It’s not a scam or a pyramid scheme ploy; it’s the truth.
Given the current market conditions, most homeowners know that their property’s value has increased significantly since their initial purchase. What homeowners don’t know is what to do with that information.
Most people think their only option is to continue making their mortgage payments month after month, counting down the years until their mortgage is finally paid off.
In all actuality, you have many options that don’t include waiting the vast majority of your adult life to pay off your mortgage that can give you cash in hand, allow you to pay off your mortgage faster, and retire earlier and comfortably. One way to achieve all of the above is to pull equity from your property through a Home Equity Line of Credit (HELOC), reinvest in a second mortgage and use the income from the second mortgage to make your mortgage payments.
Who can do this?
There are a few preliminary qualifications to consider before attempting to execute this investment strategy, some of which include:
- You are a homeowner
- Your Current Mortgage is 50% or less than your property’s Current Market Value
- Your Employment Status allows you to qualify for a larger Mortgage
If all of these requirements are fulfilled, this strategy can help you gain a monthly income on your mortgage and effectively make your mortgage payments $0.
How does it work?
Here is a step-by-step breakdown of how this strategy works using the example scenario below.
Your home’s current value is $1M
Your current mortgage balance is $500K
At 2.5% Interest & a 30 Year Amortization (typical mortgage parameters), your monthly mortgage payment would equal $1,972.25
The HELOC Reinvestment Strategy
- Add a HELOC to your home.
- HELOC Loan Amount: $300K
- Interest Rate: 3.75%
- Monthly Payment: $875
- Invest the money secured by the HELOC into a Second Mortgage
- Invest your $300K into secure secondary mortgages, which pay 12% interest.
- Your new investment income is $3,000/month or $36K annually.
- Use the income from your Second Mortgage to pay HELOC Interest & your Original Mortgage.
- Your initial monthly mortgage payment was $1,972.25.
- With the addition of your $300K HELOC, your monthly payment, for both your original mortgage plus the monthly payment for the HELOC, would amount to $2,847.25.
- The income from your second mortgage of $3,000 per month covers those expenses and leaves you with an extra $152.75 per month.
- Cash in hand.
Remember that your home is only an asset if it’s creating positive cash flow, not just adding to your monthly bills. Pulling equity from your home helps you build wealth now and in the future.
Don’t get stuck thinking the only way to gain equity from your home is by selling; there are so many other ways to build wealth through real estate investment strategies.
At HoneyTree Grow, we make it simple by doing all of the work for you. Our team consists of independently successful real estate investors focused on building commercial real estate portfolios for over five years.
Whether you’re looking for advice, education, or an investment opportunity, we’re here to help.
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