Velocity Banking & Infinite Banking Combined With 3 Income Streams

Today we're going to be looking at a case study my own numbers using the velocity of money, velocity banking, paycheck, parking, whatever you want to call it, the infinite banking concept, becoming your own banker, high cash value life insurance, whole life insurance, whatever you want to call that. We're going to combine those two strategies with three incomes. My income, Beyonce's income and my mom's income. And what we're doing is we're going to use a first position home equity line of credit to to purchase a single family property of which I am going to be using a high cash value life insurance policy. My own borrowing against the cash value for the down payment and the closing costs to basically self finance down payment and the closing costs from my life insurance policy which would allow me to retain every single dollar that I basically put into the pay down of this property while maintaining liquidity all the way through in case life happens, investment opportunity presents itself and many other benefits that will come along the way. And then when you combine the velocity of money, velocity banking, we're minimizing the cost of interest as much as we possibly can by bringing these two concepts. So first position home equity line of credit to purchase a property.

Right.

Now the benefit of doing this, not all First Lien HELOCs are treated the same same. The one that I've decided to go with is a bank called University Bank. They have a 4.99 intro rate for the first six months and the interest rate is based off of the six month treasury bill.

Right.

And then they add I think 3 or 4%. I have to verify that. But basically I'm starting off at 4.99% interest for the first six months to underwrite the product, it only costs 950 to 1000 bucks. That's just to acquire the product. When you compare that to many mortgages, 30 year fixed mortgages out there with the origination fee, just the origination fee alone, I was looking at the averages, it'd be anywhere from 0.5% to a percentage point. And according to my math based on the purchase price that I would be getting this property for would be anywhere from $2,650 to $5,300 just in origination fees. So what I tried to do was a apples to apples comparison but it's actually impossible because out the gate I'm already ahead with the first lien HELOC position simply because I pay less money in closing costs which means that gives me more capital to apply towards the principal balance of the mortgage itself. And on top of that with this first position HELOC, as long as the credit limit is under $750,000, I don't need PMI insurance. I don't have to get mortgage insurance on the loan itself or on the line of credit itself. Whereas if I went with the traditional conventional 30 year fixed mortgage, which I got quoted at 8% right. It's 2023 is when I'm recording this video. So the interest rate that I got approved for was 8% origination fee, probably around 0.5 to a percentage rate with that and I would have to put 20% down, which then I lose that liquidity. 20% of the purchase price of what I'm looking at would be around 106, almost $110,000. So I would immediately lose that liquidity just for the sake of not having private mortgage insurance. So I put 10% down, I would still need private mortgage insurance on that and that. You know, I was looking at some estimates, it'd be around maybe 220 bucks, $219 per month. So whatever that is in a year, was that like $2,400? Ish, something like that. So we're talking more money in PMI, more money in origination fees versus if I go with the first thing, HELOC out the gate, I'm already ahead. Plus I got that 4.99 intro rate. Yes. It's only for six months. That's a pretty big difference. That's going to give me a pretty big gain. So all of those factors that I just mentioned, I actually didn't even account for except for the pmi. I put it in there. If I'm comparing just making extra payments, but I didn't account for the additional closing costs of going with a traditional mortgage.

Right.

And we're going to see what, what it would look like if I just made extra payments with all three incomes going into the property. If I would have went with that 10% down, I immediately lose that liquidity, I can't access that money again. Versus with a first position he locked to purchase a property, I put 10% down, I immediately will have a line of credit for whatever that balance went down to. And then if I wanted to apply another 10% to say, say full 20% in on it, I would immediately have access to whatever else I dump in. Alright, so any extra payments I dump into the first position heloc, I'm going to have immediate access to that.

Right.

So in order for this strategy to work, if I was to just do Extra payments. I have it here that It'll take about 29 months, maybe 30 months or less to pay the property off in full. According to just making extra payments that assumes life doesn't happen. Absolutely nothing goes wrong. And I consistently cash flow, you know what that is. So I just lay that out there just to give me like a measurement stick. Okay, here's what it is. But what I want you to look at is I'm actually not intending to actually pay this property off, quote unquote early. I'm just looking to be extremely efficient with the funds and making sure that I retain liquidity. And I'm also solving for how do I recapture every single dollar that I pay in interest to the bank. How do I recapture that and retain liquidity. So let's dive into this strategy here. Let's take a look at the whiteboard. I'm going to give you all the numbers here on the left hand side. Again we're dealing with three income streams, right? So I'm showing one income at 19,901 49 with expenses at 5662 74. And that is all expenses considered on the personal side, everything all included, cash flow would be 14,238 75. Then the second income would be 5,221 54. Expenses at 3,100, cash flow at 2001, 2001 54. I'm also, I also created buffers in each of these expenses. So I created like a $600 buffer here, a $500 buffer here, another couple hundred dollar buffer here. So I created buffers overestimations on, on cost of living. So everything that I'm illustrating with velocity banking is going to be super conservative, overestimated. I'm making it look worse than what it'll actually be and I still come out ahead if I was to just make extra payments right via everything going on here. But again my intent is not necessarily to try and pay this off the fastest. In fact, I can honestly tell you that if I was to just make extra payments, right without anything else that I would be doing, I would pay off the home faster if I just made extra payments be done in 30 months. During that time, absolutely nothing can go wrong because I'm dedicating 100% of cash flow to pay down of mortgage at that 8%. That's what that, that's all I can do. So no investing, no savings, right? Like none of that. I have no liquidity. So absolutely nothing can go wrong with this scenario. With Velocity Banking, infinite banking. Combining actually all three because technically I am making extra payments, just doing it differently. I'm doing it more efficiently, more effectively in my opinion. And you get to choose whether this makes sense for you or not.

Right.

So continuing on.

Right.

We got the income, second income, this is the third one. 200985 expenses 1985 cash flow 1000 bucks. The debt which will be the first position HELOC starting at $477,000 4.99 is the intro rate. The most amount of interest I can pay in the first year is 23,802 30. That's assumed that I pay nothing towards principal.

Right.

So on a monthly basis that's what it would look like 1983.52 and then that would change after six months. So after the intro rate I way overestimated and said that I'll be at an 8.41% interest rate. That assumes interest rates continue to rise.

Right.

So I'd be somewhere around 8.41%. I'm willing to take a bet, a gamble here that interest rates will eventually start to go down or, or stay stagnant. And then the other thing that I am more than happy to do because I'm not married to any bank or any product, I'm more than happy to move this HELOC to another HELOC and get another intro rate. And I'm seeing rates right now at 1.99% for 12 months. So I do something like that or anything below 8% right. Because that's what I'm comparing it to. I'm, I'm going to stay ahead of the game.

Right.

And I'm going to pay the lease interest possible. Then in addition to this first position HELOC with these three different incomes, all income going into the first link lock, all expenses coming out of the first link HELOC we're going to be leveraging multiple credit cards. So out of all the expenses Here we've identified $6763.75 worth of expenses that can be paid with a credit card with no fees. So I would be earning around I underestimated this 2%. Cash back rewards I can do more upwards of 3. So I underestimated it. Average about $135.27 per month and if you did the math that's about an extra $1,623.24 extra in your pocket. Get applied the principal pay down of the of the first lien HELOC Right. Which is what would happen.

Right.

I'd literally what would happen is I'm applying the cashback rewards to the statement balance of the credit cards, which means less money is coming out of the first lien heloc, more of the income stays in. So what I did was I also underestimated this result. I basically said okay, 477,000 minus 6,000 76375 on a roughly 20, 25 day cycles, there will always be an extra from the income $6763.75 that's staying in the HELOC. It doesn't actually come out for only one day.

Right.

And that's to pay the credit card statement balance in full. So essentially what's happening is I'm floating $6763.75 at 0% for roughly 20 to 25 days on a monthly basis. What that looks like is roughly I'm saving about a dollar, almost a dollar in interest per day that I didn't Pay in the HELOC. And then I earn 2% on that money which results of 135. So I totally like underestimated and just rounded down, said okay, $20 is what I'm going to minus from the monthly interest costs on the first lien heloc just by parking bills in the credit card. Because that means when the income lands in the first lien heloc. And by the way, this is all automated so I can connect all three incomes to the first lien and I can connect all bill pay out of the first link. So it's literally all automated. I don't have to think about making an extra payment each and every month. I don't have to tally the numbers up. I just have to be disciplined with how we all spend money in this household. That's it. So velocity banking is fully automated. My velocity of money cycle, my wheel, fully automated.

Right.

Pretty good. Those are the different enhancers that really reduce the borrowing costs. Then on top of that I, I have balance transfers that I can do with a multitude of credit cards and I can literally do this like we call this credit card stacking where you leverage a bunch of zero percent credit cards. I got three different incomes, three different credit scores. We could rotate between three different peoples, right. To pay even less interest. So all I did, super conservative. I used me, me alone, leveraging $25,000 of credit and a credit card doing a balance transfer at 0% for 12 months and a 0% fee. No fee, no cost whatsoever. 1% minimum payment 250 bucks. Do that for 12 months. At the end you'll owe 22,000. I can either roll that 22 back into the first lien or I can roll that 22 into the next credit card, which is what I would do over and over and over again. Taking a look at what this would look like, understanding that all the incomes are paid bi weekly. So there's six checks coming in per month, all at different times, more than likely always on a Friday. So what happens? Starting balance at 477,000. If you tally up all the incomes right, you're going to get 28,108. 03. You tally up all the expenses, you're going to get 10,747 74 on. If I went with a traditional mortgage, the cash flow would be, would be different, but the same amount, roughly the same amount is still going toward the pay down of the mortgage right itself. So over here, same number, same income, everything, the cash flow would actually be the, the actual extra payment would be 14,471 37 as opposed to the total cash flow over here which is over 17,000 ish. Just add up these three numbers, right? Add those three numbers, 146713. It's like 14,300 something. Over over here is 14,471 37. The reason for that is, you know, a traditional mortgage is going to have the principal and interest payment. So out the gate the interest is 3180 as opposed to my minimum, or I should say my maximum interest cost of 1983.52. You'll notice over here, within the first month I overestimated, it'll be less than this, but it'll be somewhere around 1,086. So out the gate you can see the difference. 1,874 09, 3,180. Then you got PMI. So PMI is taking from the cash flows. That's the only variable that I put in there is $219 less in cash flow, making extra payments. Because over here I don't have pmi. It's the only thing I factored in here. I didn't factor in the origination fee cost to get that 8% mortgage, which would have cost me multiple thousands of dollars more. So that puts me technically the amount of cash flow out the gate starting would be a couple thousand dollars less because it would have had to go to closing costs, right? So I show the expense right over here, cash flow 4,000, 14,000 4 7,000, 1 37. What I'm going to go ahead and do is share my screen so you can see the mortgage calculator of how I went ahead and put all the numbers in so you can see what this actually produces. So 477,000, starting out finance amount 8%, 30 years. Payment would be 3506 bucks. That's just principal and interest. The actual mortgage payment would be the 3506. The PMI, the taxes, the homeowner's insurance. Right, all that together. So the actual payments a little bit higher, which is why you see the cash flow at the 14,000 for 7,137. I actually already factored it in into the expenses on the board, which is why I didn't show a lesser cash flow because I already factored it in as if it was already there. So extra payments out the gate, 14,471 37. And then what I went ahead and did was, okay, you know, once you get to 20% paid on the, on the property, which is right around the third or fourth, I don't know how long it takes to remove pmi. Go ahead and comment if you know roughly how long it takes to remove PMI off of your mortgage once you have paid into it that 20% mark to remove it. Right. Let me know if you, if you know that what I went ahead and did just gave it 30 days. All right, and then, and then you'll notice the cash extra payment is increased by that amount minus 29 plus 2 19. And you can obviously see takes us 29 months. And it's done a lot of commitment. This assumes that I would cash flow this amount each and every month for the next 25 months, 29 months, and life doesn't happen. Nothing happened. Nothing bad happens. Like nothing. The reality is that what I've seen personally with a lot of clients is they, you know, start with making extra payments, okay, great, you're on a roll. And then life happens. Kid gets sick, spouse gets sick, someone passes away, do the roof, fix a leak, gotta fix a car, you gotta do this, you gotta repair that unexpected expense. Holidays, birthdays, you name it, all these different things. So it's very hard to do apples to apples comparisons, especially when it comes to making extra payments because we also have to factor in, hey, does that person have an emergency fund for unexpected expenses and emergencies? If they do not, then we need to what, allocate some of the cash flow to savings so that if and when life happens, it doesn't put A halt to our debt payoff timeline. But no matter what, whether you take from cash flow to save money to have three to six months worth worth of expenses, that's taking time away from your timeline, right? So what ends up happening is this would actually, you know, if I'm making extra payments and life does happen, it would take me longer to pay off that debt. And then when it's all said and done, two and a half years, three years from now, let's say I do have the property fully paid off. So I recover that mortgage payment of the $3,500 I no longer have and then I get to just stare at a property that's fully paid off, stare at it. And most of Americans have no idea how to leverage to create more income, to create more wealth. Because you're being told that debt is extremely bad and you should avoid that and you should pay off all your debt extremely fast, as soon as possible. Which is all fine and dandy, but what happens when there's financial crisis? Market crashes, real estate crashes, like all of it, prices happen. How do we continue to leverage and be effective and efficient with our money?

Right?

So if we could just learn how debt can be of advantage of use to us rather than it taking advantage of us and us being a slave to the lender, how do we become efficient borrowers and how do we then put up, put ourselves in a position to be a lender? So what's happening is I'm lending from myself, my own banking system to myself and then I'm retaining all the capital and the liquidity in the process. That's a huge benefit to really think about whether you just want to make extra payments on your property or do it this way. So let's continue at the top. 477 total income going into the first lien over a 30 day period. Expenses coming out 10,747 74 gave you all the math over there, gave you the enhancers that I'm using over here. Now here's what I would say. If someone that you know, I hate velocity banking, I hate infinite banking. Okay, whatever. You hate it, you don't like it, great. The least you could do is at least enhance this to your debt. Snowball strategy. Leverage credit cards at 0% don't cost you anything. Earn cash back rewards, get that extra sixteen hundred dollars and you can apply that towards the principal pay down of your mortgage and that's going to help you go faster. At least just do that, right? You could. Fine, forget about the first lien heloc.

Right.

Because if, obviously, if you went with a traditional mortgage, you wouldn't have a heloc.

Right.

So let's say you went with a traditional mortgage. The least you could do is leverage credit cards, get cash back rewards. Apply those cash back rewards to statement balance. It's less actual cost of living, which means more cash flow. That cash flow difference goes to the principal pay down of the property. You're going to pay it off faster, right? That alone $1,600 a year, you probably shave a month or two off. So now you're at 27 months, let's just say over, over two year period. That's pretty valuable because you're trying to go as quickly as possible, right? But if you're over here in this camp, you're thinking, what's going on?