When I am conducting free discovery calls with homeowners wanting to pay off their home in 5-7 years, I come across a few misconceptions people have about home equity lines of credit that I would like to clear up. Some have heard of a heloc before but not from a professional that knows them well like myself. Here are some misconceptions that I hear. See if you have these same misconceptions as well.
Hey gang, Michael Lush. We're going to talk to you today about some very common misconceptions that I get when I talk to my clients on the phone. They'll call me up and say, "Michael, one thing that we didn't quite understand about the strategy is that a home equity line of credit being a portion of the equity. We only have 10% equity in our home, how are we going to use that to pay off our existing mortgage?"
It's actually very simple. A lot of folks don't realize that a home equity line of credit can be a first lien position loan. When I did mine 2 years ago, I only had 10% equity in my home. I called the bank and said, "Look, what I'm going to do is I'm going to refinance my existing mortgage into a home equity line of credit."
You're not having 2 loans at the same time, you're just substituting one for the other. Sometimes you don't need any equity at all. In fact, we found dozens of banks that do 100% financing. Primarily we like folks to have a little bit of equity. We're not using that equity so the misconception comes in the name of the type of product that we're talking about because it is called a home equity line of credit. In fact, that's where a lot of bankers get confused too.
They're also thinking no differently than you because nobody's coached them or told them how this works. They're thinking that you can only use it in a second lien position and use the equity that's available above and beyond your mortgage.
Nothing could be further from the truth. You can actually refinance your mortgage into a home equity line of credit and that be your only loan. Again, if you like this video, we have others we'd love for you to check out. Be sure to like this video if you did like it and also subscribe to our channel it says get, yep, more videos. We'd also like for you to subscribe to our channel. Again, take care and God bless. Thanks for watching the video.