okay hello everybody Welcome to Korean Atlanta mentorship and in this video we're going to cover velocity banking 102 uh and we're going to learn about paying off your mortgage much quicker than your average American would um so first thing I want to mention is that if you haven't watched velocity banking 101 go ahead and watch that first you'll get a much better Foundation about what velocity banking is about and then come back here uh to learn about the next step which is about paying off your mortgage another thing I want to mention is that if you want an interest in joining our group uh go ahead and go to the about section in our YouTube channel and go ahead and email us so you can find our email address there another way you can reach out to us is by clicking the Google form Link in the description below and go ahead and copy and paste that into another tab just let you know Google doesn't let you have clickable external links unless um unless you've been with YouTube or posting on YouTube for like two months and since this is you you YouTube channel uh it won't allow you to have a clickable link so you got a copy and paste now back to the topic uh paying off your mortgage quickly velocity banking why is this needed so as you can see here from this news article we see that the majority of recent home buyers say they struggle with payments so about 62 percent of new home buyers have struggled when it comes to paying off their mortgages and if you had a mortgage or recently bought a home with a mortgage with this year or the past year you're probably a very high income person especially given that property prices haven't gone down and the mortgage rates have gone even higher so this is almost kind of like a high income problem nowadays because those are the only people who can actually get homes but out of those people 62 percent say they're they're struggling and another um thing that I want to mention and this we talked about this another video is that there was a study that said more than 80 percent of millennial or first-time homebuyers regret buying their home so I think that if they learn the strategy then they won't have that regret and I'll talk about in more detail how the strategy Works in my personal uh case study and testimonial now let's just do a quick bird's eye review of velocity banking 101 so what is velocity banking about basically if you watch that video uh that I talked about that's going to be in the description go ahead and click it but you learn to pay off debts to increase your cash flow using a tool called a line of credit a line of credit and when we pay off debts normally we're Target targeting the highest interest and lowest balance uh loans first uh we take care of those loans we increase our cash flow and then the next step is once we've done all that we take on the big kuna which is the mortgage that's what I would consider the next step paying off the mortgage now the mortgage is a little bit different because it's your largest debt right so it's the highest balance of all your loans and it's going to be lowest interest so there's going to be some nuances how it's different from from paying off your other debts like your student uh loans and your your car loans all right so this is my case study here uh we have a mortgage statement that I capture screenshot online so a couple things that I'll mention is that this maturity date here is the that's the date that's the last date of the 30-year mortgage so if you want to know when I got the loan you just subtract 30 years so I bought this house I got a mortgage in November 2021 right so November 2021 I got the mortgage this is one year after November 2021 and to calculate how much I paid off it's just the original loan amount minus the principal balance so I've done that calculation for you as you can see I paid off about 25 of the mortgage in about a year right no the average American does not do that in fact I'm going to go off on a little kanji here the average American cannot pay off a 30-year mortgage in 30 years what happens is that every five to seven years they usually either sell their home or they refinance meaning in both situations that they get a new loan so that's why they don't pay it off at 30 years another thing I want to mention is when I first learned about how mortgages work or velocity banking I was so excited I was like man I want to figure out what do people that I know what are they on their homes so I looked up addresses of childhood friends or their parents or people that I know and this is really common in Southern California where I'm from let's say people buy a home in uh the 90s for they bought it for 300 000 and then 30 years later they somehow owned three hundred thousand dollars or they bought a home in a nice area maybe like six hundred thousand dollars and then 30 years later they owe a million dollars you can find that out because that information is public data so if you have access to the MLS you can you can find that data if you have access to a software some sort of software Service uh you have access to the financial data of a home anyways back to my point is that almost Nobody Does this almost nobody nobody pays off one-fourth of a mortgage in a year except for me I'm showing you that I can do it and you can do it too if you have uh know the right techniques and have the right tools okay all right so uh now here's the thing if I want to pay off a debt early I'll if I'm going to use the last name banking I want to I want to accomplish three things so first one is I want to pay off the debt quickly right second one is I want to pay obviously pay less interest and now there are situations where you pay off the debt quickly but you still pay a ton of Interest that's possible another thing too is that you want to maintain control liquidity of of your money so one of the common things that people talk about is hey well you know I don't need a line of credit to pay off my mortgage quickly why don't I just directly overpay with savings well if you directly overpay with savings you lose control and liquidity in fact you know everybody has that option to overpay with savings right you don't need good credit to overpay with savings you need good credit to get a line of credit but you don't need good credit to to overpay with savings and the average American never does that because they know in the back of the mind if they overpay that loan you know let's say they put their entire Savings in they need an extra ten dollars they ain't gonna get that right so this is what we're going to do with velocity banking we're cut we covered it more deeper in velocity banking 101 but I just want to quickly review that that's the whole point of velocity banking we're going to apply it to to our mortgage now some considerations uh with the mortgage because the mortgage is a big debt at a low interest rate it's actually not in your best interest to pay to transfer the entire debt into a line of credit and and I'll kind of go over the numbers about that uh so if you have a really big debt that's let's say like two hundred thousand dollars and it's at a five percent interest rate and you decide I'm gonna transfer the entire 200 000 into that line of credit and it's a much higher interest rate you'll see that that's actually better just to do it in little chunks and I'll show you what I mean by that okay so uh the third point we kind of already talked about it so basically overpaying yeah so when you overpay a loan you definitely save money I'm not gonna say oh you don't save money you definitely save money but that liquidity is gone and that's what you want that's why most people don't pay off their loans because they know overpaying means losing the liquidity right so I really want to emphasize that again so I'm going to go over a lot of these nuances when it comes to paying off your mortgage so here's my example 210 000 mortgage at a five point six five percent interest rate and we're gonna go over to two scenarios first one is paying off the entire loan with a line of credit that's at a much higher interest rate and the second one is transferring that that mortgage payment overpaying in small chunks to a higher interest line of credit okay so let's just go over the first scenario so I have this awesome velocity banking calculator here provided by Renata shout out to renatus if you join our group you'll be able to have access to this velocity banking calculator um this is a part of our educational packages that we provide and distribute and it's through Renata renas is awesome so um let me get back to my point so now let's just kind of demonstrate um some scenarios here so this is a easy quick cheat sheet of what how much you would pay and how much you're safe you would save and how long it takes so let's say I have a 210 000 mortgage right 210 000 mortgage at a five point six five percent interest rate so 210 000 mortgage so oh I put 5. 56 and then this is a 1200 dollar payment if you do the math or if you just do a quick Google search to figure out what the monthly payment would be now let's say so this is our line of credit information let's say and I also want to show you our budget as I said before budget is important in the line of credit so let's say I pay off this entire line of credit or I'm sorry this loan and transfer it into the line of credit and then take a look to the right so you'll see that if we do that even if the the line of credit is at a higher interest rate if we pay off the entire amount uh it's going to take us about 7. 3 years to pay off that line of credit right um so and take a look at the amount of interest that we sit we we we're paying so we're instead of 222 000 we're paying 139 000 and we save 82 000.
so that's pretty good that's pretty good I'm not going to say that's bad I mean this better than your average American who can't even pay off a 30-year Loan in 30 years so we paid it off in seven but let's do a little bit better so let's say that instead of paying the entire mortgage off with a higher interest line of credit we just do it in ten thousand dollar chunks and then you'll see that we only paid thirty four thousand dollars we pay it off in five years and really the amount of interest to say so it's almost like another hundred thousand dollars received in interest so that's why you know I'm not going to go two details into numbers but with this velocity banking calculator cheat sheet you can see that you don't want to put the entire balance of especially a very big debt into a line of credit especially if that line of credit and is at a much higher interest rate and it doesn't free up too much cash flow compared to the loan amount so just be aware of that Nuance okay all right so now let me go back here so we're going to go to our velocity banking average American uh example so if we looked at velocity banking 101 I went over this example about paying off your student loan car loan now let's just assume that this person now with all the loans paid off decided to buy a house right so instead of renting we have a 210 000 uh balance at a five point five percent six percent interest rate with a twelve hundred dollar payment and so if you just kind of do the calculations income's still the same the expenses are now 2200 and uh we have zero dollars in savings because when we use velocity banking we're not using our actively uh having savings because we're going to pay off our line of credit in um we're using our entire paycheck so to figure out our cash flow all it is is paycheck minus expenses so let's just do a quick Excel formula so C2 minus I'm sorry C2 minus C3 and we see that we have 2 800 in cash flow now this is kind of similar to your average American scenario because we eliminate all our debt but if we haven't eliminated all our debt then um our save our expenses would be uh much higher than they normally would and you could see that in the velocity banking 101 video okay so our cash flow is 2800 and what we're going to do is we're going to transfer parts of our mortgage into their line of credit and then just do the same exact thing that we did in velocity banking 101. now before I do that I do want to mention uh some things um so first of all I have a couple of mortgage calculators here um so let's say with this person we have our savings we directly pay our savings into the mortgage and let's see how much we save 2 800. of dumping all our savings so you can see that we say a lot so instead of paying um so let me put this at zero one more time 222 000 in interest if we add twenty eight hundred dollars of savings a month we'd save a lot and we pay off that loan um much quicker right so we pay it off in about six to seven years because that's 24.
9 years shaved off so I'm not saying that you can't do that every person has the ability to do that but and you don't in order to get a line of credit you actually have need to have income and good credit but in order to do this you don't need credit you just pay off your loan but nobody does that because they know that the moment that I overpaid a loan I've lost that money I've lost the liquidity I can't do it right but you can certainly do it if that's your strategy okay so let's not do that let's use the velocity banking way so here's the thing and here's another thing I want to mention even if let's say using that line of credit cost me a little bit more than just overpaying the loan maybe one or two thousand or three thousand dollars I would still say it's worth it to maintain that peace of mind and to have that liquidity so it satisfies the three options or the three things that I'm looking for I want to pay off the debt quickly I want to pay less interest and I want to maintain control and liquidity I need all those three things so even if I pay a little bit more interest because I'm using a higher interest tool like even like a credit card which will be like 29 30 percent um then just directly paying with my savings I'm actually okay with that right because I know that I'm in control of my money when I use it this way than using directly overpaying alone with my savings so I just want to throw that out there okay so now what we do is we're gonna transfer some of this Mortgage Debt into our line of credit so what we should do is I'm going to transfer about three months worth of cash flow into the line of credit so I'll just do 2800 times 3. and I actually need to put it equals there and how much is that 8400 all right so that's 8400 balance and if you look at the velocity banking um 101 video you'll know what what how I did this but basically um I subtract by my cash flow so I just do H2 minus 2800 okay actually this is not three yeah so this is three months worth of cash flow and so every three months let's calculate how much I would pay using the line of credit so I'll just do in order to calculate the interest what you do is you pick take the previous month's balance and it's the average daily balance so this isn't going to be totally accurate but basically take the previous month's average daily balance multiply by the interest rate and divide by 12. always divide by 12 because when they quote an interest rate it's annually and when you're doing the interest calculation for the month you have to divide by 12 and people get confused by that so equals the previous month H2 times 0.
15 oops it times 0. 15 divided by 12. okay 105 70 and let me go ahead and sum this interest up so sum yeah so if I transfer some of the debt of the mortgage into the line of credit so let's say I transfer about three months worth of cash flow payments it's going to cost me 210 dollars okay so now we can see um if I use this uh Excel well semi Excel it's Google Sheets uh mortgage calculator it's much I like to use this one uh when doing the chunking method or transferring little chunks to line of credit it's a lot easier to see how much interest we save because it's you know it shows the additional original amount and it does a comparison compared to the other Excel spreadsheet which does not do that but so let's go ahead and use this one and let me go transfer eighty four thousand or eighty four hundred dollars of the mortgage payment uh into the line of credit so we're just gonna do that so 8400 whoopsie so instead of paying just your normal amount we're going to kind of overpay Eighty Four Hundred right and take a look at that so if we just put in 8400 we save twenty eight thousand dollars of Interest and all we had to do was pay two hundred and ten dollars right and then we just rinse and repeat so every three months so one two three we just do it again that's all we do so I just so I put in the first payment I do put in my paycheck I take out my expenses and then after three months my cash flow uh will put the liner credit down to zero so one two three and I put 8400 again and take a look at that I saved fifty one thousand dollars in interest payments and all I had to do is just pay this amount times the number of times I chunk or use my line of credit and we just keep going right so one two three Eighty Four Hundred one two three Eighty Four Hundred one two three eighty four hundred and then you just keep going how easy is that one two three four hundred one two three Eighty Four Hundred one two three eighty four hundred three eight four hundred one two three four hundred three four hundred and they just keep going over and over again two three Eighty Four Hundred one two three eighty four hundred two three a four hundred one two three a four hundred one two three Eighty Four Hundred one two three four hundred kind of boring right one two three eighty four hundred and then you just rinse and repeat one two three eight four hundred two three a four hundred and then I think we'll get to an amount where if I overpay it's actually more than the remaining balance and I always get a little tripped up about how to um overpay this because I was off by a couple of cents let's see if I just do five thousand will it work okay so a little bit more if you do it's just so let's say I have to overpay six thousand Okay so as you can see uh I paid off this loan using this method I saved 292 months and it would take six years and we save a hundred eighty seven thousand dollars of Interest right and so we only paid about thirty four thousand and you have to add the additional interest that you would pay to use the line of credit but as you can see we saved a ton of money we saved a ton of money using this method and it satisfies the three things I'm looking for when I'm trying to pay off debt quickly so I'm going to pay less interest it's really quick much much quicker than the average American so this is I think about six years so 2023 uh maybe a little bit less so about six a little bit less than six years and I giving control liquidity of my money because here's the thing as I'm using my credit line right I don't need to put the whole entire balance in the credit line and as I showed you before that it's actually not in your best interest to use the entire credit line one is that you you want the credit line to be able to pay off the principal balance of the loan quickly to kind of overpay but at the same time uh you want to be able to maintain your liquidity so for example if I put in my the entire balance and something happens to me I lose that liquidity because I'm at the top of the limit but if I'm only transferring maybe a smaller amount like 10 000 or 8 000 I got the rest of the balance just in case I need emergencies right even here you know if I'm here then okay uh if my cash flow isn't let's say 2800 and I need an extra 100 200 even a thousand dollars expenses uh I'm not sweating I'm okay because uh I got the line of credit to help me to maintain my liquidity and at the same time overpay uh the loan right so this is what I'm doing in a nutshell right here so it's what I'm doing and that's how I was able to get from a one year from 238 000 to 179 and if you look at the average American as I said before um after one year like that number barely goes down because they're just mostly paying interests like it goes like 238 000 to maybe I don't know 236 but I'm at one you know after one year I was at 179.
