HELOC vs. Mortgage - Confused

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UncleBogle
Posts: 92
Joined: Sun Jul 15, 2018 7:53 pm

HELOC vs. Mortgage - Confused

Post by UncleBogle »

I have run across a few articles discussing the use of a HELOC in a method to pay of your mortgage in as quickly as 5 years.
I realize, "if is sounds too good to be true, it probably is", but I could not find any good information that really describes the method in adequate detail. Did anyone run across this or make sense of this vs. a traditional mortgage/making early payments ?
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Nate79
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Location: Delaware

Re: HELOC vs. Mortgage - Confused

Post by Nate79 »

This is an age old scam, especially when people want to teach you this method for a fee. Search and you will find it discussed on here many times.
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jimb_fromATL
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Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: HELOC vs. Mortgage - Confused

Post by jimb_fromATL »

Those schemes like the "Australian Mortgages", “mortgage accelerators”, “money merge accounts”, “freedom mortgages”, and John Commuta’s “Transforming Debt Into (his) Wealth" capitalize on a general lack of understanding of how compound interest works and how even a little extra money per month can save an exponential amount of interest on the debt.

Their sometimes very slick presentations are really just smoke and mirrors intended to sell things like books, tapes, CDs, and “magic” software packages via internet sites and Multi-Level-Marketing networks.

While the gimmicks can help you trick yourself into paying a little extra on your mortgage every month and thus save some time and interest, they do not work as well as just paying down the mortgage as fast as you can with all the spare money you have after all the bills are paid every month -- instead of giving some of your money to someone else to manage it or to show you how to do it.

And despite their claims of paying off mortgages in a few years, if you don't have any spare money in your budget, they cannot save anything -- and may even cost you more and put you in deeper debt.

Here are links to a couple of older threads that go into more details and discussions of the near-scams.

viewtopic.php?t=179600

viewtopic.php?f=2&t=208918&p=3205451#p3205451

Incidentally, another thing they don't mention is that if you really do have spare money in your budget, you'll come out better in the long run to contribute the maximum allowed to any available tax-advantage retirement accounts like 401(k)s and IRAs before you pay any extra on debts like mortgages and student loans.

Here are some links to several threads where my posts show examples of how delaying your tax-advantaged retirement investing and paying taxes prematurely in order to pay down manageable debts too fast can --depending on your age, income and tax brackets -- literally cost anywhere from tens to hundreds of thousands to sometimes millions of dollars out of your future retirement income in exchange for saving only a tiny fraction as much interest on the relatively short term debts.


jimb
TwstdSista
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Re: HELOC vs. Mortgage - Confused

Post by TwstdSista »

Ha ha ha -- a HELOC is a mortgage. (Just with a fancier name....)
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Nate79
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Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: HELOC vs. Mortgage - Confused

Post by Nate79 »

jimb_fromATL wrote: Mon Aug 13, 2018 11:13 pm Those schemes like the "Australian Mortgages", “mortgage accelerators”, “money merge accounts”, “freedom mortgages”, and John Commuta’s “Transforming Debt Into (his) Wealth" capitalize on a general lack of understanding of how compound interest works and how even a little extra money per month can save an exponential amount of interest on the debt.

Their sometimes very slick presentations are really just smoke and mirrors intended to sell things like books, tapes, CDs, and “magic” software packages via internet sites and Multi-Level-Marketing networks.

While the gimmicks can help you trick yourself into paying a little extra on your mortgage every month and thus save some time and interest, they do not work as well as just paying down the mortgage as fast as you can with all the spare money you have after all the bills are paid every month -- instead of giving some of your money to someone else to manage it or to show you how to do it.

And despite their claims of paying off mortgages in a few years, if you don't have any spare money in your budget, they cannot save anything -- and may even cost you more and put you in deeper debt.

Here are links to a couple of older threads that go into more details and discussions of the near-scams.

viewtopic.php?t=179600

viewtopic.php?f=2&t=208918&p=3205451#p3205451

Incidentally, another thing they don't mention is that if you really do have spare money in your budget, you'll come out better in the long run to contribute the maximum allowed to any available tax-advantage retirement accounts like 401(k)s and IRAs before you pay any extra on debts like mortgages and student loans.

Here are some links to several threads where my posts show examples of how delaying your tax-advantaged retirement investing and paying taxes prematurely in order to pay down manageable debts too fast can --depending on your age, income and tax brackets -- literally cost anywhere from tens to hundreds of thousands to sometimes millions of dollars out of your future retirement income in exchange for saving only a tiny fraction as much interest on the relatively short term debts.


jimb
+1 Well said.

Preying on the financially illiterate.
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