Pros and Cons of Velocity Banking
One thing I'm asked pretty regularly is if Velocity Banking will work for a specific circumstances, I always ask if they know their Four Major Numbers and from there we can get into the pros and cons.
Pros to Velocity Banking
Pay less interest: Because the velocity banking strategy requires free cash flow, the length of the mortgage is significantly shortened. Because you are paying more up font you have less compound interest on the principal amount owed.
Pay off your debt early: Velocity Banking is one type of debt repayment strategy that will work to help you pay off your debt more quickly. (Example in the video below)
Free up equity: Mortgages don’t allow you to tap into your equity, a home equity line of credit (HELOC) combined with velocity banking lets you use money that you wouldn’t ordinarily have access to.
Cons to Velocity Banking
HELOC adjustable rates: You may not be able to find a bank that offers fixed rate HELOCs. This may put uncertainty on the amount of interest that may be charged over time.
Credit Score: To qualify for a HELOC, you do need to have a solid credit score. There are other lines of credit you can use that will help you build your credit if you are unsure of how to recover from previous shortfalls.
Requires free cash flow: Velocity banking requires extra money (Cash Flow) this is what we use to pay off parts of our outstanding balance. I recommend having at least $50 of cash flow to make Velocity Banking work for you.
As you will come to know I like to include real life examples of Velocity Banking so you can make an informed decision. This is just one example of the strategy check out the video below to see what Velocity Banking is all about and whether it will be a good fit for you!