How to pay off your mortgage faster?

JROC

Inspired Forum Member
REIN Member
May 27, 2008
52
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South Surrey
#1
Thoughts on Velocity Banking?

Different way to do banking but can pay off your mortgage a lot faster and save thousands of dollars in interest payments. One has to be disciplined but I think its brilliant.
Message me if you want to chat about it.
 

DEWDROPS

Inspired Forum Member
Registered
Jan 7, 2010
32
9
8
#2
Watched few YouTube videos, interested in learning more about it. The way they present this seems unreal though TBH


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Michel Lafleur

Frequent Forum Member
REIN Member
Apr 30, 2015
98
100
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#5
This isnt a new concept.
Most mortgages specify how much one can pre-pay each year without penalty.
Paying off your mortgage quicker does save $$ in interest, and potentially years of obligations.
However, in my opinion taking a loan (LOC) to pay off your mortgage is complicated and unnecessary. If your LOC interest rate is notably lower than your mortgage, this might make sense for a personal residence. Usually the LOC rates are higher than a mortgage, so this doesnt make sense to me.
When dealing with investors and leverage, most would prefer to use that extra $$ (such as a HELOC) as a down payment on another property, and/or to build a reserve for their rental property.
Personally, Im fine with tenants paying down mortgages over 25 years and being able to pocket some cashflow & fill the property reserves along the way.
 

Sherilynn

Real Estate Maven
REIN Member
Oct 22, 2007
2,756
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Edmonton
www.qdhomequest.com
#6
I've heard mixed reviews about "Velocity Banking." I've also heard it is sometimes tied to what amounts to a Multi Level Marketing program. One should use extra caution whenever someone is making money from referrals.

The Smith Maneuver works well for investors.

Ensure your personal mortgage has an automatically re-advancing HELOC attached, and commit that credit line to business/investment purposes only. Use any excess rental income to pay down your personal mortgage - remember, the CRA doesn't care where you put the cash as long as you record it properly as income. As you pay down your personal mortgage, the HELOC limit increases and you may use that credit for renovations or down payments or expenses on your rental portfolio. AND the interest on your HELOC is tax deductible!

Once your non-tax-deductible personal mortgage is paid off, start paying down the HELOC. (Or not, it's up to you.)

Advanced strategy: get the longest possible amortization on your personal mortgage and sign up to automatically double down on your monthly payments. This way, you pay down the mortgage WAY faster, but the minimum required mortgage payment you would list on other mortgage applications is lower (because it doesn't count the voluntary extra payment), so your DCR is better making it is easier to qualify for more rental property mortgages, and yet you are still making huge payments to your personal mortgage. I paid off my $200k mortgage in less than 3 years using this strategy.