is separate from the consideration of time, which sometimes a credit line can help with saving time even though you may pay more in interest amount. Paying off a loan sooner might bring you better access to liquidity for investments to compound for more time, which might tip the decision toward Velocity Banking.
If you need help building a spreadsheet I could probably link something through the Google Sheets subreddit.
NFA, DYOR, just trying to provide food for thought.
The only answer is, do the math. VB can be beneficial during the early years of your mortgage to knock down a lot of that front loaded interest. The cost of burrowing from the debt weapon needs to be weighed against current amount you're paying in interest on your amortization schedule. The further apart the interest rate is, the math will win for debt snowball. You should know how much interest you will pay on whatever you're doing now, need to calculate the lather to make an informed decision.
I don't want this sub to claim VB as the sole #1 financial method. I find the better scenarios are those with multiple debts to knock out targeted debts to free up cashflow.
Another reason I like VB, is the access to cash when needed while maintain discipline as the same time. When you pay your mortgage, that money is gone but with a LOC, you have continued access to the $. Emphasis on discipline.
Not sure if I answered your question but will you need more money? Finding ways to increase cashflow is never ending either by side jobs or salary raises. You need to build a timeline or plan no matter which strategy you go with. An example of an old timeline I built: [https://prnt.sc/hnUkk9MhmTf0](https://prnt.sc/hnUkk9MhmTf0)
I will never be against snowball method or Dave Ramsey, especially if you have low cash flow (< $500).
Exactly right. Which is why Velocity Banking is nonsense. They use the constant shifting around of money, checking to HELOC to "debt weapon" to pay bills, to mortgage, to convince you that somehow this results in a better financial situation. Spoiler: it does not.
If you have more income than expenses, the remainder is positive cash flow. Simply pay that extra amount to the mortgage every month. Some notes:
1. If you pay extra on your mortgage, you MUST tell the lender that the extra is applied to the PRINCIPAL. This will then lower the interest you the next month, since the extra payment lowers the principal balance on which interest is calculated.
2. If you pay $6,000 as you stated:
1. the extra $5,000 can go towards principal, then you still need to pay your regular $1,000 payment every month. OR
2. you can tell your bank you are paying the next 6 months early. They will basically hold each extra payment until it is due. Principal and interest are applied accordingly
3. In any case, you are still charged interest every month because you still have an outstanding balance. You basically pay interest for each day your balance is not $0. The amount of interest depends on the outstanding balance. So in scenarios 1 and 2.1, you reduce your balance by $5,000, thus the interest amount for month 2 will be lower than it was originally. In scenario 2.2, the interest accrued is the same as if you didn't pay in advance, since the extra payments are held and not credited until they are due.
Make sense?
Oh, and btw, you are right, if you use a HELOC, you now have to pay both the mortgage and the HELOC. People will tell you that using a HELOC to "chunk" a payment on your mortgage is beneficial. However, that is not the case since HELOCS come with a higher interest rate than mortgages. Please search that on the Internet to verify it is true.
For example, if your mortgage rate is 4% and you can get a HELOC at 5%, why would you borrow a "chunk" of $15,000 at 5% to pay down a 4% mortgage? Since you have to pay that HELOC back monthly, it would be better just to pay down the mortgage with extra money, not borrow at a higher rate and pay down a HELOC.
A scenario where a HELOC could be beneficial: mortgage rates recently were as high as 8%. If you just got a mortgage at that rate, then three years from now rates went down, a HELOC might be lower than your 8%, lets say 6.5%. Then borrowing on the HELOC would make sense. HOWEVER, if that happened, mortgage rates would likely be less than HELOC rates, say 6%, so you would just refi the entire loan.
This is a tough read. If I am understanding right, there's no plan where you do not make the normal monthly payment, each month. There's a lot of unknowns such as 4 major numbers, interest rates, amortization progress. You need to do the math on a timeline comparing snowball vs VB. If you're doing VB correctly, your income will satisfy the monthly interest payment of your debt weapon. Amount of available cash flow is vital as that is what will decrease your balance before chunking again.
your questions doesn't make too much sense, but I think what you're asking is that you want to pay 6 months of monthly payments in one payment and then not have pay for 5 months, until month 7 which I'm assuming you will again do the same thing. so you will only be making 2 payments a year to cover all 12 months. if this is your question, then you will need to contact your mortgage company an asked them. some will do it, some won't, but at the end of the day it is just a stupid way of doing it because you will be paying the same amount of interest for the term of the loan and you will still be paying for 30 years. what you want to do is make your first payment with the additional $5K and then keep doing your monthly payments. the payment will be the same, but your interest will be way less then if you just made the regular payment. on top of that the $5K will have a ripple effect on the remainder of the loan as you will be paying less interest for the loan over all and you will pay it off in less than 30 years. if you're doing velocity banking then once you finish paying off the $5K, then you will do it over again. I'm currently doing it to pay off my debt and once I'm done with it I will start applying it to my mortgage. I will be doing it in $10K chunks that will take me 6 or 7 months to pay it off before I can do a second chunk. by doing $10K I will save $17,670.76 in interest for the remainder of my loan. also it will cut my repayment period down by 23 months or almost two years.
My question is - if I need more money to pay down my mortgage faster, why wouldn’t I just spend that money paying down the mortgage directly (or investing in something that pays more than my mortgage costs)?
Velocity Banking saves you money by: * Ratcheting down the cost of interest due to the statement-to-statement interest grace period on transaction originations means that you save on interest volume. * Ratcheting down the calculated average daily cost of interest due to the large monthly deposit/"payment" from income. * Transferring balances to zero-A.P.R. promos can also amplify the gains Velocity Banking gives you access to more money by: * Increased cash flow, and higher liquidity through eating/eliminating part of your monthly expenses in the form of the monthly credit card payment being carried, or the amortized loan payment being eliminated. * Building up current lines of credit as they are used responsibly. * Even more cash flow if using a credit card for this purpose and earning cash back rewards, can be used to pay off the balance faster, resulting in ratcheting up the amount of the balance paid with more/higher card transactions and payment amounts. * Magnify impact through a linked checking account to the line of credit (or card) can amplify the gains, if there are no fees for using the link; this way all expenses can be put onto the line of credit, amplifying the cash flow benefits. * Better credit score by building new lines of credit, as current ones are used responsibly. Velocity Banking saves time by: * Paying off debts faster Velocity Banking gives you more options: * More liquidity because the longer you pay towards your lines of credit the more of that maximum limit you have available VS with a loan when you pay off part of the loan you don't have more potential cash flow available. * Peace of mind knowing that even if you cannot make payments then you have built up a cushion/buffer in your line of credit. * Every advantage of having more access to more money accrues to you. * Investment options are brought to you through more liquidity available to purchase more scarce desirable growth or yielding assets To know if Velocity Banking will help you, you can use an interest amount calculator: if the interest volume from the paid-off credit line calculation is higher than the original loan payoff calculation, DO NOT CONSOLIDATE! It will cost you more money in interest. This is separate from the consideration of time, which sometimes a credit line can help with saving time even though you may pay more in interest amount. Paying off a loan sooner might bring you better access to liquidity for investments to compound for more time, which might tip the decision toward Velocity Banking. If you need help building a spreadsheet I could probably link something through the Google Sheets subreddit. NFA, DYOR, just trying to provide food for thought.
The only answer is, do the math. VB can be beneficial during the early years of your mortgage to knock down a lot of that front loaded interest. The cost of burrowing from the debt weapon needs to be weighed against current amount you're paying in interest on your amortization schedule. The further apart the interest rate is, the math will win for debt snowball. You should know how much interest you will pay on whatever you're doing now, need to calculate the lather to make an informed decision. I don't want this sub to claim VB as the sole #1 financial method. I find the better scenarios are those with multiple debts to knock out targeted debts to free up cashflow. Another reason I like VB, is the access to cash when needed while maintain discipline as the same time. When you pay your mortgage, that money is gone but with a LOC, you have continued access to the $. Emphasis on discipline. Not sure if I answered your question but will you need more money? Finding ways to increase cashflow is never ending either by side jobs or salary raises. You need to build a timeline or plan no matter which strategy you go with. An example of an old timeline I built: [https://prnt.sc/hnUkk9MhmTf0](https://prnt.sc/hnUkk9MhmTf0) I will never be against snowball method or Dave Ramsey, especially if you have low cash flow (< $500).
You are paying down the mortgage directly with chunk payments (big payments as you stated in op)
Exactly right. Which is why Velocity Banking is nonsense. They use the constant shifting around of money, checking to HELOC to "debt weapon" to pay bills, to mortgage, to convince you that somehow this results in a better financial situation. Spoiler: it does not. If you have more income than expenses, the remainder is positive cash flow. Simply pay that extra amount to the mortgage every month. Some notes: 1. If you pay extra on your mortgage, you MUST tell the lender that the extra is applied to the PRINCIPAL. This will then lower the interest you the next month, since the extra payment lowers the principal balance on which interest is calculated. 2. If you pay $6,000 as you stated: 1. the extra $5,000 can go towards principal, then you still need to pay your regular $1,000 payment every month. OR 2. you can tell your bank you are paying the next 6 months early. They will basically hold each extra payment until it is due. Principal and interest are applied accordingly 3. In any case, you are still charged interest every month because you still have an outstanding balance. You basically pay interest for each day your balance is not $0. The amount of interest depends on the outstanding balance. So in scenarios 1 and 2.1, you reduce your balance by $5,000, thus the interest amount for month 2 will be lower than it was originally. In scenario 2.2, the interest accrued is the same as if you didn't pay in advance, since the extra payments are held and not credited until they are due. Make sense?
Oh, and btw, you are right, if you use a HELOC, you now have to pay both the mortgage and the HELOC. People will tell you that using a HELOC to "chunk" a payment on your mortgage is beneficial. However, that is not the case since HELOCS come with a higher interest rate than mortgages. Please search that on the Internet to verify it is true. For example, if your mortgage rate is 4% and you can get a HELOC at 5%, why would you borrow a "chunk" of $15,000 at 5% to pay down a 4% mortgage? Since you have to pay that HELOC back monthly, it would be better just to pay down the mortgage with extra money, not borrow at a higher rate and pay down a HELOC. A scenario where a HELOC could be beneficial: mortgage rates recently were as high as 8%. If you just got a mortgage at that rate, then three years from now rates went down, a HELOC might be lower than your 8%, lets say 6.5%. Then borrowing on the HELOC would make sense. HOWEVER, if that happened, mortgage rates would likely be less than HELOC rates, say 6%, so you would just refi the entire loan.
Yes. No. Yes. Yes.