Mortgage VS HELOC – Is Not Knowing The Differences Causing You To Pay More?

mortgage vs home equity line of credit heloc

Having a traditional mortgage vs a home equity line of credit can be causing you to pour thousands of dollars down the drain. Find out the differences on this video so you don’t miss out.

Transcript

Hey folks. Michael Lush. I wanted to talk to you today about the baseline differences between a mortgage and a home equity line of credit. Again, a mortgage tends to be a compounding interest loan where a home equity line of credit’s really no different than a credit card. It’s simple interest meaning you’re paying interest on that day’s balance.

If the next day’s balance is lower, you’re going to pay less interest and a lower payment. Let’s take 2 examples here. Let’s take a traditional mortgage, 4.25 on a 30 year loan at $300,000.

The payment is going to be $1,475. Let’s take that same debt and let’s transfer it and think of it as a home equity line of credit. Now in a home equity line of credit you have $300,000 so the same as that mortgage right?

Here’s what we’re going to do. Instead of using my strategy, just to show you an apples to apples comparison, we’re actually going to make the same payment of $1,475 because again that’s what your payment would have been on the mortgage of $300,000 anyway at 4.25%.

We take our $300,000, pay $1,475, and guess what? You actually pay it off in 24 1/2 years. The reason why I’m telling you this is right off the bat you can see that a home equity line of credit is far superior than a mortgage.

Using the home equity line of credit, like your checking account, you’re going to accelerate it even further. On average, 5 to 7 years. Again, that’s not changing anything about your budget. If you’re accustomed to taking all of the money that you earn and depositing it into a checking account, and at the end of each month you’re paying your bills out of your checking account, that’s all we’re asking you to do with a home equity line of credit.

Instead, don’t use the checking account, use your home equity line of credit. It doesn’t force you to pay more or less or change anything about your budget. You’re keeping your budget the same. You’re just changing where you’re cash goes.

If you like this video, be sure to like below, subscribe to our channel. Again, thank you and God bless. Thanks for watching the video.

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.