Confession: The Case Against A Traditional Mortgage From A 14 Year Recovering Mortgage Banker

home equity line of credit

This post has been a long time coming and quite honestly, it’s scary to put myself out there like this. However, if I am going to teach you how to pay off your home in 5-7 years, you should know a bit more about my background and how I even came to this point in my life.

My name is Michael Lush and I am a recovering Mortgage Banker of 14 years.

It has been a tough road to sobriety as the addiction of offering mortgage products started January 19th, 2002. I was young and fairly fresh out of college when a buddy of mine asked me to entertain selling mortgages to folks as a career.

Now don’t get me wrong, it wasn’t what you typically perceive as a bunch of junkies in an alley way getting high on an illegal substance. In fact, it was a very nice office in a high rise in downtown Charlotte, North Carolina working for the 9th largest lender in the country.

Looking back, this was a perfectly legal white collar position selling financial crack to homeowners. No one, including myself, thought we were doing anything wrong offering mortgages to homeowners to save money from refinancing their existing mortgage. I must also add that although this was at the height of the subprime days, we weren’t offering loans that put folks in a worse situation. Every loan I sold was putting folks in a much better position than before they met me.

It didn’t take long for me to get hooked. In a selfish way, I got more enjoyment making my borrowers happy and to top it off, the commission checks weren’t bad either. I was making more money than I knew what to do with and it showed.

In my first year, I was making $40k checks and had to get another fix quick because the money was gone faster than it came in.

In my first year, I became “Newcomer of the Year“. In my second year I was promoted. Then promoted again and again. Just like any junkie, I was splurging on material items buying a large home, several high end cars and motorcycles. My wedding cost more than most people make in a year.

Certainly, I say this not to brag, but out of embarrassment. I moved further away from the principles my parents instilled in me and further away from my faith. We never thought the supply of money would end and just thought this was now our life for the unforeseeable future.

However, God had other plans and he found the perfect opportunity to teach me a lifelong lesson…the housing crash! On my birthday, one of the largest lenders in the nation and my family’s employer filed bankruptcy. In a split second all of my income came to screeching halt.

Thankfully, I didn’t do everything wrong.

I maxed out my 401k every year and it performed extremely well. The company was publicly traded going from $0.2 a share to over $13 and the majority of my 401k was in company stock. I saw the writing on the wall and cashed in the value just before it plummeted giving me a healthy nest egg to live off of for quite some time.

I knew that nest egg wasn’t going to last forever, so I jumped back into mortgage business starting from the ground up again. Although I finished with the last firm as a top sales manager, I had to start at another firm as a loan officer in Tennessee where no one knew my abilities as a leader. This was another one of God’s perfect plans for me.

It humbled me and forced me to appreciate what I had squandered. My wife and I had to adopt a more realistic budget and financial plan to get back on our feet. I was always good at math, so my wife had me count the grocery bill plus taxes during our weekly trip to the grocery store. Times were tough and luxuries were non-existent, but it forced me to realize what was truly important in life…faith and relationships.

It was tough making a decent living in the mortgage industry after 2007, so I picked up some side jobs laying tile with a buddy of mine. Manual labor can teach you what “hard work” really means and again made me appreciate how blessed I was to be given such an opportunity. I was no stranger to hard work due to the example my parents exemplified throughout my young life. I already had the habits of working hard as an athlete and it would pour over into my professional life.

One day I got a call from the former CEO of that 9th largest lender stating they were starting back up and wanted me to spearhead operations of a Nashville location. During my tenure with this firm, Nashville was the black sheep of the company and was the worst performer. In their previous life, the company could not recreate the success they were having nationwide.

However, I didn’t second guess this opportunity and made a split second decision to say yes and become the Director of Operations for the resurrected firm. I started with 4 friends in a small office and within 2 years become the top branch and manager growing the Nashville location to 60+ employees generating $20 Million+ per month.

Hard work leads to success and the money supply grew again.

Except this time, we were going to do it right. My wife and I still lived as if we were poor. Our first major purchase was a vehicle. A 5 year old Jeep Commander with a lot of miles. It’s sitting in the driveway to this day. For a while, we lived off of one car and to get this additional vehicle allowed my wife to have a social life again. After another year we decided it was time to buy a home again and stop throwing away our money towards rent. We saved up a nice down payment for the home we still live in today.

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However, prior to buying the home we spent several years without the luxury of TV. We spent our time entertaining ourselves with books. I read mostly self-help and inspirational books. I decided to start surrounding myself with folks that had what I wanted and conversations I wanted to be involved in.

I realized that experience is a long and hard teacher, but I wanted to speed up the process. So, I invested in mentors…wealthy mentors. Being in the mortgage business where compensation is tied to volume I made an effort to gain the business of my mentor and his friends. They bought large homes and I wanted to be their mortgage banker and that lead to enlightenment of what I was selling countless folks everyday.

I asked my mentor to introduce me to his friends in an effort to earn their business and gain large mortgage transactions. And this is how it went:

Me: “If you could introduce me to your friends, I would greatly appreciate it as I can provide them with the mortgage solutions to fit their needs.”

Mentor: “Michael, I don’t mind introducing you but you will never get their mortgage business.”

Me: “Why is that? I am good at what I do and can help them.”
Mentor: “Michael, we don’t get mortgages.”

Me: “Let me guess, you pay cash for everything? Well, I have an answer for that too. Have you thought about the concept of lost opportunity cost by using cash to buy things instead of leveraging the banks money and retain tax deductions?”

Mentor: “Yes we have Michael, but we don’t use mortgages…we use lines of credit for businesses and homes.”

Me: “Why in the world would you do that? Isn’t that just like having a credit card on your home?”

See, I spent years refinancing folks out of a Home Equity Line of Credit telling them it’s just like having a large credit card on your home. In fact, I refinanced my own HELOC on my Charlotte home into a traditional mortgage thinking I was doing the right thing.

And that’s when his next words hit me like a ton of bricks.

Mentor: “Mortgages are the most expensive debts one can have. However, using a line of credit properly allows us to pay very little interest and pay off the debt VERY fast. We pour our cash flow into a HELOC allowing simple interest to work in our favor. You can supply us with HELOCs and that would be an opportunity for you to get our business.”

Well, my company didn’t offer HELOCs and quite frankly I didn’t know jack about them. But I was about to buy a home and just like anyone else, if they had a better solution then I wanted to benefit from this technique. So, I spent a long time researching the topic. I spent long nights watching videos, making calls to financial planners, CPA’s, etc…

He was right! It is a much better strategy and all this time I thought I was offering the best service and products to my customer but really all I was doing was making the banks rich. Making my mentor and his friends rich. Heck, some of his friends owned mortgage companies and the revenue was insane.

Have you looked at a Truth-in-Lending disclosure?

Basically, you buy one home for you and another one for the bank. No wonder they loved soldiers like me. I sold their financial crack to lower and middle class folks which kept them coming back for more due to the mortgage keeping them in financial bondage for decades.

When rates dropped, most folks were chasing low rates to lower their mortgage payments but also extending their terms back out again. It didn’t matter that the rate was lower as long as the term was longer. They made even more money! Money made off the backs of hard working Americans.

Fast forward to my home today. I refinanced it onto HELOC shortly after I purchased it and started implementing his strategy. However, it wasn’t his strategy. The concept and formula had been around for a century. Millions of folks outside of the U.S. had been doing this a long time.

In fact, 80+% of Australians and the UK have been using this strategy since 1997. The strategy grew like wild fire and those folks were paying their homes off in 5-7 years on the same level of income. The strategy didn’t require them to make more money or live on a tight budget.

In fact, all they did was change where their cash goes. Since a HELOC was open-ended, meaning money could go in and out freely, folks would put all their money into a HELOC by-passing their checking accounts. When they needed to pay bills, they just used their HELOC to do so. As long as their made more money than they spent, the acceleration of this simple interest tool was astounding. Almost too good to be true if you didn’t understand the simple math.

It’s important to understand how banks make money.

We give banks our money in the form of checking accounts. Accounts that pay very little rate of return…0.17%! Then when we need money for homes, cars, credit cards, etc…the bank would then lend our money back to us at much higher rates. It’s called turn or yield.

The easiest way to fix this was to stop leaving money in a checking account and use a HELOC instead to dump all funds into. The more funds you put into it, the lower the payments became each month since the interest was calculated on that days balance. The lower the balance, the lower the payment allowing more funds to go towards principal thus creating a “Debt Reduction Snowball”.

You’re probably asking yourself, “Why not just refinance to a 10 year mortgage?” Although that would help eliminate paying a lot of interest on your mortgage, it’s still slower than using a HELOC cash flow strategy. Not to mention, dumping all of your funds into a closed-end mortgage means you just put your money into the banks treasure chest with only two options to get it back:

1. An expensive refinance costing thousands in closing costs making the bank more money yet again…your money.

2. Sell your home! Well, that’s not a realistic option.

Even if you could live this way, it requires loads of discipline with very little flexibility for life events (medical bills, new car, blown transmission, etc…) Again, all of your savings would be tied up in a mortgage. That would be a scary 10 years!

Now that I have had time to experience and test this method, I am happy to announce my research was right! It works!

I started this in December of 2013 and I will pay my home off in 16 months. I can also leverage my equity to buy assets…dividend paying investments that further accelerate the pay off term. I can use the banks money to make money!

So, I started to think about what my career was really doing to folks. I wasn’t truly helping them if I kept this to myself. After all, I became successful because my clients trusted me and because I cared about them first. It would go against the grain of my faith if I didn’t share this.

I decided to start a consulting business showing folks how to use this strategy for themselves and have the same success I was having. Complete financial transformation!

The response has been nothing short of mind blowing. It’s not that hard of a concept and the tools have been available to us all for decades right under our feet. But it does take a lot of education to avoid falling into another banking pitfall.

Over the years, I have discovered further concepts coupled with this strategy to accelerate the pay off faster. Also, there are a lot of different types of HELOCs available that one needs to avoid to maximize the potential. Having 100’s of thousands of dollars at my disposal forced me to research techniques to utilize this asset to further my goal of financial independence. I wasn’t going to make the mistakes I made in the past this time.

Before, only my wife and I had to deal with those mistakes but now we have young children and there are few motivators more powerful than caring and having the responsibility of ensuring their future.

My faith requires me to give and spreading the word of truth is very important to me. This needs to be shared with every homeowner or would be homeowner on the planet. There is a better way! What if a fraction of America was doing this in 2007?

We wouldn’t have had the meltdown we faced.

Those folks would not only own their home free and clear but their vacation and investment properties as well creating massive net worth.

In closing, come join us on this movement and change the legacy of your family forever!

A word of warning though…

You will be faced with opposition from your banker or loan officer, but don’t blame them.

They don’t know any better. I haven’t gotten to them yet.

You are my first priority.

God Bless!

Michael

About The Author

Michael Lush

Michael Lush is a mortgage industry expert, having spent fourteen years as a mortgage banker helping thousands of families with their mortgage needs. He is also a father and husband. Michael is co-author of the book Replace Your Mortgage: How To Pay Off Your Home In 5-7 Years On Just Your Current Income. Besides this blog, you can find him on Youtube where he shares more information about HELOC's.