What was your mortgage situation prior to starting with Replace Your Mortgage?
We sold our home in Texas that had a 20-year home-equity loan (recommended as a cash-out refinance after our remodel was finished) and moved to Utah.
When we found RYM we were renting, looking to invest the money we netted from our home sale. We had just learned about the line-of-credit chunk method from Renatus and began researching. We were also Dave Ramsey followers and had no debt, so we started looking to buy an investment home and pay it off using a HELOC.
A Renatus teacher said we should buy our own home first. Since we didn't have any mortgage, we thought doing a first lien with low closing costs would be cheaper. The cost of RYM Platinum was equivalent to mortgage closing costs, so we figured we had nothing to lose!
What is the current status of your HELOC and how many months did it take you to achieve it?
We have had a HELOC since the end of May 2018 for $486,000. Today, 4 months in, we owe $481,000, which is about equivalent to 7 months of payments on a 30-year amortized mortgage.
However, we owe about $5,000 on our offset credit cards. With waiting to the get auto-drafts set up, we haven't been able to do the paycheck parking strategy fully yet.
What was your biggest concern when deciding to join RYM?
We were worried about paying the membership and still having to get a mortgage with closing costs first.
Our bank ended up costing us about $4,000 with their delays and changing policies, so in the end RYM didn't save us money on closing costs.
However, the ongoing support working with banks to create better product servicing was unexpected.
We'll also certainly make our money back between our investment and primary homes over the years and enjoy convenient products that improve the savings.
How has using the RYM strategy changed your life?
We would not have been able to afford the payments for our current house on a 30-year mortgage, even using all of our seller net as a down payment.
Now, with paycheck parking, we put 10% down and easily afford the payment. We invested the rest of the money into life insurance and real estate. We feel like we're finally able to be serious investors, being out of the mortgage and 401(k) rat race.
What advice would you give to a homeowner considering trying the RYM strategy?
Just pay for it! It makes itself back many times over.
Most people we tell about RYM just want us to share the bank list, not understanding the other value of joining the group. Yet just saving the closing costs on one refinance are worth joining the group instead.
So far, they want to watch us first. They're still skittish, so we are sharing our statement summaries each month to show how it works despite the rocky slow start right now.
A home equity line of credit is great...and smart to have instead of a traditional mortgage. However, don't make these mistakes when it comes to HELOC's. If so, you might as well stay on the treadmill of having a traditional mortgage. It's not going to allow you to pay off your home in 5-7 years like we teach our clients. Watch as we talk about two common mistakes or risks with a heloc.
Hey gang. Michael Lush again. As you can see I still haven't shaved, still growing it out pretty long. It's probably not a whole lot longer than the last video you watched. What I want to talk to you about is ways to use a home equity line of credit properly, and some of the most common mistakes that people have when using a home equity line of credit.
One, you don't want to treat it like it's a separate loan, so that you put money in a checking account and you just chalk that portion of your loan up as a different payment and you segregate your money and you just make a payment towards it. The purpose of the strategy is to use it like it's your checking account, so all of your money goes into it.
Now, something else that I make sure that my clients do not do, and when they call me I kind of interview them to make sure that they don't have these types of personality.
1) You don't want to use your home equity line of credit improperly. Most home equity lines of credit, when they give you a payment that's due at the end of each month, that's going to be the interest only portion. That's why the payments are extremely small. Don't pay just that payment. Again, treat it like a checking account. Put all of your money into it, and don't worry. You can get your money back out. If you only made the minimum payment, it's like being on a treadmill. You're not going to go anywhere.
2)...You're going to build equity extremely fast. Say you use my strategy and in 12 months from now you've got $100,000 of equity and you've always wanted an S-class Mercedes. Me too. I think they're great. Then you swipe your card and go get an S-class Mercedes that's going to depreciate 10% as you drive it off the lot, 30% in the first year.
That is the exact wrong way to use a home equity line of credit. If we are going to pull money out, we're going to pull it out for investments, and very specific investments, investments that pay dividends, cash flow, so that way when you're pulling it out you can actually pay it off even faster.
If you like this video be sure to click the like button below. Subscribe to our channel. We've got some more videos that we believe that you would love. Again, this is Michael. Thanks and God bless.