Velocity Banking Is A Complete SCAM 

Here's the fun part. You say we need to disprove it. It's magical thinking and NO ONE has an actual documented case study anywhere to be found. Just lots of folks telling you this magical theory that will get you debt free in 7 years....instead of showing how THEY got debt free in 7 years. This isn't complicated math. The theory is make a large payment on an LOC at the beginning of the month, pay your bills from the LOC and the surplus at the end of the month is principal reduction. Do it again next month and it snowballs. Take a look at current household savings rates. Few have excess savings to make this work. Fewer still have the discipline to execute it. And those with the ability to save and discipline to do it find far greater returns elsewhere than paying down a 2-3-4-5-6% mortgage.

@@TheEducatedHomebuyer I agree with you many people do not I have case studies and unlike many velocity banking teachers I show doing velocity banking and extra payments on a mortgage. The reason why my clients have so much success is we don’t throw out basic financial principles in fact we keep them and use velocity banking like a switch when it makes sense and then turn it off once we have a significant lead. I think that is a better financial strategy. Instead of this or that what would it look like if I did velocity banking on my higher interest debts outside of my mortgage which would put me ahead and then by the time I get to the mortgage maybe velocity banking for a few lump sum payments then stop and go back to extra payments to finish it off in that 7 year timeline or less. I’m happy to discuss this with you both on my channel or yours if you are up for this and I have many case studies on my channel laying this out in detail

@@TheEducatedHomebuyer, did you take Denzel on his offer?

@@TheEducatedHomebuyer Vanntastic shows how it works with little cash flow ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-ZDFGFP0D_aY.htmlsi=YtWh_zmiftB-FRoh

@@michaeldusek1107yes we are all waiting for this but no response yet.

No response? Come on lets have the debate.

The conversation was pretty clear. If you want to take one sentence, and make a case that unnecessary complexity is a good thing, that's a personal decision. Let's just say if people were getting out of debt in 5-7 years using a 25 year old concept, we'd have lots of documented case studies available, not people of questionable intellect standing at a whiteboard telling you how great it's going to be when they don't understand there is no magic "simple interest" with lines of credit. Your HELOC has no float, you pay interest on the average daily balance, at a higher rate than your mortgage. All simple. Not complex.

It's not complicated....it just doesn't work for 99.99% of people. If you're in the .01%, congratulations.

Get this guy a cookie

Yeah...it actually doesn't unless you have a massive inflow of cash at the beginning of the month and all of your bills are due later in the month. The people who could actually benefit from this strategy know how to invest and don't waste time stepping over dollars to pick up pennies. The math is out there in hundreds of videos from people who actually understand finance but the true believers still think there's a magic answer for people with more debt than income to wish it all away.

You may want to look up the actual return on the S&P over the last 95 years (shorter time frames are higher). 1928 to 2023 = 9.9%...plenty of room for fees and still getting an 8% return. You pay taxes on all income, and long term gains are the lowest tax rates you'll find. www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

@@TheEducatedHomebuyer I get that but go year by year on those returns and you will end up with a different number. So yes the average is say 9.9 or 10 or 11 or whatever the number is but if you go year to year you will end up with a different result. This will be very helpful for your listeners.

People with high debt are exactly the folks that should stay 1000 miles away from this strategy. The spreadsheet shows it can work but you better be very disciplined and have more free cash flow than the typical homeowner.

@@TheEducatedHomebuyer Discipline and education on strategy and other alternatives are definitely critical. Im general, I would not advise someone to do velocity banking on a mortgage, but it could be effective on other consumer debts that have high interest cost or are significantly impacting someone's monthly cash flow.

Velocity banking is ultra easy.

Most loans are amortized where is alignment credit is simple interest and there in lies the magic.

The easiest way to tell someone has drank the Velocity Banking Kool Aid is when they tell you the magic is in simple interest vs compound interest. The ONLY difference in interest accrual between a mortgage and a line of credit is that the LOC accrues interest on the average daily balance. Velocity Banking ONLY works if you receive a large influx of cash at the beginning of the month and slowly pay out your living expenses over the course of the next 30 days thereby reducing the average daily balance. If you get paid on the 1st and 15th and most of your bills come due between the 1st and the 15th, you will have a miniscule reduction in the average daily balance that will be more than offset by the increased rate of interest on the LOC. So, if you are a business owner with large monthly revenue that you can apply to your mortgage, then use the "float" before paying your bills to reduce the average daily balance AND you have the discipline to not screw it up, it can work. That accounts for about .01 percent of the population. This isn't hard math. There is no magic.

Great points Dave. Thanks for sharing. It's important to note, HELOC's that allow you to fix the rate on a portion of the balance typically have limits on how many times you can fix a chunk.

I just overpay my 2.875% 30 year fixed by $40 every month, each COLA we add another $10 ever since our first mortgage payment was due, In Jan 25 we will overpay by $50, Knocked years off the life Of the mortgage already, we have the double home exemption. Once we claimed it our property taxes almost halved, once we turn 65 and bring in less than 25k a year as a single person or 30k for married couples property tax freezes. We paid down 1 credit card, paying down another, Also we Add to savings so wouldn't make a lick of sense for me to get a HELOC

@@winniethepoohandeeyore2 That's great that you're aggressively eliminating debt. Have you thought about taking the extra principal payments on the 2.875% mortgage and allocating them to the remaining credit card until it's paid off? Since it's likely at a much higher rate, that would help you get to the debt free finish line sooner. Thanks for watching.

@@TheEducatedHomebuyer I only owe less than 5K Which I overpay on that too. I'm not 1 of the maroons with 10's of thousands of dollars in cc debt

Check out the video we linked in the description. That gentlemen has several spreadsheets walking through the math. It works in theory but rarely in reality and only for very specific borrowers.

Glad you enjoyed it.

Be very careful Peter....without large free cash flow, the juice isn't worth the squeeze. Just keep saving and investing.

@@TheEducatedHomebuyer Ty, I’ve got 1.m retirement, 30 yr Fed retirement, and about $50k cash left over. Sooo many numbers, I’m just trying to make it work.

Appreciate it!