Use this 1st Lien HELOC calculator to calculate your potential cost savings by replacing your mortgage with a 1st Lien HELOC. See your payment schedule, total interest costs between your mortgage and HELOC, and how much faster you can pay down your home.
calculator currently in beta
We searched far and wide and could not find a good calculator that sufficiently showed how this revolutionary financial strategy works. We felt that a great calculator would include an outputted payment schedule, and could allow one to directly compare a mortgage vs. a 1st Lien HELOC.
We felt like this movement and the benefits of the First Lien HELOC were so strong that we needed to pull together a great calculator that can directly showcase the benefits, and help people understand this financial strategy, month by month, and the total costs involved with financing their home… not just on their disclosure date.
We get it. When you hear someone say “You can pay off your home in 5-7 years without earning more or spending less”… well, it souds a bit like a scam doesn’t it? A “too good to be true” scenario, we think that modern finance strategy requires a healthy dose of skepticism. But in this case, when using a Maximized Cashflow Strategy (similar to Velocity Banking Concepts), the math actually shows you really can pay off your home in 5-7 years without earning more of spending less.
So what’s the secret?
Using a 1st Lien HELOC in combination with the Maximized Cashflow Strategy (essentially, all income and expenditures used from one sweep account) HACKS the way that interest is calculated and accumulate for you to pay on top of your debt.
A few key points that are required to properly understand this:
In a nusthell; shorter loan time.
You see, to calculate interest, an annual interest rate has to multiplied by the number of billing periods to calculate a total cost. It turns out, that a lower interest rate on a loan over 30 years actually costs a lot more than a higher interest rate loan at 5 – 10 years.
Hypothetically you could, however, a mortgage is a one-way loan product. You can only pay into it, and therefor, you have to keep separate bank accounts to maintain a personal liquidity to cover life expenses and living costs. This means that at any given time, you are holding money that is losing its value through inflation, but instead could be applied to and reducing your debt’s principal balance.
A HELOC is a much better product for this use case because your 1st Lien HELOC is an all in one checking, mobile banking, home loan, and other debt loan. Because it is a line of credit based on the equity of your home (generally at an 80% or 90% LTV), you maintain maximum flexibility and function of your personal income and personal profit.
The current federal interest rate (and the rate that banks generally tie to to determine their loan products interest rates) is low, and it’s important to understand that this can adjust upward, similar to a variable interest rate.
Because the American consumer is so heavily marketed and sold on the interest rate of the loan, no one ever focuses on the math of the term of the loan. When you crunch the numbers, most financially responsible households still out perform using a 1st Lien HELOC + Maximized Cashflow Strategy than they do a low-interest rate 30 year conventional or FHA mortgage.
Consumers have been “Trained” by the banks to look at APR as the primary factor for their pricing structure for their home loan, but this is only a secondary metric.
The most important metric to understand for your loan is what is called “Actual Cost of Funds” (ACF) and is the relationship between the amount you have financed, and the total amount you pay in interest for that financing.
With a standard 30 year conventional mortgage at a 3% APR, you will still generally pay between 40-120% of the total price of the principal balance in interest to the bank.
So for example:
Say you finance $300,000 at 3% for a 30 year rate.
Your actual cost of funds would be: $155,332.36 of interest paid.
$155,332.36 / $300,000 = 51% actual cost of funds (also known as Effective Interest Rate).
So while 3% APR is used to make you think you are getting a GREAT DEAL on your home loan, when you actually do the math… not so much of a great deal is it?
Empowering American Homeowners with Better Financial Strategies