Advantages of an LOC part 2

Posted by property on Aug 20, 2013 in Financial Advise | 0 comments

  I told you before how much more you can do with a line of credit than you can with a standard loan. Now, let me explain what you are looking for. Most large banks provide the kind of line of credit we want. There are a few things to ask for: – A variable interest rate (not my favorite either, but the way the interest is calculated comes out cheaper anyway.) – Open Line of credit – This is important, some banks offer a LOC that is structured like a loan. You don’t want that; you want as close to a checking account as possible. The account should come with either a debit card or checks and allow you to withdraw or deposit at any time (at least five withdrawals per month). This allows you to deposit income into the account, enabling you to keep the average daily balance low for most of the month and pay bills with that same money as bills come due. What are we going to do with such an account? This account does not charge interest until you pull money out, but as I said earlier, you can control how much interest is charged.  Now, use this account to pay off the other debts, ESPECIALLY YOUR MORTGAGE. I will make a 2-5 thousand dollar payment on my mortgage every so often. The interest that I cancel on my amortization schedule is almost double the interest charges on my LOC. One payment can cancel up to $5000 in interest on my mortgage and the interest I pay in my LOC to do this runs around $400-$1000. You’re simply paying $1000 to save $5000; who wouldn’t want to do that? Simply make a payment to the mortgage of around 30-50% of the amount in the LOC (never pull out more than 50% of the total line), then put your income in the account to cancel interest. The money you save (don’t spend) stays in...