Do you have videos on negotiating with banks and what to take with you when dealing with a new bank?
Yeah but what if you don't own a primary residence? How do you get a HELOC on an investment property? I talked to my bank and credit union and they both said they only do HELOCs on primary residences…
finally know wtf is HELOC, but we don't have a HELOC possibility in my country.
Is it a smart idea to instead of using the 80k to buy a home completely out rite would it a good idea to use the heloc to pay 20% on 2 homes and finance the rest and rent it out?
To put today's news about "GM Closes Plants" into context: GM employs 31,000 people in Detroit, of which 1,500 will be removed. Not a big number, relatively speaking. Detroit remains a vibrant market with a diversified group of employers, related and unrelated to auto. Question is: will further closures and restructuring of the auto industry follow? Stay tuned.
I just recently bought your book “How to Pay Your Mortgage Off in 5 Years” (the 2018 edition). Awesome book, thank you! Great content, great book. Question for you though, how do I get the downloadable calculator that you said in episode #364 of your podcast would be in this book?
What are some places in the midwest that are good blue collar neighborhoods like you describe? The types of SFHs you like to go for are $80k+ in any county around me here in FL, and also need a lot of rehab.
Thinking about going long distance.
Clayton, does a quit claim deed transfer title or deed? The bank says they will hold the deed until the HELOC is paid. But that shouldn't matter if it's the title that I'm transferring, correct? I just called Corporate Direct, my title company and a few of my mentors, and no one can confirm this. I don't want to call the bank
In Canada you cannot find less than 450 k home..There no 50-60 k !
Do you have consultant here in Vancouver Canada?
How does your company work with helocs? I’ve seen that your turn key rentals are at or below market value. If I wanted to refinance, it wouldnt work. Do you do something else with people using helocs? Thanks and we love all the videos!
Notes/Study Guide to How to Pay Off Your Mortgage in 5 Years by Clayton and Natali Morris
The point of this book is to help you pay off your mortgage. Keep in mind this makes sense for your primary residence, which is a liability, not necessarily for your income properties.
CHAPTER ONE: What Is Your Mortgage
When you buy a property and get a loan, monthly payments are set up. These mortgage payments reflect a number of things:
Principal: This is the amount you borrowed. When you have an amortized mortgage, a portion of your payment pays down the principal balance. For example, if you borrow $100,000 a piece of your payment decreases so it would become $99,800 and then $99,600.
Interest: This is your “fee” for borrowing the money. It is always based on the principal amount. So, you will pay interest on $100,000 your first payment. Then, you pay interest on a slightly smaller amount of principal for your next payment. This is why paying down your principal is critical to getting your mortgage paid off.
Equity: This is not part of your payment but the part of your house that you actually own. If your house costs $100,000 and you still owe $75,000; you have $25,000 in equity.
Taxes and Insurance: Often, lenders will require that taxes and insurance money are collected in an escrow account so it is paid without question. This protects them but since the money is due annually, you should try to have that money available for yourself so you can earn with it. If you can be the one who pays the taxes and insurance, it is better than the bank making money and interest with your money.
PMI: If you are a larger than normal risk to a lender, they will often require Private Mortgage Insurance, a payment that protects them if you default.
The Biggest Damage to Your Home Finances (The Beast): InterestThe most critical thing to remember is that interest is paid on what is still owed on the loan. Thus, if you reduce what is still owed, you pay less interest. Here are some types:Interest Only Loans: These require no principal payment. Monthly payments are lower but the balance of the loan is never reduced. They also have a balloon payment due at the end, which can devastate you.
Amortized Loans: This pays the interest as well as a portion of the principal. The amount for interest is much higher in the beginning and the amount on principal is much higher at the end. (Look at the Amortization Schedule in the book to see how it works.) The monthly payment never changes but the amount toward interest or principal does. When you look at an amortization schedule, you might be dismayed to see how much interest you pay. Buying a $200,000 house can actually cost you more than $300,000!
CHAPTER TWO: ATTACKING YOUR MORTGAGEThere are two things to consider here. In regards to your mortgage, your enemies are interest and time. Interest is simply an expense, it costs you money. The longer you have the mortgage (time) the more money you pay. Strategies to reduce interest without time aren’t as effective as strategies that do both. For example, putting a little bit extra on principal every payment will reduce the total interest paid but won’t do much with the time because it only very gradually reduces principal.It is more effective to make a large cash payment on principal as early as possible. It makes the interest part of the payment PLUMMET. The key, of course, is getting the large chunk of cash to make it happen. That’s what this book is about.
CHAPTER THREE: Using a Home Equity Line of Credit
To understand this section, you need to think in terms of interest rates and payments. If I loaned you $150,000 dollars and you paid me an interest rate of 10%, it would cost you a lot of money. Now, assume a month later you could borrow $50,000 from someone who would only charge you five percent. You borrow that and pay me $50,000. Now, you’re paying 10% on $100,000 and 5% on 50,000. You focus on paying the smaller interest rate loan as quickly as you can because then you can borrow more to pay the higher interest rate off. It’s that simple. Let’s dive into it.
With a Home Equity Line of Credit, you are obtaining the lower rate loan using the equity in your house. It is like any other line of credit (you’re familiar with those) except for two critical differences. First, this line of credit is based on the equity of your home, which is the value of your home minus what you owe. Second, it is usually handled like a checking account. You get checks with which you can draw against the credit line. Home equity lines of credit are important for two reasons. First, you only pay interest on what you have actually borrowed. Second, they are usually interest only, so they have small payments.One helpful thing is to think of a home equity line of credit almost like a credit card. If you have a credit card with a ten thousand dollar limit and you have spent $9000, you have $1000 available. That is important to think about with this plan.
If you have a $200,000 home and you owe $150,000; that means you have $50,000 equity and your bank will usually give you $40,000 in a HELOC. Assume you take that line of credit and immediately use all $40,000 to pay down your regular mortgage.Your debt becomes:Mortgage: $110,000HELOC: $40,000That’s still $150,000. However, since you have paid substantially on your mortgage, the amount of each payment that goes to principal instead of interest has dramatically been reduced, meaning you will eliminate it much more quickly.
Here is how you accelerate payment of the HELOC. Since they work like a checking account, you can set up direct deposit, making all of your income go to the credit line. Since each deposit frees up that credit, you can still use the money to pay your monthly expenses. However, you will use the extra to pay down your HELOC. If you do that aggressively, your HELOC would be eliminated well ahead of schedule. For example, if you could manage $2000 per month, your HELOC would be paid off in 20 Months. That means you would only owe the mortgage. Since more of the payments for the last 20 months have gone to principal, the mortgage now is at about $102,000.So you do it again.You could just do the $40k, again, which would mean your mortgage would be $62k but since you now have a lot more equity in your home, you could do much more. At this point, you have more than 90K in equity, so you get a HELOC for $70k. Then, you put that on your mortgage, which is down to $32k now. You pay the HELOC back at $2k per month for 35 months the same way. Because of the lower principal, by that time your mortgage will only be about ten thousand. Use the HELOC to pay that and presto—no mortgage! In five months, your HELOC will be paid off too!
Keep these tips in mind:
1) Shop local: Local banks are more likely to work with you for customer service reasons. It’s a good idea to have your HELOC and your mortgage in different locations.
2) Set Up Your HELOC like a checking account: That’s an important part of this plan.
3) Since HELOCs often have small charges or notifications for transactions. Try to limit them. Put as many of your expenses as possible on a credit card and pay it off every month. It’s a bonus if you use a credit card that gives you miles or rewards.
CHAPTER FOUR: BORROW FROM YOUR OWN RETIREMENT ACCOUNTSThis is the same principal as before. You simply put a lower interest rate to use against a higher. However, in this case it is lower because when you borrow from your retirement account; you are paying the interest to yourself. Follow the same principles as above. It isn’t possible to be as aggressive as you would be with the HELOC but it can still be very aggressive.
CHAPTER FIVE: Make Extra Principal PaymentsThis is the least effective strategy but here’s the key. One extra principal only payment can save you more than four years of payments. Four years!
CHAPTER SIX: ConclusionRemember—a liability costs you money and an asset produces money. It’s that simple. If you have debt for something that doesn’t produce cash, pay it off or sell it. These strategies can be used for any debt as well as for the mortgage. Once you’ve finished, celebrate your great job!
I agree 100% with you, the question I have is if your rental property is already in an LLC the only banks I found would require you to switch title back in your personal name while they did the heloc and then after the heloc was approved then you could switch back to your LLC. What about the liability risks during this period? Does it make it easier for an attorney to pierce the veil in the future because of this? Are there any banks that will do a heloc under an LLC?
Is 5.75% interest rate too high for a HELOC to use for investing in rental properties?
Should I set up the LLC in that particular state prior to purchasing a home with your company?
I just saw you on Fox News about using 401k to pay down a mortgage, and now using a heloc (with variable rate ) to buy investment property, are u fucking kidding me
I recently used a Heloc to buy my 3rd rental, I profit about $800-$1000 a month on all of them. The problem I'm facing is that I'm trying to buy a 4th rental but I can't find a bank that wants to give me a mortgage. I was wondering if you had any information to help me out. Thanks
Thanks for this information. This is my 3rd time watching this.
FYI, if you loan your Business the. Money and charge a small interest. you can use the rental income to repay the HELOC and only pay a small personal tax on the interest.
Secondly, the your business will not pay taxes on your profits because overhead cost low.
This is how I understand it. Please speak to your acct and/or lawyer to see if this strategy would work for you.
Excellent Video. Thank you!
@ 17:40 John Guthrie asked if you could have two HELOCs on your property; you assumed the first HELOC was in second position, but there are banks/CUs that have a first lean HELOC product (see ReplaceMyMortgage.com). To answer your question as to “why would (I) do that?”, because there are banks that will give me a 125% LTV second position HELOC (Not to say that it is/isn’t responsible).
Do we need a job to get a HELOC?
How do you avoid co-mingling when using a HELOC? My fiance's and I sign papers Monday for our heloc. When we purchase a rental property with our heloc would it be in our names or our LLC? And how would the rental income be transferred to make payments of the heloc without co mingling?
Hello Morris would you recommend a first-lien position HELOC or would you recommend a second lien position on primary with he's interest rates Rising which would be best
What do you think about a Heloc as a first position to pay off our primary mortgage
“How to Pay Off Your Mortgage in 5 Years” Is this the book you reference in the video? Thanks great stuff
Any contractor recommendation and property management company in Dayton Ohio ? Thanks!
Would getting a HELOC just for the down payment to get a mortgage be worth it? I’m looking at a property that has a tenant. I do not have the 60k in equity but I can get some of it.. and should I use as much of the equity as I can or just do enough for a down payment?
where do you buy $50k to $100k properties?
The properties you mention at 20min. They cashflow 700? or is that before expenses?
Question. 1, how you guarantee that you can find a personal to rent your rental home? 2, when you get your second home/ rental property mortgage, i understand you can get the down payment from your HELOC, but where you can get extra cash flow to support your second mortgage? Unless your income is pretty good.
So I have a question. It's a bit involved but I would really appreciate your input as I don't have a mentor I can reach out to about this. I'm getting about an $8k bonus and roughly $2.5k tax return. I was thinking that I could invest in my own house which was appraised at $240k (with about $202k in loan left) in Farmington Hills MI. I was thinking; Invest the $10k into my house (needs a new kitchen/appliances bad, and some floors). Have my house re-appraised, then use a HELOC for a greater amount? I would then take the HELOC and apply as you suggested to a Rental. I'm thinking in Warren. Thank you for all your videos, I'm trying to go through them all.
Would you use a HELOC to buy a car and use it as an UBER? Is that a good idea? Or a regular car loan or lease is preferable??
How would you start in a market like California (around SF) where everything is over 400K???
I know this is an older video – hope you chance upon my question. I don't own a home; but I have savings that I will soon begin investing in rental property… My question: when I own one rental property free/clear can I get a heloc on the rental property (rather than traditional mortgage to take out equity)? This is assuming the rental property is owned in an LLC (not by me personally).
Do I have to loan out my heloc money to my LLC to use it for buying investment property?
I know I'm late but could you take a heloc and use it to fix your house up then renegotiate the heloc to gain more equity out of the house you just fixed
Tax? LLC? Immediately? Prop management?
Thank you so much I learned a lot you think it work for my case since I have only 3,75 % still on 190,000 with almost other 150,000 Helioc on my house thank you
When calculating ROI, should i facor in the monthly heloc payment into the monthly expense for the rental property?
Hi morris, awesome information as always. I'm getting ready to try out the single family investing For maximum cash flow. I was wondering if you have written or, could recommend any good books on .purchasing single family homes for investors? Thank you an, your wife for all your hard work .And information.
From Nino, thank you guys a million.
Thank you Mr. And miss Morris again
Building is appraised at $750k. $390k is owed on the mortgage. That means I can take a 80% HELOC of $360k? Therefore, I can put down a 10% DP on a $3.6 million rental property?
Can you do that with commercial properties
I am scheduled for a call with your company but it is a little while from now, I’m starting my journey in Florida possibly (Orlando) area using my VA loan, am I even able to buy through your company in that general Orange County area? I’m asking because you say your properties are around 70k and below and that doesn’t seem to be in the area I am aiming for,
How much of a distribution can you take from your llc rental business?
Or how much do you recommend to take of distribution from llc to yourself and how much do you take?
What is LLC?
I really enjoy your channel, it's very informative and you are a good, clear communicator. My question is this, on these 3 bedroom / 1 bath 1,000 sq ft homes, do you use the HELOC for the entire purchase or just for the down payment, and use traditional bank financing for the remainder? Thank you.
Hi Clayton, that link for the 30 min call is not available. Is this available somewhere? I'd like to discuss my 1st investment potential. Thanks.
If every single paychecks deposit into HELOC account, how your income pay for the regular living expenses? Does it still need the monthly payment? What is the important terms to shop for HELOC?
clayton my primary residence is a rental not owned by me however i own a home that is a rental and i dont plan on purchasing a home anytime soon. Question is can I use that owned rental property to get a heloc? or do i have to do a secured loc ?
All very good and well, but on what planet do you buy a $60,000 dollar house? That would be a good downpayment, barely 20% in most areas.
I Live in the Boston area, and i wanna know where do you buy houses for 40k and get 800 dollar rent In the USA?
I can't figure out , how could you earn 9% to 12% net ?? If you keep buying 40k to 50k properties. That mean it's a very low cost of living state. No people are going to rent. People will buy their own home . Instead of rent .Therefore rent market is suck. Sometimes It doesn't making sense. 2+2= won't come 4.
HELOC don’t make sense. Lets say i take a credit on my home for 25k so if I had a 225k mortgage now I owe 250k cause I’m using 25k to pay the principal. Then i’ll pay it off to zero and start over again. However every time I creat new dept I’m at the same number’ how you pay off something from the same money you’re using. It the HELOC a separate credit you get from the home cause if its not I don’t get how I’m paying something off with the money I’m borrowing.
Hello I’m confused. I am just wondering if i were to get a heloc to pay down my mortgage is that use it expensive (higher interest rate on the heloc) debt to pay down cheap debt ( interest on my mortgage)
I'm a little bit confused in here now, why do you want to use HELOC to pay for the original mortgage? from my understanding, isn't the original mortgage has a better rate? if you use HELOC to pay for it doesn't it means you need to pay more interest for the same money now? Thank you.
Glad you brought up this topic. I had been contemplating between refinancing and selling an investment property to unleash the potential of the equity built over time. Now I know just what to do next. Thank you!
How do you pay off the HELOC? Please show us the numbers…. thanks
If you have a HELOC, are you able to sale your home and keep the heloc?
A home may not be producing cash flow but it can also be NOT eating up your free cash flow (producing negative cash flow), which is almost just as good. Think of it this way, once your mortgage is paid off, you're probably only paying taxes and insurance (and some maintenance of course), but essentially your free cash flow will be much higher than what you'd otherwise be paying for rent.
Great video thank you so much
In what part of the US can you get a 3-4 bedroom house for $80k and to have it rent out for $900 per month? How does this strategy work in places like California or New York?
Why wouldn't u pay off your primary mortgage?
Technical note: "performing asset" is a subcategory of "asset." Your house most certainly is an asset, by definition. The term "asset" does not imply "performing asset," and even performing assets are not at all times performing.
Clayton I love your videos! I just open HELOC and I’m purchasing my 2nd investment property in Trenton Nj… is the audio book available ?
Is the original home used as collateral for the heloc in that it is repossessed by the bank should the heloc loan be defaulted?
Why would Morris Investments sell properties that are cash flow positive?
i and my wife have a lot investment in heloc and everything fine we are proud of it
heloc is very useful its save a lot for you
Where can I get approved?
How can I get approved?
I have no issues using Heloc thank you
Heloc helps me and my friends, this is wonderful
I want more investment and I got more by having Heloc this year if good for me
I got favored in 2019 and God bless me by Heloc
So a HELOC works for a regular home, and I even believe that it works for a mobile home, when it is associated/attached to land. Is there any strategy that allows a HELOC to be used with a mobile home, that is not associated/attached to the land? If so, what might it be?
Hey Clinton , thanks for the video , it's super helpful! my only question is, if i buy a property under my LLC , which banks won't be afraid to give me HELOC? cause most of them wants to lend me only if it's under MY name 🙁
So excited I found your channel . I want to stop being a chicken little and move on to real estate investing. Do live on the west cost ( Vegas) maybe your company can find property out here for us.
Solid gold info as usuall.
Clayton , I have a 4 unit property , value may be around 550k with a 175k heloc 137k bal on heloc no mortgage , im now paying alot more principle every month to bring down my heloc balance , i need to pay down the heloc so i can purchase some of your class C or B homes . or i can try to increase my heloc amount how would you tackle ,this situation ? thank you .
How do you get cash out of the rental LLC to pay the HELOC when it's your personal home?
I can't find the answer to my question anywhere online….WILL A HELOC AFFECT THE MONTHLY MORTGAGE PAYMENT AMOUNT??? I own a condo in Whittier, CA. Worth almost $300K and owe $110K on it. Haven't refinanced or done much with the equity because I am worried that the monthly mortgage payments will increase, but I really want to purchase an investment property or second home in Nevada with the money from the HELOC. Any help would be appreciated. Thanks for more great content, Mr. Morris!!
but what if your heloc is not enough to buy another property? can you use the heloc as a down payment to get a loan for a property? im from belgium we dont have cash our refinance we only have heloc but the cheapest home you'll find here is 100k making you 700/month MAX after renovations.
Hey Clayton, I’ve watched and followed your channel for years. I’m about to turn 19 and saving for a house so I can use this heloc investing strategy. I have two big questions!
1. yes the heloc is not a loan or check from the bank, but don’t you have to pay it back eventually?
2. Like I stated above, I’m in the process of saving to buy my first house to use this heloc plan. What is a good price point for a home to buy that would produce enough equity to use in this plan.
I have 80k in equity in my home. I saw a home here in Chicago for 200k. I want to use 20k of my equity for a down payment. Will the bank finance me the other 180k to purchase the property?
Can you get a heloc on a investment property?
Thank you so much for providing all that helpful information through the videos
Is there any upper limit where a heloc would NOT make sense? I’m looking at a 200k duplex which I’m considering purchasing with a heloc (I have a lot of equity from a primary residence). Wouldn’t monthly payments on this be astronomical?
If the home from which I am taking the heloc is in another state (previously my primary residence), should I get the heloc trough a bank in that state, or a bank local to me in my current state?
Im curently going to pull some sweat equity out of my first investment home inform of a heloc witch i think is better than a refi because of the cost, even though wouldnt it be better not to owe another debt and cash flow even more and do a refi cash out even though you lose more up front in fees?Also how do you go from to propertys to 3 if your income to debt is at full capacity?
I have a question: why does it matter how much equity you have in your property if it’s LTV meaning they loan based on the value of the property. So if property is worth 400,000 and it’s 80% LTV which is 320,000, does it matter if I don’t have 20% equity which is 80,000? Also, why does it matter if we have 40% equity vs 50% equity? Why would the HELOC amount change to more or less than 320,000?
How to pay off HELOC quickly? It’s hard enough to find property that generate positive cash flow with 20% cash down. Finding opportunities that can pay off HELOC at the same time is even more challenging.
THANKS! Powerful information ??
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