To put it briefly, Velocity Banking is one of the many mortgage repayment strategies that exist. Velocity Banking is the simple concept of opening a HELOC, or Home Equity Line of Credit, and thus making it your primary account where you will deposit your monthly income and pay your expenses from. There are limits to HELOC and the first time you open one, you will be asked to make a lump payment to your mortgage. By opening a HELOC, it will become your primary checking account, so for a few months you will receive your income on it and pay your expenses from it. This is done in order to pay off your outstanding balance; as soon as the balance is paid off, you continue to make lump payments until your mortgage is no more.
This might sound a little complex but in short terms, the idea of Velocity Banking is that all your extra money is put towards paying off the HELOC, subsequently, it allows you to frequently make lump-sum payments that will eventually pay off your mortgage. As any mortgage repayment strategy, there are a lot of variations that can be used in HELOC such as interest rates, repayment terms, current cash flow, income expenses, and more.
So we’ve explained what Velocity Banking is, now let’s take a look at what it actually does well for you.
Advantages of Using Velocity Banking
Velocity Banking is an excellent mortgage repayment strategy; however, you must follow a set of rules and different stipulations must adhere in order to use it. Some of the advantages of Velocity Banking are:
• It allows you to pay off your mortgage early
Considered as one of the best mortgage repayment strategies that work in your favor, Velocity Banking can significantly improve the time it takes for you to pay off your mortgage. While some mortgage repayment strategies ask you to make monthly payments in order to pay off your mortgage, by using velocity baking the time is shorted by a lot.
• Frees up equity
By combining HELOC with your Velocity Banking strategy, it allows you access to your money in a way that you can’t while streamlining the mortgage payment process.
• You pay LESS in interest
Velocity Banking strategies allow you to utilize free cash flow. This makes the lengths of the mortgage significantly shorter than most times when not using Velocity Banking strategies. By having a shorter mortgage, you pay less in fees each month, making it a mortgage repayment strategy that saves you more money.
• Allows access to cash
By utilizing HELOC, you can have access to money that isn’t available to you in any other way. This makes it perfect if you have an emergency and need access to quick cash. Emergencies can happen to anyone, and HELOC will allow you to use some of those to deal with those emergencies.
Who Benefits From Velocity Banking?
People who have hard time-saving money, or have nothing previously saved, are the people who most benefit from Velocity Banking. Velocity Banking can be considered as a tool that helps these people pay off their mortgage as soon as possible. People who also take part in property investing also use HELOC as a way to utilize cash flow.