A few years ago, Natali and I discovered an incredible means to pay off our primary residence. Now we utilize this strategy consistently in order to meet our ultimate goal: purchasing more buy and hold real estate.
Using a HELOC, or home equity line of credit, to pay off your mortgage is a way to create equity in your primary home. Doing so allows you to pay down your balance quickly. More importantly, it allows us to leverage our funds in order to purchase cash flowing real estate.
The reason this works is because the loan on your house is amortized, meaning the value of the home is gradually paid off. Typically on a mortgage, you’re paying off the interest for the first years of the loan. Principle is not paid off until later.
But if you’re able to put a large amount of funds from a HELOC toward your mortgage, you can designate that money to go specifically toward your principle balance. Then going forward, a larger percentage of your monthly payment can be applied toward principle, instead of primarily interest.
Traditionally, you would pay off your mortgage in 15-30 years, but with enough discipline, this system allows you to do so in 5 years or less. Natali and I have utilized this strategy, and it works! If you want a step-by-step guide on exactly how to employ this strategy, pick up our new book on Amazon!