When To Use A Heloc vs Credit Card When Using The Mortgage Accelerator Strategy
Building The Equity Back In Your Home:
The difference in a home equity line of credit and a traditional home equity loan could save you thousands of dollars and slash 13 years from your mortgage
Do you know the difference between a traditional credit card and an American Express card? At first glance they both appear to be credit cards.
But there is one huge difference.
A traditional credit card such as a Visa or MasterCard charges you a high interest rate but you're allowed to pay only the minimum balance at the end of each month. With an American Express card on the other hand you have to pay the balance in full the end of each month otherwise there are huge charges for the outstanding balance and interest.
The purpose of the American Express card is to allow you to fund your purchases for 30 days but settle your balance immediately when it is due.
So while credit cards seem to be just credit cards, they in fact serve two different purposes. If you do not plan your cash flow you could be in trouble if you don't make payments on your American Express card.
The same applies to any HELOC and a home equity loan. Not knowing the difference could cost you thousands of dollars in extra interest payments. And one of them could help you slash at least 13 years off your mortgage if you just know how to use this and this is critical to knowing when to use a heloc vs credit card when using the mortgage accelerator strategy.
So let us get started.
A HELOC mortgage is a line of credit usually secured by your home. You can think of this as your second mortgage. The heloc interest-rate is usually a variable interest-rate.
It adjusts according to the prime interest rate. So if the prime interest rate goes up generally speaking your heloc interest-rate will go up.
And if the prime rate falls your heloc interest-rate will fall as well. In some cases you can get a lower interest rate on your heloc at a few points below prime rate depending on your financial situation.
When you use a heloc mortgage interest is calculated on the outstanding balance on your heloc. So if you make payments during the month, interest is calculated every single day and is applied to your account.
This is called a variable method of calculating interest. The reason is that if you balance increase or decreases the interest you pay if variable or changes daily.
With the heloc mortgage you can always pay down the heloc and borrow against the heloc at any. As long as you don't exceed your heloc limit you can generally use the heloc to keep borrowing money.
A traditional home equity loan on the other hand seems very similar. However there are two differences.
The first difference is that the home equity loan is for a specified fixed period. The interest on the home equity loan is fixed each month and you would pay interest based on the fixed-rate. This rate does not fluctuate with the prime interest rate mortgage. Think of this as a 30 year fixed loan.
The second difference with the traditional home equity loan is that once you borrow against it you cannot borrow from the equity loan at any time. In order to draw funds from this equity loan you have to have sufficient equity in your home and refinance your home equity loan.
The good time to use the traditional home equity loan is when you require lump sum payments up front and you plan to make a small payment every single month. You can pay back both interest and pay extra towards principal.
In all respects a traditional home equity loan is fixed. The interest-rate, the amount you borrow and term to the repay the home equity loan, is fixed. You cannot change this and you're expected to repay this mortgage over the life of the loan.
The heloc this loan is variable. The interest rate, the amount you borrow can change over the repayment term of the loan.
Each has his own significant advantages and disadvantages.
The one significant advantage of the heloc that no one talks about is that you can use the heloc as a mortgage checking account.
All this means, is that you can deposit your paycheck in the heloc, pay bills and make electronic bill payments every single month. As you can see this works just as a regular checking account.
There is one insider secret that no one actually talks about.
Do you know by using the heloc as a checking account you can slash at least 13 years off your primary mortgage and save thousands of dollars?
In fact without changing your lifestyle or spending more you can save over $63,000.
Because the heloc has a variable interest rate and the ability to withdraw and deposit money, you can use this as an effective tool to repay your mortgage early.
In order to find out what you could save for your situation go directly to Pay Off Mortgage Accelerator and enter your information directly into the free heloc mortgage calculator and see for yourself exactly how much you can save and how fast you can pay off your mortgage. And download your free guide that shows you exactly how to pay off your mortgage and save thousands without changing your lifestyle today and you can determine when to use a heloc vs credit card when using the mortgage accelerator strategy.
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