Combining Velocity Banking and Infinite Banking in Canada?

If you are practicing velocity banking, you are making a huge mistake. There is a much better way for you to get ahead financially and save a lot more interest with a lot less risk. If you're trying to combine infinite banking with velocity banking, it's really a contradictory strategy. And watch to the end of the video and you're going to find out exactly why. What's this whole velocity banking thing all about? I'm hearing a lot about it. I have a high level understanding of it. I understand that you have a bit of experience with velocity banking. Can you just provide a little bit of context based on what you know about velocity banking? Like how does it work?

This is exactly why I found infinite banking in the first place. I was actually searching for velocity banking and I was actually practicing velocity banking. I would take a loan, like I would borrow from a bank in order to pay off my mortgage faster. So the whole idea of velocity banking is actually so that you can switch from amortized interest in a mortgage. So your mortgage is an amortized interest. Basically your payment is level. It's the same exact payment through the whole mortgage that you have. And then you basically use simple interest instead. How it works is you need to open up a line of credit, or home equity line of credit, which is heloc, in order to borrow from a bank at a simple interest. And then you take that chunk of money, for example, like $25,000 or $30,000, and then you transfer that debt from line of credit to mortgage. So we know that in Canada you can actually pay off mortgage, send extra payments to banks. Not always, but you have to ask your, it's a certain mortgage to the.

Mortgage or something per year, right?

Yeah. You have to read your mortgage contract. Basically, if you don't have savings, then you're using velocity banking, using someone else's money, for example, banks. And then you take that chunk of money, you apply it against your mortgage and your balance goes down immediately. This way. What you do, you actually, there's a schedule of payments for, for 25 years amortization table. What you're doing, you're actually jumping ahead.

On that schedule. For example, like 10 or 15 or 20 months ahead of you. This way you actually save up a little bit of interest. Because we all know that when you pay your mortgage, then at the very beginning of the table, you're actually paying more interest than principal. And then when you move down the scale, move down the table, then you're paying less interest and more principal.

Right.

When you jump ahead this way, you actually jump you skip many, many months of paying interest. This way you save interest, but at the same time, you have to pay interest on your heloc. No, but it is a simple interest.

Right.

And next step is you take your income and then if you have discretionary income, of course, you have to replenish the system. You have to make payments towards your HELOC now and continue paying your mortgage. Of course. Right. So basically you are sending more money to the bank. This is in a nutshell, what velocity banking is.

It doesn't matter if I slam a bunch of money toward the principal of my mortgage. My payment does not change. My payment basically stays the same. Now, we know when you renew your mortgage, it could go up, down, whatever, depending on interest rates, yada, yada, yada. But the point is, we're basically paying the same payment. I'm not actually sending less money away because I brought my principal down. I'm still making the same payment on my mortgage. Now we have this amortization schedule, it's called 25 years. Because I put more on my principal, I'm shrinking the amortization schedule. And as a result, I'm going to. I'm going to pay less interest because I'm getting ahead in the schedule and I'm hitting more principal now with my regular mortgage payments because I'm ahead on that interest, that interest. Now, right now, this is a great conversation about interest rate, interest volume. You have not heard this concept around interest rate versus interest volume. Make sure you check out the playlist beside us. There's going to be videos there that will tell you about interest rate versus interest volume. The point that we're making about interest rate versus interest volume, a banker is never going to talk to you about interest volume. You got to think about, I got a 3% interest rate, but if I pay $100, is only $3 going to interest or is it a lot more than $3? Well, if it's a lot more than $3, that means that that's the volume of interest that's actually being paid. The percentage of every dollar that you pay toward your payment, your mortgage, as an example, how much of that payment is going to principal versus interest? If I make a $2,000 payment today and I'm early on in my mortgage, I'm probably going to spend $1,100 to interest and $900 to principal. So my interest volume is much higher than the rate.

So.

So that's why we say rates do not matter. Rates are nothing more than a distraction. Yeah, I'm doing this velocity banking thing. But what I'm hearing is, I'm hearing, okay, I'm adding a line of credit, either unsecured or home equity. So I'm taking more risk, doing more on someone else's terms. I now have a minimum payment that's going to flow away from my family under someone else's terms. And then I got to put extra principal toward that line of credit to replenish it, which is smart, but I'm still sending more money back to someone else's bank. And I'm. The whole time I'm adding more risk because I still have my mortgage. I used to have this line of credit now, and now I'm putting, I'm still making my mortgage payments. So all I'm hearing is that, yeah, maybe I'm getting ahead on my amortization and my interest, but all I'm doing is sending a ton of money away from my family.

Of course. Yeah. So what you're doing is you're still using your income to send more of your income away from you. Instead of, you know, keeping this, this money, you are rerouting this income through your. So income goes from your paycheck to your line of credit. And then from the line of credit, you're doing like once, once a year or twice a year, you're doing chunks of money payment on your mortgage. And in addition to that, you're still paying mortgage payments. So basically, all of your discretionary income, the income that you could have otherwise saved in your own banking system, you're now sending it all to bank.

So they're coming at this from really, I mean, it's smart. If you look on paper, from the traditional banking idea when someone else is the bank. This strategy sounds really smart. It sounds like a good idea. However, if we contrast that just briefly with the process of becoming your own banker. As you said, my discretionary income, my discretionary savings, I want to build. Build that up and capitalize my own banking system and put my money to work for the purpose of building up a system that I can borrow against to maybe I can chunk down my mortgage as an example. But now the policy system, if I owe money to my own policy, you could. Now, this is big air quotes. That is a line of credit. I'm kind of building my own line of credit. So I'm building up this policy. It's not a line of credit, but you could think of it as a line of credit. You can borrow against it anytime you want. I own the contract. Well, now I'm the One who's in control of the repayment schedule. And when I make payments back to my own system, I'm not sending them to someone else's bank, I'm sending them back to my bank. And the purpose of becoming your own banker is so that you and your family are the ones who are receiving the money and you and your family are the ones who are putting that money to work for you and your family. Versus putting, I still have to pay the mortgage, but I'm putting all of my own hard earned dollars back into someone else's system so the money goes to work for their family. So you can't say infinite banking and velocity banking together. They're actually two contrasting concepts. They don't actually blend. It's like oil and water. They're not the same thing.

In essence, if you compare velocity banking and infinite banking, the difference is that with velocity banking, you are trying to save money on sending money away from you.

Right?

Infinite banking, that's great.

You're trying to save money by sending money away from you. Roman, clip it. That was brilliant.

Yeah. Versus in the infinite banking, you're actually creating your own banking system. And you're compounding in your own bank and in your own banking system. And money now is growing for you. So what do you want, Mr. Klein? Do you want to save a little bit of interest that is leaving you, or do you want to create your own system and recapture this interest?

Do you want more certainty and more guarantees and more control, or do you want to add more risk? Because as you know, Roman, if I go and borrow more money from banks, although this might be a, you know, a great strategy, if all things are perfect, the economy stays the way it is, interest rates stay the way that they are, my job stays the way that it is, my credit doesn't change forever. I might be able to do this, but that's the same to me. In my mind, that's the same as me taking all of my money and throwing it into the stock market. Everything goes well then, yeah, it's great. But the minute things go sideways in any way, shape or form, who has 100% of the risk? That's me. Who's left picking up all the pieces? That's me and my family. And that's not speak to me at all. That's not what I'm. That's not what I'm interested in.

And the banks, even if you have a line of credit or a heloc, then the bank actually still has control. Yes. You're doing simple interest versus amortized interest. But still the bank has has control over your repayment schedule. The bank still needs interest every single month. You cannot miss a single month of interest. You have to send them this interest no matter what happens where. If you have your own banking system now, you have control. You can send as much money as you want back to the system. You can miss a payment if you want, but at the same time, you are still compounding, you are still growing your money.

Yeah, your cash is growing every single day. So I'm going to lean in and ask you, what is it that you want in your life? Do you want to actually make more payments and have more money flow away from you and add more risk, or do you want to create more control, more peace of mind and have more money flowing back to you and your family? And oh, by the way, as we know, we're using a permanent participating, dividend paying, whole life policy. If I add more lines of credit and add more risk and do those kinds of things, what I'm doing is I'm adding more risk to loss potentially. God forbid I get smacked by a bus. If you don't come home one day, your family's left with all that risk, all that interest and all that principle that needs to be paid back. It has to get done. Whereas God forbid something happens to you and you have this policy system in place, a whole lot of money is going to flow in when it's most needed and it's going to make sure the family never has a bad financial day.

Yeah, and I'm glad that you mentioned this, Bern. So what happens if you need access to this money again? What happens if you need to react to this money? Can you borrow against your property? Because you're basically paying off your mortgage quickly now you're building equity in your house. How do you re access it? How do you, if you have like an emergency situation where you need cash, how do you access this money again? Can you go to a banker and raise your HELOC limit or refinance your house? Of course you can, but at the same time you will be sending money away for, you know, to your banker again. And you have actually have to qualify to take another loan or to raise a limit limit on your heloc, where with your banking system, your available limit goes up every single day. You don't have to qualify again. You don't have to go see someone. All you need to do is just, you need to fill out one simple form. Your policy number, your name and how much you want that's it and send it by email.

I'm putting my money in a financial prison by continuing to send it to the banks again. It's all comes down to control now.

Oh, yeah.

Oh, wait, no. The value house went up and we hit the principal. Hey, guess What? There's like 100,000 of equity in our house. And I can maybe get access to that money on someone else's terms. I go ahead and access that money and now at least I have a minimum monthly interest only payment that has to be made. So I'm just, I'm continuing to go down that rabbit hole. That's what continues to happen to Canadians. And that's the problem. What do we say the problem is? That money is always leaving you. I've been practicing the concept of becoming your own banker for many years now. I've built up my policy system to the point where My family has 10 policies in the system. We're working on our 11th. Okay. And what I'm doing is I'm aggressively building my policy system at this point because I know that I will never be this young ever again. My kids will never be this age ever again. So I want to get these policies built as robust as I can, as quick, as early as I can. Right. Build up this policy system. And I've shared some of these stories before, but I've been able to access money from my own policy, pay off my vehicle, my Ford F150 five and a half years early. So now my family's recapturing those payments and we own that vehicle up outright. That loan is no longer on my credit. I have been able to access policy loans because, you know, and use the policy loans to pay annual premiums for my kids, critical illness insurance, my wife's critical illness insurance, my own critical illness insurance, my home and auto insurance. Think about adding all those payments up. The monthly payments that I was making for home and auto insurance alone, $420 a month, $600 for my vehicle, hundreds and hundreds of dollars for those other important insurance instruments that I mentioned. They got to be paid. It's got to come from somewhere or come from my own cash. Or I can change my premiums to annual and I can use a policy loan to make that same payment while my cash goes up. And I'm a responsible banker, Roman. So all those payments that I was sending to insurance companies and all my Ford, Ford credit, I'm taking those payments and I'm sending it back. I've been able to lower my family's cash flow outlay by more than $2,700. Those things still got to get paid. But we're the ones collecting and accumulating money and building momentum in our system. If you look in your bank today, like the commercial bank, and you log in to your main checking account where your income comes in and maybe your bills come out, look at your deposit to withdrawal ratio, it will make you sick. There's amount of a couple deposits coming in and then withdrawal, withdrawal, withdrawal, all these automatic payments. And when I look at my bank now, I have very few. In fact, I look at my main checking account, I literally have one automatic debit that comes out, one automatic debit per month. I control all of the payments. And that payment that comes out, it's not coming from my own cash, by the way. It's coming from a policy loan, because that's how I finance my entire lifestyle. And all of my money circulates back through my policy system. So you can do this too, right?

Yeah, yeah. When you become your own banker, you know, you actually, it gives you peace of mind, gives you freedom, because you are the banker now in, in all your transactions in life now, you control everything. I hear there's a lot of noise in the financial industry saying that there can be some sort of combination between velocity banking and infinite banking. So, for example, you could technically borrow from your line of credit, basically doing velocity banking, and then you open a policy, whole life insurance, participating dividend paying whole life policy, whole life, and then you borrow against your cash value to actually pay off your mortgage. Now your income is going to replenish two systems instead of one. It is going towards your home equity line of credit or line of credit, and the second payment actually goes to replenish your policy loans. Is that an effective strategy? What do you think?

Oh, boy. Roman, look, everybody's situation is different in some cases. If someone were to do that, because they might think it's a great strategy. If you are sitting on piles and piles of cash and you knew if the sky was falling, you lost your job, whatever, you could manage all of this. Maybe for that person, maybe that's a good idea. If you look at, you know, even people who are doing very well, if you look at the regular person just walking around, when you were talking right there, my heart was jumping into my throat because all I'm thinking about is, okay, I'm accessing someone else's pool of money to deposit into my policy. I still now have that commitment for that policy premium, whether it comes from my own cash, a line of credit or whatever. So I've committed now to depositing premium for at least 10 years to make the policy self sustaining. If I didn't want to put premiums in beyond that. Now, I would not recommend that you do that. I'd recommend you keep depositing premium. But my point is I've committed today, year one to, to a five, seven to ten year window to make sure I'm putting premium in. So I got that money from a line of credit. Now, if I didn't have that money already sitting in cash somewhere, that is a major no, no, in my mind, I would never borrow money to start a policy. So number two, to your point, I borrowed money from this, this line of credit. Now, in some cases, I will caveat that, Roman, again, if I have good cash flow or maybe I have existing savings. There's even a video that Sarblo shares about our colleague from our team where he talks about debt recapture and he talks about one of his clients supercharging by borrowing money from a line of credit first. But they had a very clear plan in place to start the policy and replenish and do the debt recapture strategy. Okay, so keep in mind that what I'm saying here is a general, general terms here, but generally speaking, to borrow money to supercharge a policy and add more risk, again, create another payment. There's a lot of moving parts there. Roman, to your point, and personally, I'm not a fan of this strategy myself.

It requires a lot of discipline and a lot of attention. Otherw, you know, you can be leveraging to the point where one of the systems will collapse because you will be struggling to make payments toward premium payments to your infinite banking policy. And at some point you may be so much leveraged that you will not be able to sustain both velocity banking system, which is Hillock, and your infinite banking strategy.

Why?

Because you've sent too much money away to pay off this mortgage.

Yeah. And to your point, Roman, like, how comfortable are you with leverage and debt? Most people that we speak to, correct me if I'm wrong, most people in Canada are wanting to get out of debt because it's stressful and it's hard and it's heavy and I'm going to add more debt now just so that I can try and create this fancy strategy. To me, it just feels like it would be extremely uncomfortable and you'd have to make sure that to your point, maybe 10, 15 years down the road, if all works out perfectly, maybe you're like way ahead of the game and it's great. But the likelihood is, you're watching this video now, you know that life happens, people get ill, the economy changes, you lose your job, a parent needs help. You know, other opportunities come up where you might be able to take advantage. But now your money, your policy system is tapped out, your line of credit's tapped out, and all your money's trapped in your home. You're not taking advantage of any opportunities. And that's the point of becoming your own banker, is that we're eliminating, we're mitigating all that risk. We're, we're taking that, that liability and we're shifting it into our own banking system, which creates, makes it an asset. And now I'm the one collecting and accumulating the money. And when opportunities track you down, I know exactly where I can tap into a pool of capital to take advantage of opportunities or, God forbid, a problem. Right?

If you want to learn more about the infinite banking, how exactly it works, you really need a good coach. So we encourage you to take action and go to watchibc.com again, it is watchibc.com and yeah, sign up. There's a link under this video. Also sign up for a free online training on demand training where you will learn about how exactly infinite banking works.

Here at Ascended Financial. You know, we're the absolute best at this. With all due respect to the rest of our colleagues, that's what we share. You don't have to work with Ascendant Financial. Make sure that you're working with an authorized infinite banking practitioner. But more importantly, make sure you're working with somebody who can actually show you their policy system and what they've been able to achieve. Roman, how often do you speak to somebody who, who has bought in a policy? They've gone through maybe some training, maybe they've read some books. They've met with somebody, you know a few times or a bunch of times. They get the policy in place and then what do they hear?

Crickets and tumbling. They don't hear from this coach. They don't ever get actual coaching. They've just got a policy and now they're lost. Right. Remember, if you're practicing velocity banking and you're making a big mistake, there is a far better way that you could have more control and less risk and have more money flowing back to you and your family than continuing to have it flow away. Make sure you click the link in the post description below watchibc.com and get in touch with us if you have questions.