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HELOC Cash Flow Strategy; Using HELOC to pay off your house in 5 years?
Topic Started: 8 Dec 2016, 12:18 PM (1,085 Views)
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Hello all!
I live in the U.S. and there is a lot of buzz around alternative media here about this strategy of using a HELOC as your primary bank account. You put all your income into the HELOC, withdraw as needed for bills, food, gas etc. and this strategy alters the amortization of your traditional mortgage (conv, fha, va...) paying off your house in 5 years.
They say this method originated in the land down under, so I figured I would ask you all about it.

Just curious to hear if you've done it yourselves, how to do it, or if you know about it at all.

Thanks guys.
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Rufus
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themetalbison
8 Dec 2016, 12:18 PM
Hello all!
I live in the U.S. and there is a lot of buzz around alternative media here about this strategy of using a HELOC as your primary bank account. You put all your income into the HELOC, withdraw as needed for bills, food, gas etc. and this strategy alters the amortization of your traditional mortgage (conv, fha, va...) paying off your house in 5 years.
They say this method originated in the land down under, so I figured I would ask you all about it.

Just curious to hear if you've done it yourselves, how to do it, or if you know about it at all.

Thanks guys.
Our banking products are a bit different to yours. For a start we simply don't have 30 year fixed rate mortgages, ours are mostly variable rates. That is they move up and down more or less in accordance with our central bank rate adjustments.

We do have some tactics to reduce the cost of our mortgages though.

1. We do have Lines of Credit (LOC) which are really a US import. Citibank introduced them here in about 1988 or thereabouts. The cost for them is about 50 points above the cost of a normal variable loan, so not many people use them.

2. Our loans mostly have a redraw facility. People can have their salary credited direct to their loan account, and then redraw what they need at a later date when they are settling their accounts.

3. An extension of 2. above. Many of our credit cards have a 25 days interest free period after the monthly account has been issued, so a card holder who pays their card to zero within that term can get 55 days interest free. therefore a borrower can live on their credit card at no cost, and have 7.5 weeks of salary credited to their loan account saving them interest on their loan.

The key to making any of the above work is self discipline, people who don't have that just won't be able to make it work.

Not sure why alternative media is getting excited, this has been around for decades.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Rastus2
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themetalbison
8 Dec 2016, 12:18 PM
Hello all!
I live in the U.S. and there is a lot of buzz around alternative media here about this strategy of using a HELOC as your primary bank account. You put all your income into the HELOC, withdraw as needed for bills, food, gas etc. and this strategy alters the amortization of your traditional mortgage (conv, fha, va...) paying off your house in 5 years.
They say this method originated in the land down under, so I figured I would ask you all about it.

Just curious to hear if you've done it yourselves, how to do it, or if you know about it at all.

Thanks guys.
Yeah, it's basically a line of credit, akin to a 2nd mortgage.., i assume it is at a low rate, such that you can stop using your credit cards to save on interest.

Simply having an offset bank account works just as well here in Australia. As Rufus said, the primary thing is discipline, the mlst dangerous thing to do for someone without it is to give tham a line of credit.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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stinkbug
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It's a great strategy for the financially disciplined, a disaster for those who aren't.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Rufus
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Rastus2
9 Dec 2016, 12:34 AM
Yeah, it's basically a line of credit, akin to a 2nd mortgage.., i assume it is at a low rate, such that you can stop using your credit cards to save on interest.

Simply having an offset bank account works just as well here in Australia. As Rufus said, the primary thing is discipline, the mlst dangerous thing to do for someone without it is to give tham a line of credit.
Yes I should have mentioned Offset accounts, they make it much easier to reduce the interest cost, but I'm not sure they use them much in the USA. They really started here as far as I'm aware, but they will probably spread elsewhere.

Setoff accounts used to be offered to government and semi governments to keep their interest cost down, they were never offered to the public, but now that they are they're here to stay, people understand them and use them pretty well.

Take risks - if you win you will become wealthy, if you lose you will become wise
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