馃攳
HELOC Strategy: Is it Still Worth It? (SERIOUS UPDATE) - YouTube
Channel: The Kwak Brothers
[0]
hey what's going on guys it's Sam Kwak one of the Kwak Brothers and i'm
[3]
finally getting around to make another
video about our favorite topic in the
[6]
channel which is the home equity
line of credit also known as a HELOC now
[10]
you might be wondering sam with the
interest rates so low
[13]
and a lot of people getting a refinance
is it still worth it to go and get a
[17]
HELOC to paying off your mortgage
why don't we just go and refinance at a
[20]
lower 30-year fixed rate
so in this video i'm going to unpack the
[24]
latest update as to what the banks are
doing with the heloc products
[27]
as well as is it still worth getting a
heal off to paying down your mortgage
[31]
we'll go and explore that in this video
[36]
so let's go and start the video with a
little bit of update as far as what are
[39]
the banks
doing with the helocs what are the
[41]
latest news and what are the latest
updates as far as heloc's being offered
[45]
but first be sure to subscribe to our
channel if you guys want the latest news
[48]
and updates
to help housing market and of course
[51]
investing
in real estate earlier this year when
[54]
covet 19 started taking toll on the
american public and the economy
[58]
three major banks decided to shut down
their line of credit department and
[61]
those were chase
wells fargo and navy federal but pretty
[65]
much the other banks were operating as
nothing happened and they were offering
[69]
helocs just like in normal time and then
on april through may time period
[73]
majority of the banks start experiencing
a major slowdown
[76]
in terms of their application and this
isn't just heloc application
[79]
but we're also talking about mortgages
30-year fixed refinance applications
[83]
that were taking twice as long as a
normal 20 to 30 day time range as far as
[88]
when
mortgage applications usually get
[90]
processed and finalized
so during april and may a lot of people
[94]
were getting their helocs and mortgages
and it was taking about 30 to 60 days
[98]
some even 75 days
for the heloc to finally close now
[102]
originally my presumption and my
hypothesis was that
[105]
well because a lot of bankers and
underwriters are staying home to work
[109]
it's probably lack of infrastructure as
far as banks
[112]
not able to communicating with each
other thus slowing down the application
[116]
process
and ultimately creating a lot of
[118]
efficiency well
so i thought well the real reason that i
[121]
discover and the new hypothesis that
i've developed
[124]
now as far as why are the banks slowing
down well by now we should have a pretty
[128]
efficient structure as far as
communication between the banks
[131]
and underwriters so there really
shouldn't be an issue well the new
[134]
hypothesis that i've developed as far as
why our heloc and mortgage applications
[139]
have slowed down
to the point where consumers have to
[142]
wait anywhere between 30 to 90 days
for a key lock to get approved and
[146]
ultimately be funded well it really has
to do with who are ultimately buying
[149]
these mortgages now just as a reminder
in case you don't know how the banking
[153]
system works after the bank creates a
mortgage they lend out let's say a
[156]
hundred thousand dollars to you
right they don't keep that hundred
[159]
thousand dollars loan and wait 30 years
for you to finish paying it off
[163]
instead what they do is they sell it to
a group of investors
[166]
hedge funds bond market and typically
what the banks do is they package these
[170]
mortgages
as a one singular unit known as the
[174]
mortgage-backed securities also known as
mbs so imagine thousands of different
[178]
mortgages being combined
turning into a one giant mega mortgage
[182]
and we have group investors
that buy these mega mortgages expecting
[187]
a guaranteed return from anywhere
between three to five percent
[190]
interest not only this is true with
mortgages your traditional 30-year fixed
[194]
mortgages but
a lot of the first-lead heloc products
[197]
also fall in that category where
investors and private banks
[201]
buy these mortgages or heloc loans
essentially expecting a guaranteed
[205]
return
over a period of time well what happened
[208]
was because of the covet scare and how
the economy
[210]
starting to slow down we've seen a
massive increase of unemployment
[214]
a lot of investors are now thinking we
got to exit we're going to start selling
[218]
off our bonds we're going to start
selling off our stocks
[221]
we're going to start liquidating our
portfolio our investments
[224]
and therefore less buyers are in the
market buying these mortgage-backed
[228]
securities and also
these first-team heloc secured products
[232]
now right now daniel may have covered
this already but the number one investor
[235]
that is buying mortgage-backed
securities right now
[238]
is federal reserve it's the bank that's
responsible in printing money which
[241]
there's a lot of conflict there and
daniel can definitely cover more about
[244]
that but
as you can imagine a lot of people are
[247]
frightened right now they don't want to
buy anymore they don't want to invest in
[250]
stocks because
lots of scary things are happening
[253]
therefore there's less people right now
buying the mortgage-backed securities
[257]
and of course consequently
banks are saying well why do we need to
[260]
keep on making mortgages when no one's
buying them on the back end
[264]
in the stock market and also the bond
market and also the secondary market so
[268]
therefore the banks are saying you know
what let's go and slow down the process
[270]
so that we have
we have enough buyers catching up think
[273]
of it like a highway
with congestion during the rush hour
[277]
traffic right imagine a highway just
packed with cars
[280]
and all the exit ramps are blocked right
so there's no way the cars can leave
[284]
the highway but the on-ramp to the
highway
[287]
is wide open and right now a lot of
people because of low interest rates
[291]
um there's a frenzy for real estate a
lot of people want to get a mortgage or
[295]
refinance
therefore a lot of people want mortgages
[297]
but banks don't want to give it to them
because there's not enough people buying
[300]
the underlying mortgages on the other
side so there's that little conundrum
[304]
there right there's a little bit of
for the lack of better term constipation
[308]
in the banks and
and how loans are being issued right now
[311]
so to give you the latest update as far
as what's happening with the heloc
[314]
do you expect a major slowdown with your
application process and also true with
[318]
30-year fixed loans which
i don't know why you should get them in
[320]
the first place i'll get to that in one
sec
[322]
but if you're looking to apply for a
heloc whether it's a first line heloc or
[326]
even a second lean heloc
you may see some slowdown and also a
[330]
delay in processing time
although we're experiencing less of that
[333]
with second lean position heloc because
a lot of times secondly helocs don't get
[337]
sold into the mortgage-backed securities
market
[339]
just like how you would with the first
lean position heloc now
[343]
moving on to the grand question of the
video is is it still worth getting a
[346]
heloc
to paying down your mortgage i mean sam
[349]
the refinance rate is super
low why would you ever get a heloc right
[353]
now to go and pay off your mortgage
why not just refinance why not go and
[357]
and get a better
interest rate right now very good
[359]
question and i had to admit that i did
have to think about this one for a fair
[363]
amount of time and i finally have an
answer and justification as to why
[367]
a heloc still comes out on top in fact
the way that i would say this
[370]
is that the heloc strategy transcends
the need for refinancing
[375]
in playing the interest rate game and
here's what i mean now remember heloc
[379]
interest rates also fluctuates and
deflate
[382]
depending on what the prime rate is
doing a lot of time helocs do follow the
[386]
wall street journal rate but also
it follows libor which now is going to
[390]
be converted to what's called sulfur
which is secured overnight
[393]
financing rate so so far is a newer rate
that banks are using right now for
[397]
heloc's and some of the non-qm
non-qualified mortgage loans that are
[402]
out there
so with that being said you can actually
[404]
shop for a help that are often
lower than your typical 30-year fixed
[409]
rate or
even a refinance rate overall in fact
[413]
some of the clients in my private
membership
[415]
they got a hell out that's 2.75 2.99
some as high as 3.75 percent which beats
[421]
the typical notion that he locks are a
lot higher when it comes to the interest
[425]
rate so if you are playing the interest
rate game
[427]
might as well get a first-lean heloc at
a similar rate that you would get on a
[431]
refinance rate
but you get all the advantages and
[434]
benefits of having a first lean heloc
which
[436]
gives you more options and flexibility
over time including
[440]
paying off your mortgage faster using
the home equity line of credit and also
[443]
to remind you guys that a heloc
uses simple interest average daily
[447]
calculation what that means
is just like how i explained it in our
[450]
other videos in our strategy
if you dump all of your income and
[453]
savings into the home equity line of
credit
[456]
it brings down the average daily balance
low where you're subject to less
[459]
interest overall
and still use the heloc to pay for
[463]
expenses and emergencies that you may
face
[465]
well because of life right life just
happens and we deal with a lot of
[469]
accidents
and trouble over time now just by doing
[472]
that alone that's going to help you save
incredible amount of interest and time
[475]
overall and of course depends on how you
set up the
[478]
strategy but overall our clients in our
private membership have been
[482]
experiencing tremendous amount of
savings but again
[485]
this will depend on how you use the
strategy and also your financial
[488]
background information
now another argument can be made by
[491]
saying sam why focus on paying down your
mortgage
[494]
versus investing and buying more
properties or buying stocks and
[498]
investing in other
cash flowing adventures well getting a
[501]
heloc allows you to do just that in fact
it gives you a faster transition from
[506]
paying off your mortgage
to ultimately buying more assets and
[510]
here's what i ultimately mean when the
times are doing really really well
[513]
and asset prices are inflating and
there's low unemployment i believe
[517]
that's a great time to paying off your
loan and staying flexible as much as
[520]
possible
now when the times are bad and there's
[522]
blood blood on the streets and asset
prices drop
[525]
i believe that's a great time to take
your heloc that you were using to pay
[528]
down your mortgage
and then buying cash flowing and cash
[531]
cal businesses or if you're into real
estate
[534]
like me start buying real estate because
prices are cheaper
[537]
and rental markets going to be likely to
be hotter so you're going to be able to
[541]
create more
cash flow in those time so it's kind of
[544]
like taking one step back
but taking two steps forward when
[547]
looking at the bigger picture
as to creating more income and wealth
[551]
over time and also something i mentioned
in my previous
[554]
heloc videos a heloc can act as almost
like an income
[558]
insurance now picture this and i hope
that this never happens to you ever in
[562]
the future but
let's say you lose your income or you
[565]
lose your job or your income goes down
in a significant amount well if you have
[569]
a help you can use the heat lock to stay
afloat and pay for food
[572]
gas groceries in the meantime until you
can recover and bounce back
[576]
now i know exactly what you're saying
you're saying sam that's what a three to
[580]
six month savings for like why use a
heat lock why use
[583]
debt to cover for emergencies why not
use an actual savings account
[587]
with actual cash inside them and it's in
a savings or money market account
[591]
well my argument to that is what is your
savings account or money market account
[596]
paying you like 0.5
1 i mean it's really laughable right
[600]
when it comes to
the amount amount of interest that the
[602]
banks are paying as far as the savings
account
[605]
so instead of putting your money or
parking your money on a savings account
[608]
or
money market account that's paying you
[610]
less than one percent why not relocate
that money
[613]
into a heloc where we can now save 2.5
to 6 percent interest depending on where
[618]
you're at
so instead of focusing on earning one
[620]
percent now we're taking that same
dollar putting in a heloc
[624]
saving us two to five percent or two to
six percent and still getting access to
[628]
that money whenever you want
and if you do it the right way you can
[631]
virtually eliminate all risk when it
comes to the heloc and using the heloc
[635]
to pay down your mortgage or other
income producing assets
[638]
so all that to say getting a help to
paying off your mortgage is still alive
[642]
and kicking and it's still relevant and
i believe it transcends
[645]
the need for refinance and keep in mind
guys getting a refinance doesn't
[649]
necessarily guarantee that you're going
to pay off
[651]
the mortgage faster or even save money
by refinancing in fact
[655]
i have several videos covering why
refinancing
[659]
is literally a financial suicide it may
actually cost you more money down the
[663]
road
though the interest rate is lower so
[666]
definitely check out some of those
videos where i explain
[668]
how the math behind that works and also
i'll have a video as to why fixed rate
[672]
interest rates are a huge
scam and i'll explain exactly why in our
[676]
next video so definitely subscribe
and stay tuned because i have some lot
[679]
more updates for you guys coming soon
take
Most Recent Videos:
You can go back to the homepage right here: Homepage