How to Leverage the Velocity Banking Strategy

When you decide to become a homeowner, there is a good chance you’ll come across the velocity banking strategy. Some proponents of this strategy will tell you it is a remarkable way to pay off your mortgage in 5-7 years. Others may tell you that this strategy is a scam and not worth your attention.

Either way, it always pays off to learn this by yourself if you’re to eventually make an informed decision. As a quick reminder, velocity banking is strategy that allows you to use a line of credit as your primary account and use lump sums to pay off a loan, in most cases a mortgage.

The main idea behind the success of this strategy lies in using a line of credit to ensure you use your cash flow and extra money in covering your expenses while also going towards paying off your mortgage. In most scenarios, this strategy leverages a Home Equity Line of Credit (HELOC).

Actually, it is the HELOC that functions as your primary account rather than a checking account. This helps do away with the need for a savings account considering all your free cash flow goes toward the mortgage via the HELOC. Proponents of the velocity banking strategy believe it helps them pay off their mortgage faster and with less interest.

Before leveraging the velocity banking strategy to your advantage, you should remember that lack of security is one of it’s major challenges. This strategy may fall through for a variety of reasons. In the event that the interest rate on your HELOC changes, your housing market drops and lowers your credit access, or when the bank freezes your line of credit, then the numbers might not work out.

Also, it is quite easy for one to miss out on seven year of saving for your future while velocity banking diverts all your money in your mortgage and the HELOC. That’s why you should research more before you can finally make it your ideal financial strategy.

Hopefully, this simple guide will help you make an informed decision regarding the velocity banking strategy.

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