Velocity Banking: Take Control of Your Finances
Introduction
- Presenter: Christy Vann, Vantastic Finances
- Topic: How banks negatively impact personal finances and how to regain control using velocity banking.
Problem with Traditional Mortgage Payments
- Banks encourage long-term mortgages (e.g., 30 years).
- High interest rates (e.g., 7.75%) lead to paying more interest over time.
- Most mortgage payments go towards interest rather than reducing the principal.
- Example: On a $135,000 mortgage, a couple pays $967.16/month.
- In month one, $871.87 goes toward interest, only $95.28 towards principal.
- Total interest over 30 years: $213,176.35.
Key Insights from Mortgage Documents
- Actual interest rates are much higher than they appear (e.g., 3% rate can mean a real interest rate of approximately 60%).
- Importance of reviewing closing documents to understand true interest rates.
Alternative Strategy: Using Lines of Credit
- Proposal: Use a $10,000 line of credit to pay down mortgage principal.
- Calculate interest on lines of credit based on average daily balance.
- Pay back the line of credit using monthly cash flow.
- Scenario: Couple has a $1,100 monthly cash flow.
- Use this to pay down the $10,000 line of credit in six months.
Benefits of Using a Line of Credit
- Significant interest savings by making lump-sum payments on the mortgage.
- Example: A $10,000 lump sum payment can skip seven years on the amortization schedule, saving $65,520 in interest.
- By continuing this strategy, the mortgage can be paid off in 77 months (6.5 years), saving $176,373.35 in interest.
Conclusion
- Velocity banking involves using lines of credit to efficiently manage finances.
- Encouragement to take action and avoid high-interest loans.
- Reminder to re-evaluate refinancing options and understand the impact of amortized loans.
- Empowerment: Control your finances, reduce debt, and achieve financial freedom.
Call to Action
- "I am poor no more in 2024!" - A declaration for financial freedom.
- Encouragement to ask questions and seek further understanding.
- Anticipation for a financially prosperous future and continued learning.
Note: This summary encapsulates the strategies and insights shared by Christy Vann on how to regain control over personal finances by avoiding traditional bank practices and leveraging lines of credit effectively.