Sam Kwak, Author at The Kwak Brothers

You may have stumbled upon videos or other articles that claim that you can pay off your mortgage in 5-7 years. Many times, such methods involve using a HELOC, a Home Equity Line of Credit, to pay down the mortgage quicker. While it’s a bold claim, is it actually possible to pay off your mortgage in 5-7 years? Is this legitimate? You may feel confused by the explanation of such method. Perhaps you have questions. So let’s dive in.

What Exactly is this Method?

The method has many names from Velocity Banking, Mortgage Acceleration, pill method, Replace Your Mortgage, and more. The official name of the strategy is “Accelerated Banking”. The goal behind this method is to help homeowners and property owners pay off their mortgage faster while saving money on the mortgage interest. This method may seem new to many but it isn’t. This method is widely practiced in other countries such as New Zealand and Australia. In Australia, they actually have a financial product designed for this strategy called an offset account. Here in the United States, banks don’t offer offset accounts. So a few banking and financial experts had a clever idea of mimicking the same method that the Australians are using by adopting a HELOC instead.

The idea works by taking your entire income and/or savings and depositing it against the HELOC’s principal balance. By doing so, you now owe less interest on the HELOC. But because a HELOC is a revolving line of credit, you’re able to withdraw the money out of the HELOC at any time through online banking or an app. A HELOC is truly flexible in many ways. By lowering the HELOC principal balance for a long period of time and delaying any withdrawls, the borrower CAN save money on the interest while simultaneously being able to use the same income for living expenses. This is quite clever.

Not only does it allow you to save money, you’re now able to treat your HELOC as a “savings account” – allowing you to deposit money and withdrawing it for emergency use. But by leaving your savings in your HELOC, it allows you to save money in the meantime because of the lowered principal balance of your HELOC.

What if the HELOC gets Frozen or Shutdown like 2008?

During the 2008 market crash, it is true that many homeowners had their HELOC shutdown or frozen involuntarily – forcing many homeowners having to make a large payment to the bank. This is known as a “margin call”. Banks typically do this when the homeowner has done something illegal or the use of their property is illegal. Another common reason is that if the homeonwer owes more on their mortgage than what the home is actually worth (underwater), then the banks reserve the right to freeze or shut down the HELOC. In extreme cases, the banks may demand payments to lower the balance. The problem with the 2008 market crash is that many homeowners financed their homes with 80% LTV mortgages while simultaneously getting a HELOC to cover the 20% down payment required. Hence, homeowners were able to get 100% loans to finance their purchase.

However, much of this has gone away since the 2012’s passing of the Dodd-Frank Act. Plus, many banks have stopped lending 100% of the home value. And since the method suggests that you’re paying down the debt (not increasing it), you’d actually be at a safer situation than what happened in 2008.

What About the Higher & Variable Interest Rates on a HELOC?

So, this is a BIG myth to bust. After countless hours of research, it’s discovered that not all HELOCs are variable OR higher interest rate than a traditional mortgage. One particular user of this method has found a 2.68% Fixed Rate 1st lien HELOC. They are actively using this method to pay down their mortgage. Another user reported saying that they were qualified for 3.75% fixed rate HELOC. You may find banks that do offer a higher rate HELOC and they may be variable. But because a HELOC is a non-qualifying mortgage, banks have little more liberty to offer variety of different HELOCs. Therefore, not all HELOCs are the same.

Why Not Use Extra Payments on The Mortgage?

This is a common question that many ask. The obvious and often used method is to simply take extra money and make a principal payment against the mortgage. However, there are many drawbacks to doing extra payments instead of the Accelerated Banking Method. First, when a homeowner throws extra payments into the mortgage balance, it locks up the money in the equity. If there’s ever an event where that money is needed for emergency, the equity would be inaccesible. Now, some may argue saying that they also have a savings account to cover for such emergencies. The proponent of the strategy would say that leaving your savings account is disasterous since most savings account only yield 0.25 ~ 1% APY of interest. Instead, the users of the Accelerated Banking strategy would take their savings and deposit it against the HELOC to save 2.5% ~ 5% of interest and still access the cash when needed. It truly is a flexible tool that allows you to save money and gain access to the equity in case of an emergency.

In fact, many of the users of this strategy has benefited from this flexibily during the COVID-19 pandemic. Many of the users did experience loss of job or income during the pandemic. However, they were able to use the funds from the HELOC to pay for expenses and bills as a temprory measure. This allowed many homeowners to avoid foreclosures, defaults, and bad credit records for missed payments.

Can Homeowners with No Equity Use this?

Yes, the strategy can also be used by homeowners with no equity. The strategy does allow homeowners to use an alternative tool such as a PLOC (Personal Line of Credit). One particular user of the strategy bought a home using a VA loan. After using the strategy with a PLOC, he was able to pay down close to $40,000 off of his mortgage balance in just 2 months. So it is possible for homeowners with no equity to participate.

Doesn’t this require tons of Discipline?

While figuring out the strategy alone can take discipline, many companies and organizations have created a turn-key process to minimize the effort. Some companies like Accelerated Banking (The Kwak Brothers) have created a software tool to help track the day-by-day steps to succeed with this strategy. 

The Kwak Brothers also offer a FREE 1 hour Online Seminar about this topic here: https://acceleratedbanking.com/free-virtual-class

 

 

May 7, 2021

Can You Really Pay off Your Mortgage in 5-7 Years?

You may have stumbled upon videos or other articles that claim that you can pay off your mortgage in 5-7 years. Many times, such methods involve using a HELOC, a Home Equity Line of Credit, to pay down the mortgage quicker. While it’s a bold claim, is it actually possible to pay off your mortgage in 5-7 years? Is this legitimate? You may feel confused by the explanation of such method. Perhaps you have questions. So let’s dive in. What Exactly is this Method? The method has many names from Velocity Banking, Mortgage Acceleration, pill method, Replace Your Mortgage, and more. The official name of the strategy is “Accelerated Banking”. The goal behind this method is to help homeowners and property owners pay off their mortgage faster while saving money on the mortgage interest. This method may seem new to many but it isn’t. This method is widely practiced in other countries such as New Zealand and Australia. In Australia, they actually have a financial product designed for this strategy called an offset account. Here in the United States, banks don’t offer offset accounts. So a few banking and financial experts had a clever idea of mimicking the same method that the Australians are using by adopting a HELOC instead. The idea works by taking your entire income and/or savings and depositing it against the HELOC’s principal balance. By doing so, you now owe less interest on the HELOC. But because a HELOC is a revolving line of credit, you’re able to withdraw the money out of the HELOC at any time through online banking or an app. A HELOC is truly flexible in many ways. By lowering the HELOC principal balance for a long period of time and delaying any withdrawls, the borrower CAN save money on the interest while simultaneously being able to use the same income for living expenses. This is quite clever. Not only does it allow you to save money, you’re now able to treat your HELOC as a “savings account” – allowing you to deposit money and withdrawing it for emergency use. But by leaving your savings in your HELOC, it allows you to save money in the meantime because of the lowered principal balance of your HELOC. What if the HELOC gets Frozen or Shutdown like 2008? During the 2008 market crash, it is true that many homeowners had their HELOC shutdown or frozen involuntarily – forcing many homeowners having to make a large payment to the bank. This is known as a “margin call”. Banks typically do this when the homeowner has done something illegal or the use of their property is illegal. Another common reason is that if the homeonwer owes more on their mortgage than what the home is actually worth (underwater), then the banks reserve the right to freeze or shut down the HELOC. In extreme cases, the banks may demand payments to lower the balance. The problem with the 2008 market crash is that many homeowners financed their homes with 80% LTV mortgages while simultaneously getting a HELOC to cover the 20% down payment required. Hence, homeowners were able to get 100% loans to finance their purchase. However, much of this has gone away since the 2012’s passing of the Dodd-Frank Act. Plus, many banks have stopped lending 100% of the home value. And since the method suggests that you’re paying down the debt (not increasing it), you’d actually be at a safer situation than what happened in 2008. What About the Higher & Variable Interest Rates on a HELOC? So, this is a BIG myth to bust. […]
November 12, 2020

Low-Interest Rates: Is it Still Worth Getting a HELOC?

With the historically low-interest rate on 30-year fixed conventional, this is a frequent question I get quite a bit… “Sam, is it still worth getting a HELOC to pay down your mortgage when the mortgage rates are so low?” One of the BIG myth about HELOC is that the interest rates are always higher than your traditional 30 year conventional mortgage. That’s simply not true… You also have to consider the lien position of a HELOC if you’re to make an accurate assessment. 1st lien HELOC interest rates are VERY comparable to 30 year fixed rates. Many of our clients are getting 2.5 – 4.75% rates on their HELOC. Plus, many of these rates can be fixed! YES! You can fix the interest rates on HELOCs as well. So the idea that all HELOCs are variable and higher interest is simply not true. With that being said, if you’re planning on refinancing to a lower rate to “save money”, why not consider refinancing to a 1st lien HELOC where you do have the advantage of paying off your HELOC faster by using our strategy. If you’re unsure what our strategy is, check out this video on How to Pay off Your Mortgage in 5-7 years: https://www.youtube.com/watch?v=3f-ebCjeH8o Also, refinancing to a lower interest does not guarantee that you’ll pay off your mortgage any sooner. In fact, if you’re refinancing into another 30 year mortgage, then you’ve just reset your amortization clock to where you’re paying ALL of the front-loaded interest again. This is bad bad bad! Bottom line, using a HELOC to paying off your mortgage trascends the benefits of refinancing to a lower rate. Here’s the ultimate reason why… Getting a 1st lien HELOC now gives you both flexibility to invest in certain investments while paying off your mortgage by default. Think about it… If you can save money on interest and time passively while building up a cash-reserve to invest during a market crash, wouldn’t that be the ultimate win-win? Plus. like I mentioned before. HELOC rates are low as well. Mortgage rates have fallen steeply and so has HELOC rates. So the answer is YES… It’s still worth getting a HELOC. In fact, I would argue that NOW is the best time to get it because you’re getting an instrument that can act as both a sword and a shield when it comes to helping you save money and giving you the flexibility to act on an investment opportunity.
October 3, 2020

Can You STILL Use a HELOC to Pay Off Your Mortgage?

Hey what’s going on guys, it’s Sam Kwak here one of the Kwak Brothers… And I’m finally coming back to writing about HELOCs! With the mortgage interest rates being at an all-time low and the economy at its slowdown, you might be wondering… Is it still worth it to get a HELOC to start paying off your mortgage? Wouldn’t it be better to refinance? Now, if you want to watch and listen to this blog instead of reading it, check out this video: https://www.youtube.com/watch?v=PVmAml9jyiw This is probably the question running through your head. So I’m going to unpack the latest updates to HELOCs, what the banks are doing, and why I ultimately believe using a HELOC transcends other options such as a refinance. So let’s start with the latest update on HELOCs and what the banks have been doing since COVID-19… But first, don’t forget to subscribe to our channel if you want more HELOC content, Housing Market News, and how to invest in real estate. Earlier this year when the COVID-19 situation blew up, 3 major banks and institutions shut their Line of Credit Department down. Those were Chase, Wells Fargo, and Navy Federal FCU. But pretty much every other bank operated their lending procedures like nothing really happened. And then on April-May, banks were experiencing a major slowdown on processing applications and that is due to bankers and underwriters working from home – causing a communication meltdown. But so I thought… While the work-from-home situation may have caused part of the slowdown, I think the bigger contributor came from the lack of buyers of the underlying notes. As the market started tumbling down, investors and investment bankers started to sell and stripped cash out of their investment. Why this is important is that when mortgages are created at the bank level, these mortgages are often packed and sold to the market as a Mortgage-Backed Securities. This is how the banks make their money by creating mortgages and selling them in bulk to investors for a “guaranteed” return. Because of the wave of sellouts and cashing out investments, there were fewer investors buying these Mortgage Backed Securities – causing the banks to slow down on processing the mortgages. This is also true with certain HELOC products – such as a 1st lien HELOC and ultimately, I believe that’s happening right now at this moment… The interest rates are ridiculously low which is leading the consumers to refinance or buy a new home… Which if you guys don’t know, refinances are literal financial suicide. I have a separate video to explain why (point) With a huge demand for new mortgage loans and not enough investors buying the mortgage backed securities, the banks have ultimately slowed down the entire process to make sure that they’re not creating mortgages without ever being sold. It’s kinda like your local highway during the rushhour but all the exits are blocked yet the on-ramp to the highway is open. The bottom line, it’s now taking 45-60 days for the banks to process loan applications when it comes to mortgages. Okay now moving over to THE question… Is it still worth getting a HELOC to pay off your mortgage despite the low-interest rates? Wouldn’t it better to just refinance? Yes… And… No… Learn How to Pay Off Your Mortgage with a HELOC: https://www.youtube.com/watch?v=3f-ebCjeH8o Now, remember, HELOC interests also ride on the WSJ Prime Rate. In fact, some HELOCs are based on LIBOR but next year, it’ll be phased out to SOFR (Secured Overnight Financing Rate) The current SOFR is at 0.10% which is ridiculously low. So […]
June 2, 2020

EIDL Loan: What Can You Use it For? (Do’s & Don’ts)

INTRO Hey everyone, it’s Sam Kwak here and a lot of you guys have been asking me… Sam, what can I use the EIDL loan for? Can I pay off my mortgage with it? Can I buy a new truck? Can I buy new rental properties? Can I pay myself with it? Watch This Article in a Video: https://www.youtube.com/watch?v=wn69aTgE3Yg Well, in this article, we’re going to break down exactly what can you use the EIDL loan money for and what you cannot use it for. The CANs.. Okay, so let’s first break down what you CAN use the EIDL Loan money for: What You Can Use For: Business Operating Expensesa. Rent & mortgage payments (Not early payments)b. Payrollc. Virtual Assistantsd. Independent Contractorse. Accounts Payablef. Utility The CANNOTs… Now, let’s go into the list of what you can’t use the EIDL loan money for: What you Cannot Use For: Distribution of dividends to Owners, Loaning money to self, cannot loan to other businesses Expansion of Business Paying off mortgages early Buying new properties Buying a new car The Consequences How would SBA know and what are the consequences of misuse…The SBA requires strict bookkeeping, record keeping, as well as maintaing a ledger of receipts, invoices, ; pretty much all records of how the money was spent. The SBA has the right to audit your business books by making you hire a CPA to furnish the reports to the SBA. If the SBA deems that you’ve violated the loam agreement and subsequently you default, the SBA has the right to call the entire loan due. If SBA deems that you’ve lied, cheated, or misrepresented your business when getting the loan, you can be liable for a penalty of 100-150% of the loan amount. CONCLUSION So there you have it guys, hope this video helps with understanding what you can and cannot use the EIDL loan money for! If you liked the breakdown and want to see more updates, be sure to subscribe to our YouTube channel! And check out some of our other videos on buying rental properties and real estate investing!
May 30, 2020

Real Estate Market – New Stimulus, the Foreclosure Wave, and Crash

Watch This Article In Our Video: https://youtu.be/QPbsT7sfaoE Here is the latest on the Real Estate Market update. We have a guest commentator joining us for the video. We have Al Curiel who has over 35 years in real estate and investing. Al is going to shed some of his expertise and experience in the current real estate market, where we’re headed, and are we going into another real estate market crash and recession? Many YouTubers and experts have predicted some kind of a real estate market crash or a recession for this year but no one has predicted the pandemic. We’ll give you the latest outlook on the real estate market and what the next 3-6 months could potentially look like. Our guest today shares his take on the current economic outlook, the real estate market, and how the new Stimulus programs are impacting the overall economic activity. Al believes that the real estate market could continue to take a nosedive and possibly a recession coming soon! This could also be mean a wave of distressed properties such as foreclosures, short sales, and loan modification. Here are couple of things as a summary that is happening in the economy: 1.) Quantitative Easing – the government is essentially printing more money. 2.) The GDP is dropping to -6.3% according to the JP Morgan Report. 3.) Unemployment is back to double digits which is something we haven’t seen since the Great Depression