We Tested Velocity Banking with Real Numbers | Does It Actually Pay Off Debt Faster?

We want to see real numbers, and that's what we're going to do. I'm going to use Velocity Banking to pay off my mortgage faster. We have to keep things in perspective. This is my concern. Velocity Banking might have had an earlier leap, but then it lost its leap. It's an emotional decision. We reduced the interest cost from $822,000 down to $799,000, so we picked up about $23,000. If the math makes sense, the math makes sense. Go ahead and do it. I would personally would rather have it be a little less efficient and hold on to cash because of... All right, ladies and gentlemen, the content that you guys have been requesting, part two on this whole velocity banking debate, it's more of like a conversation and we have a bunch of amazing people in this video. We have Todd Langford, founder of Truth Concepts. We have Kim Butler, who's going to be running the computer and also being a part of this conversation. We have Daniel Romberg, who is... a good friend we've had many videos in the past and then we have denzel rodriguez who i do not think needs any introduction who also has an amazing youtube channel and we've done collaborations and uh in full transparency we did this video a few weeks ago and there was what we found is that there are a lot of questions a lot of moving pieces and so we all agreed to come back and be able to shoot a a better video for the viewers and so how we're going to go about this is we've all agreed on the data and the inputs. And so one of the common requests is, okay, we get the big picture philosophy conversation. Now we want to see real numbers, and that's what we're going to do. And so I'm going to hand it over to Todd and Kim, who are taking the data that actually Denzel and Daniel brought to the table and said, these would be great facts. We're going to have Todd walk through that. We're going to look at the calculators, and then Daniel and Denzel will have the ability to ask questions. But we want to be as respectful as possible to keep things moving, but have time to ask questions. And I just want to thank you all. I have tons of respect for you all and excited to roll up our sleeves and look at the numbers and see how this all plays out. This is fun stuff because it allows us to really, like you say, get in there. We're going to look at the math, and we also have to step outside of that sometimes, right? Sometimes we violate the math because of somebody's particular situation. There might be a risk situation where... The pure math kind of makes, puts somebody in a riskier spot than not doing it. So there's all kinds of parts around this that we have to really acknowledge. And so we'll look at the pure facts with a calculator, and then hopefully that's where some of the discussion will come afterwards as well. So what we're looking at is, originally there was a $660,000 mortgage at 6.75%, but we are now, we've paid 16 of those. payments. And so we're in the 17th month of this mortgage and the current balance is $650,514. So we've got 44 months left at the 6.75. So we can go ahead and put that information in there. So current balance of $650,514, what's left of $344,000 and the rate of 6.75%. And let's put our months to illustrate. 360. And let's also, let's back this up because this actually all came together on April the 1st. So we'll go back to April the 1st. Let's make the pay date on this mortgage the 3rd. Okay, so we can see here $4,281. It's actually $4,280.75 per month on this mortgage payment. Now, what I want to do first is just look at the idea that's talked about a lot around monthly interest versus daily average interest. A HELOC works, most of them use this daily average interest rate that they use across the time frame or the daily average balance. And so before we even get too far into this, I want to just bring that out and see what that looks like. And so I'm going to look at this and then I'm going to compare this. Turn off that sync button, if you would, Kim. And let's go to B and let's turn on a new HELOC and turn it off up there in the upper right. All right. And so. Now let's turn on the current HELOC. And we're going to turn off the mortgage on this one. We're going to put the same $655.14 here on the current HELOC for the same time frame of 344 months. And I'm going to put $6.75 in here. So the difference between the way this HELOC is calculated is and the mortgage is just daily versus monthly. Okay. Now let's look at our graph. Okay. So what we see here is there's actually... no difference across this time frame. Sometimes, depending on the way the months fall in, can be a little bit more or less on one or the other just for that differential. And so the daily compounding, which is talked about as being a big deal, when the same dollars are flowing, the results are the same, whether it's daily average or monthly. And think about this. Like I say, they can be a little bit different sometime, depending on on the particular scenario of when those payments get made. But what happens is anybody who's ever bought a new house and they still have a balance on the old one and now they've got a new loan and they're going to pay off the old one or sometimes that happens with a car as well. When you buy a new car and you still have a balance, you ask the bank, what's the payoff on this? And they always say, well, it's this for the next three days or the next four days. You know, it's in a limited time frame. And the reason for that is they're actually doing daily calculations as well. But on a normal loan, you have the same amount borrowed across the whole month. So the daily average and the monthly is the same. It can be a little bit more because of the time frame on the compounding. But outside of that, they're the same. So here we have on our graph on the left side of each of the pair of columns. The left side is option A. The right side is option B. So in this case, the left side is going to be our mortgage. Just the regular mortgage that we started with on the right side would be the same amount as the mortgage, all dumped over to a HELOC and looked at as daily average interest charges across the time frame. Same payments. And then the two lines, actually you just see one line up above. since it's following the same track, they both... have nearly the same amount of interest. We can see that the interest amount paid on the HELOC, in this case, is actually slightly more than the interest paid on the regular mortgage. And the reason for that, we can't really see that differential up here, but the reason for that is simply because we're having a higher, since it's charged daily on the interest, it actually has a slightly higher interest charge, just barely than the monthly would, because it's the compounding periods more often. Question so far, Denzel, Daniel. No, I'm good. I agree with everything and the inputs look good. Thanks for walking us through that, Todd. I'm good as well. No issue. The only input I would add here in the velocity banking world where I think a lot of people get confused is that point that you just made. Is there a difference between simple interest and or compounding or monthly compounding? amortization loan. So what you've proven is they're the exact same thing. Is it safe to say, Todd, that the difference between, say, a 30-year amortization loan or a 30-year HELOC is the means of how you contributed money to each other? Yeah. It's cash flow that makes the difference. It's not the daily compounding. And a lot of the sites that are out there and different things we'll talk about. You know, the magic in the HELOC is the fact that it does daily average compounding versus a bank that does monthly. And that's really not the differential. In all reality, if it was the same 6.75 in both, the daily compounding, because more compounding periods, would actually be slightly higher, as we see here, by, you know, like $1,000 or something. So it's essentially the same, whether we do monthly or daily compounding. Unless we're putting money in there. Now, when we're putting additional dollars in there, that's going to change. But a bank's going to do the same thing. Like, if I had a regular bank loan that was normally being compounded on a monthly basis, but we dump some extra money in there mid-month, they're going to allow for that. So they're going to calculate that fact that, hey, we didn't have that whole amount borrowed the whole time frame because we put some money in there mid-month, right? And they're going to make an adjustment for that. And it's the same reason, like I say. You know, if you pay that loan off early because you're getting a new car, you have a window of how long that payoff amount is good. And they're giving us some leeway when they do that because clearly if they were compounding it daily, they would say, ah, today it's this, but tomorrow it's going to be slightly more, and the next day it's going to be more. They just kind of put that out on the wash and say, well, we'll just give you this window of when you can pay it off. So, all right, so let's now go in here and look at this. So we're going to go back to A, if you would, Kim. And let's turn the sync back on. We'll keep these synced together. All right. And so here is our current strategy of the $650,000 compounding out all the way for 344 months. And what we want to contrast that with is what would happen if in month one, because we have a little bit of differential, our house value has grown, and we've got some space in there and we qualify for a HELOC. And we could apply $74,000 or borrow $74,000 from the HELOC to apply against the mortgage in month one. And then in 13 months, we can do another $65,000. Okay. And the current rate on the HELOC is at 5.99. So let's look at that. So here's A. Let's go to B. Let's add a new HELOC. And what I want to do is put in that amount one, put $74,000. And then in amount two, we're going to put $65,000, and that's going to happen in month 13, so 12 months later. All right, so now let's take a look at our graph and see where we are. So here, what we're going to see is that our loan is actually running. Oh, we don't have rates in here on the new HELOC. So let's say the month, the time frame on this, the time frame, Kim, is $344 on the month's left. and the current rate of 5.99. Okay. And the payment day of four. And you can change those to May or to April 1st. It's not going to matter because we're not going to put fees in there. So down on the bottom, what we see is we reduced our interest cost, right? We went from 822,000 down to $7.99. So by doing this, it actually increased. the efficiency of this by reducing some interest cost. We reduced the interest cost from $822,000 down to $799,000. So we picked up about $23,000 in interest savings. Or put another way, we paid about $23,000 less in interest by doing this. And the reason for that is we went from $6.75 down to $5.99, not on the whole amount, but on $74,000 and then on $65,000, right? So that's going to reduce the amount of interest that we have to pay. But that mortgage rate or that HELOC rate of 5.99 was for a limited time frame. So now in 13 months or in 12 months, it's going to go up to 8.5%. Prime plus 1.5% and based on current conditions is where that would be. So 8.5% going up on an annual basis in 12 months means it would actually cost us, if we stayed on this track all the way out, about $50,000 more paid in interest. Now, again, think about where we are. I'm just trying to push this together one step at a time. We haven't applied any additional dollars anywhere. We're just looking at what would happen if we continued that process out across the whole time frame in either of those two scenarios. It would actually cost us a little bit more. But that's the beauty of what happens. happens some of with the HELOC is when we can apply that extra money, we're paying it down faster at the front end before we get into those more expensive rates. Okay. Good. Okay. So how are we going to do that? We're going to have to take the difference in our incomes. And so what we're going to do is we're going to fill out the income information over here on the upper left. And so the net after-tax annual income is $185,400, which was the same as $15,450 a month. And we have monthly expenses, not counting the expenses for our mortgage payments. All of our other expenses, taxes, insurance, electric bill, living expenses, everything was $6,669.25 per month. Six, nine, two, five. Okay, now by adding that additional cashflow, so let's slide this over, 9.25. All right. And that actually didn't change anything on our debt structure at this point, but it does allow us to save that difference. Currently, just accumulating that out into the future. Right. Now, what we can see is that if we just put that in a tin can across this time frame, that differential, our asset value, if we kept our mortgage the way it is, would be a million six hundred eighty eight thousand. but it'd be $1,635,000, so about $50,000 less with the HELOC because of that increase in the 8.5%. And that's why we're going to accelerate that payoff. So what we're literally going to be able to do, ideally, is with that extra money that we have, is take our whole paycheck at the beginning of the month. Throw it into our HELOC, which is going to lower our balance. And since the HELOC is charging interest on a daily amount, the daily interest in that first day of the month is going to drop considerably. When we get to the 15th, we're going to have to take out half of our expenses. And so we're going to actually borrow against the HELOC. That's going to push our interest rate up for the next 15 days just a little bit. And then at the end of the month, we're going to do that again. We're going to borrow another half of the expenses, and that's going to push it up again. The next month it'll drop it because we get to put our whole paycheck in there and continue that process. So we get to take advantage of those days between our expenses and having our whole paycheck reducing the amount of our interest. Okay, so what we see here is we've got some funny little lines down here at the bottom. The debt is the entire red line, but where it has the yellow around it, the dots, it means we've got that much in assets above covering it. So at any point in time, we could liquidate our assets and pay that piece off. So we've called that the amount of covered in the month loan balance. So that's the amount of loan balance we have in savings at that point in time. Good. That is keeping our current mortgage all the way out. And we can see on this line here, the loan would pay off in 344 months. we'd end up with an asset value for the difference between our expenses and our income of $1,688,000. Again, if we just accumulated that in a checking account, 10K and whatever else, it's not earning anything. And at the end, our net worth basically turns out to be the same amount as our asset value. But what it marks is the difference between what we have in assets less any debt that we would have. At that point in time, both the debts are paid off because we're going out to 360 months. So it's the same amount. And what we see is option B going with the HELOC because of that increase in interest rate actually has $53,000 less in value at that point in time. But we haven't deployed the velocity banking or HELOC strategy of adding our additional payment directly into that HELOC to go against that debt. And so we're going to do that now. We're going to add our extra cash flow rather than putting it into the... the tin can, we're going to apply it first directly to our HELOC to get rid of that debt. Okay, now look what happened. This HELOC paid off in month 97, so a little over eight years out, and we can see that red line on the right-hand side of the pair goes away right there in month 97. We can look up in our box in the upper left-hand corner of the graph and see, hey, The payoff month was month 97. And now we see that the HELOC is actually $628,000 better than continuing our current strategy of just paying the mortgage on option A. All right. Now, what if we actually earned some interest on that differential? What if we earned, we're going to start with 4.5%. So our savings interest rate is going to be 4.5%. When we do that, we see that we have quite a bit more money out there in the future, in excess of $3 million. And we see that, again, the HELOC option presents us with $459,000 better. And we also see from an interest standpoint that we've gone from an interest cost of continuing the mortgage of $822,000 to using the HELOC strategy and reducing the cumulative interest to $193,000. Okay. Before we take it further, any questions on where we are right now? I'm good. This is very helpful to go through these inputs and explain each step of what we're looking at. It's wonderful. Thank you. Yeah, so for me, just to clarify, and for the audience listening as well, what you just said is option B, which is velocity banking, doing it all the way through, we could approximately, estimation, pay off your home in about eight years, a little after eight years. And from that point on, I now have an increased amount of cash flow because I no longer have the mortgage payment. So you're saying the existing cash flow, $4,500 plus no longer paying $4,280, combine that together, stick it in an account where I can earn at least 4.5%, correct? Right, 4.5% net of taxes. Yeah, so that's about 22 years of growth, and you're saying... That. person that did that versus the person that did not pay their mortgage off and just earned four and a half percent on $4,500 is behind about $459,000. At this point, you're exactly right. Yes. Perfect. And we can see here, look at like, you know, I'm going to guess here, month 270, somewhere along in there. That's about when a crossover point happens with our the amount of cash we have. So along the way, because we were putting less against the mortgage, the person who had the regular mortgage has more in their savings account. But because we've gotten rid of that debt early on the HELOC and they're putting even more in there, there is that crossover point that then grows to $459,000 better. Good. Say again, the crossover point? See right there where the cursor is? That's about where the crossover happens, where the HELOC, because The HELOC hadn't had as much time to put money in the savings, right? Because they were putting all of it towards the HELOC. And so that's about where the crossover in assets occurs. Gotcha. That is clear. Thank you. Okay. So, yeah. So now let's, there's something else that I want to look at, and that is the tax deduction. Because the value of this would actually, the tax deduction alone on the... the interest we're paying on this mortgage would exceed the standard deduction. And so we would be wise to take itemized deductions, which a lot of people get kind of fooled by that because the amount of the standard deduction is so high, they tend to just check that box and forget about some of the other pieces. But even if the mortgage deduction only got us to the same level, it would also open up our ability to have our charitable deductions and other things actually deductible. So it could have a huge impact. on what we have out there having that deduction. So because all of our Schedule A deductions are lumped together, and if we don't have enough to get over the threshold with just certain pieces, then we just take the standard deduction. But here, this alone would get us over. So if we look at a 22% bracket, which is about where this individual would be, based on this $185,000 of income, and we turn on the tax deduction on the mortgage, It changes the... the benefit of the HELOC a little bit from 450 down to 151,000 because the accelerated payoff on the HELOC gets rid of that mortgage deduction faster. And so we have the mortgage deduction up front, but it all goes away in that same 97 months. And so we'll lose any mortgage deduction we have there on that side while keeping the mortgage. Yes, we pay more interest. We also get a higher mortgage deduction. And so the differential there of giving that up versus versus extending it out, was about $300,000. So if that's available, that would be something we'd want to consider when making this decision as to whether to do this or not. The other thing is, as the same way that the individual is putting all their paycheck into the HELOC, we could have that extra $4,500. This individual that had their mortgage cut, could apply the extra $4,500 to their mortgage along the way. And if they were to do that, if we turn that on, then what we see is the HELOC option of the Velocity Banking is about $5,000 behind. It actually cost us a little bit in doing that. Even though it's paid off quick up here on the front, doing the same thing gets us, I would call that the same. $5,000 in $4 million over 30 years to me is pretty much a wash. Okay. So it's pretty much the same thing. The reason for that is the interest rate is slightly lower on 30 year mortgage. So if you want to just put dollar for dollar, you would be able to quote unquote, pay it off a little bit quicker because of the interest rate difference. Is that you got it? Okay. That's exactly what it is. So what happens here is if we can earn for only earning four and a half percent and our mortgage is costing us 6.75. Yes. It's deductible, so we're paying 68% of that. It's still more than 4.5%. So the option of either putting the money in a savings account at 4.5% or paying debt that's more than 4.5%, it's more, again, pure economics, economically beneficial to accelerate the payoff of the mortgage because we're not earning as much as we're paying on the cost. Yeah, and just for the record, Todd's not recommending this. paying off your mortgage as fast as possible. Because I think we could all agree that if that was the case, paying a 30-year mortgage fast could have... lack of flexibility and unknowns but you're just saying from a mathematical standpoint it's actually a wash or slightly ahead okay cool we're tracking i think we can continue to move on quick question because there was some additional variables thrown in here did we the at this point what we're showing is an individual making extra payments of 4 500 or are we showing the person is earning 4.5 percent for the first you know eight years at with $4,500 and then they're going to pay their mortgage off in one big... Good question. No, we're actually putting it in there all along the way. So we're just adding the extra $4,500 a month to the mortgage payment. So then wouldn't you turn off the 4.5% in this? It won't matter. No, because after it's paid off, then we're earning the 4.5. Okay, gotcha. So you're saying... Good question. Got it. So you're saying because of the tax deduction? The velocity banking strategy versus extra payments are the same performance? They're pretty close, yeah. It's right about the same. Again, in these interest rate conditions. I mean, that's the thing. And it is the rate that's going to dictate what happens, not the amount of interest. Like I say, in this scenario, we're pretty much the same. Now, the reason we're pretty much the same, again, is we're tracking and... keeping up with our tax deduction along the way. So we're keeping apples to apples of all of it, but it does require, again, keeping track of our tax savings and having that accumulate for us. The thing about it is, what if we could earn more than that? What if we earned 6% net? If we could earn that, again, we're still in the same amount overall, but that might change whether I want to pay that off. and accelerate the payoffs going to that other mortgage. And again, I would, yeah, as Caleb mentioned earlier, I would not accelerate the payoff, even if it was mathematically advantageous, just because I like the freedom and the access to the cash. But here, it even makes it, let's see if it makes it mathematically desirable to not accelerate the payoff on the mortgage. So let's turn off the extra cash flow going to debt A. and see where we would be. And what we see is it's actually $200,000 better not to do the HELOC and have access to the cash and keep our tax benefit the whole time frame and create additional cash and see what happens here. When we look like about where, so do this, Kim, change this to um, On our month to illustrate, not up there, but in the months to illustrate, let's change that time frame to, say, 100 months, just so we can push this graph down a little bit and look at a couple of things. So here we can see, you know, one pays off at 97 months, but look how much cash is available for option A by not accelerating the money to either the HELOC company or the mortgage company. We've got $680,000. Could I buy a 680 pay cash, which would, again, not something I would necessarily suggest, but could we pay $680,000 for a house? And even at a net eight, we're talking about $48,000 a year. So we would have enough to make this mortgage payment. My point is we could buy a house, have it pay our mortgage payment. We wouldn't have the mortgage payment anymore, so we could then start saving the mortgage payment and end up at the end of the time frame with whatever that accumulated to, plus our existing house and the house that we bought to pay the mortgage on our first house, right? So it opens up options because we're in a position of cash that we might not have on the other side. And even if we didn't do that, once we get out to the end, so go back to 360, we're still $200,000 better. And, again, it's because we're assuming that we could earn. in this case, 6% net of taxes. Now, could we? I don't know. And that may be a little aggressive. But my point is the interest rate is really going to dictate where that is. And I think what's really one of the key pieces here to see when we look at it this way is look at the interest paid to the bank in either condition. The HELOC strategy did reduce the cumulative interest. And unfortunately, people are making decisions on how to pay a mortgage or other things. based on cumulative interest, which totally excludes the time value of money or other pieces. And while in this scenario there was $625,000 more paid in the option of keeping the mortgage the whole time frame, the person who just stayed with their 360-month mortgage, over the whole time frame paid $625,000 more in interest than the person that used the HELOC. But they end up with $200,000 more. And all of that $600,000 is all, it's not additional dollars that were paid. It's the same exact expense in both scenarios. And yet one of them ends up with $203,000. So my question is, do you dislike your banker so much? that you would want to make sure they didn't get $600,000 so that you would miss out on $200,000. And it's not that we paid $600,000 to get the $200,000. We paid exactly the same amount in either situation. The issue is the interest, the cumulative interest paid, has nothing to do with the end results. And that's what people are basing a lot of their decisions on. Yes, it is true. This HELOC option accelerating the payoff paid off. or paid less in cumulative interest, but we end up with less money at the end, and we paid exactly the same amount of money. Either one of these had more money or more income to spend. They spent exactly the same amount of money. The difference is one ends up with $200,000 more. The fact that one paid more interest than the other means really nothing, and it's really tough for people to get their head around it because they've heard that so much from so many different places, and we're really just focused on the wrong thing. And I'm not. I'm not saying we could get six, you know, maybe it's five, whatever it is. But the more the interest is, the more it makes more sense to keep the mortgage, keep our deductions as long as possible, because if we can earn more than the 6.75 net, then we're better off keeping the debt. And that's kind of the guidelines of where that happens. And it's really just about whatever the rate is between the options that we have. And just a general rule of thumb, again, this is not, this is just the pure math. And this is what the pure math says around interest rates. And this is what we have to remember. This is the base principle. And that is if the cost of debt or the rate of our interest cost on debt, if it's higher than what the rate is on our earnings, we should pay cash. If the rate on our earnings is higher than the net cost of our loan rate. then we should borrow money. And that's the bottom line from a pure efficiency standpoint. Now, there may be risk and other pieces that influence one of those further than the other, but that is the pure math. Yeah. So, again, I don't think there's any hard and fast, like it's always this or always that. I think that's, you know, the world's dynamic. If we look at what happened, you know, two years ago and we had 3.5% debt, holy cow, moving that to a 5.99, even if it stayed there the whole time, would not make sense at all. from a mathematical standpoint. So depending on where the financial environment, what's available to us, is going to influence how this works. But the magic of the daily interest and all that, none of that really has anything to do with it. It's all about what rates we're paying and what rates we're earning in that differential that's going to determine which is most efficient. Questions? Yes. Could we potentially go back to the extra payment strategy? because one part of it is not going to work. part of our conversation, especially for the viewers that watched part one, the title was velocity banking is the fastest way to pay off debt. And if we were to compare that to the traditional way that most people pay off their home by just plowing money into it with no liquidity, you know, and they're just making extra payments from that standpoint, which goes faster. I want to get clarity on that in this case. Then the... Second part is we're now injecting the conversation of time value of money, the opportunity cost of paying off your mortgage, regardless of how you go about doing it from an acceleration standpoint. So whether it's cash flow index, whether it's debt snowball, whether it's debt avalanche, whether it's velocity, whether it's using a cash value life insurance policy, doesn't matter. You're saying if I can earn at least equal to or more. than the mortgage rate, if I heard that correctly, equal to or more than the mortgage rate. Well, if it's equal to, it's going to be a wash. It's going to be a wash. Over that 30-year period? Yeah. Yeah. If our earnings rate and our debt rate net, net of taxes and net of tax deduction are the same, then it's a wash. We'll both end up in exactly the same place at the end. I think also one of the things that I want to point out here is I did some other work in playing with some of this, and maybe we want to do that on another episode. but But really where this really works well, going back to this conversation that I'm having with you, Denzel, about where the rate is, a lot of people are accelerating the payoff on their mortgage, and they're carrying student loan debt that might be 7%, 8%. They're carrying credit card debt that might be 18%, 22%, 23%. If we use the HELOC method to pay that other stuff, it can be massively better. Rather than focusing just on the mortgage, let's focus on some of these other debts and getting those out of the way and see what kind of. benefits we can create. Well, I appreciate you saying that from your side of the perspective here, someone that's not necessarily advocating for velocity banking, but you clearly see the value in terms of all other consumer debt items. It's like, if you can move this high rate to a lower rate here and then use all of your income, income in, expenses out strategy. Along with additional things that we can do, like using 0% credit cards, removing escrow from the mortgage, paying that in full rather than over monthly time frames, getting discounts. There's a lot of other little nuanced things that could recover cash flow. So it's nice that you're saying, okay, yeah, for all these other debts, if the math makes sense, the math makes sense. Go ahead and do it. But once we get to the mortgage, that's where it gets really, it becomes a very emotional conversation. and what we're doing in this video is trying to strip. as much of the emotion as we can and just look at the math. And I think it's very, very healthy from that standpoint. I still would like to go back and if we can look at the amortization of extra payments, I just want to make sure that math was correct without using, without the tax deduction, like just plainly, I want to see if that was the difference or if it actually is exact to velocity banking. And it's not exact. The velocity banking was a little ahead there, but it kind of got diluted out in the size and the amount of money that we have. But let's look at it. If we get a loan amortization calculator, Kim, so 360 months. Let's make it 340. Actually, what we're looking at, it doesn't matter. Let's go ahead and go 344 months. And our loan balance at that point in time is $650,514. Loan rate of 6.75. Remaining months, 344. And there's our payment of $4,280.75, right? And what we want to do is add a $4,500 payment to this, which was our differential between our net income, our expenses, and our mortgage payments. So we had the $4,500 left over. So we're going to do that. So go ahead and turn that on. that radio button, let's put in equal 4280.75 plus 4,500. Okay. 87, 80, 75. And if we scroll down, oh yeah, sorry. We don't want to accumulate it on the side, right? Scroll down and there we are 97 months. Yeah. You know, it's just part of the, of the payment. And what happens is there's been some language and this, this gets so confusing for everybody out there. Um, is there was some language around the way a mortgage is paid. And the language was, well, you pay all the interest in a mortgage up front. And that's not literally what it meant at first, but that's the way people have literally taken it to the point that they think that loans are literally constructed in such a way that you pay interest first, and once the interest is all paid for the whole time frame of the loan, you get to a place where you start paying principal. The reason you pay... More interest up front is simply a mathematical fact of you've got more money borrowed and you're only paying interest on whatever you're borrowing. So you're renting money is all you're doing when you have a loan, just like renting a car or anything else. And so the value of that money, whatever it is, you're paying a percentage of that as interest to rent it for the month. And so as the principal, which is a small, small piece in the first month, gets applied, we reduce the principal. and Therefore, there's less interest paid, and all of a sudden the principal now payment is larger than the interest payment and on down to the end. And so it's not a construction alone. You can pick a loan up at any point in time, amortize it for the remaining time frame, and the ratio between interest and loan is the same. interest and principal is going to be exactly the same as it would have been from the beginning of the loan. This is really good. So it's good that we just clarified that. What I want to say for those that are listening that do practice acceleration with a home equity line of credit, one of the key things that I advocate a lot for is, you know, the rate does matter. It's pretty interesting, though, that at 8.5% on a home equity line of credit, it ended up doing the same exact. performance where in my mind it would have done slightly worse and this is where i like want to educate folks that if your home equity line of credit has now exceeded your mortgage interest rate what what i think happens and we use this i think in in in our first uh video together where we talked about like diminishing returns so i'm a huge advocate for turn on velocity banking because it was simply at a lower rate. early on get get your win and then just make extra payments the the rest of the way out if you cannot get a lower interest rate to the 6.75 at some point it's really not going to make sense so it's really cool that we show that the results were actually exactly the same simply because the person making extra payments eventually caught up so velocity banking might have had earlier lead because we did those big lump sum payments. but then it lost its lead due to the fact that you're now sitting at eight and a half percent for the rest of that time frame and i'm i'm the person that says that progress that we initially made eventually stop because eight and a half is too expensive compared to 6.75 especially if you were to just make direct payments to the 6.75 so ultimately when it comes to velocity banking you could have gone a little faster if you would have had the wisdom to stop using the strategy. And that's something I'm incorporating a velocity and debt snowball in this example of accelerating the mortgage. And possibly, we can get that timeline even lesser than the eight years. Would you agree to that point there at that point in time? Well, I think we have to keep things in perspective. This is my concern. And I know where people are. And like you said earlier, it's an emotional decision. The problem with the house is what they see is Holy cow, this is a huge amount of debt, and they're not looking at the rate. And literally people are so focused on that side that they're piling money up on their credit cards so they can double up on their home payment. And it's totally backwards, but it's because the focus is, I've got to get rid of that $600,000 worth of debt. And so I'm adding, even though it's at 6.75, I'm adding debt in other places in order to allow me to do that. And that's where we start to get into trouble. where we're starting to... to more the $20,000 of debt because it's at 18% because it's only $20,000 versus the $300,000 or $600,000 or whatever it is on the mortgage side. And it literally is whatever is going on with the rate. And part of the reason, just to clarify something on this and why these kind of came out the same, and this goes to a question that Caleb had from when we discussed last time about, wow, I'm surprised that 8.5 wasn't a whole lot more expensive. But there's a couple of things going on. Number one, in... in the time frame when we had the most amount of debt, that first 12 months, it was at 5.99. And then the 8.5 hit, but we were accelerating the payoff on it, so it wasn't hugely impactful. But remember this, too, is we didn't move the whole debt. If we had moved the whole $650,000 over to the HELOC at that 8.5, we would have seen the HELOC be a whole lot more expensive. The issue is it got diluted down by the fact that still $500,000 worth of debt, Was it 675? And that's why they're pretty close to the same. Right, right. You know, this is really good. I think really helpful for those that are doing the strategy. They are getting some results. And just to isolate in this example here, let's just say this person has no other debt and they're just rocking with their mortgage. Would we potentially segment some scenarios where it does make sense to accelerate the mortgage depending on age or, you know, Certain amount of years from retirement. Is there any scenarios where you might kind of break your standard thinking of keeping the mortgage the full 30 years? Because to realize, I would say, the time value money equation, I have to be willing to wait the 30 year period, right? Or that point where you start to exceed mine, is there, or are we like, no, it's always the standpoint of keep... keep the mortgage, especially if I can earn more than the rate that I'm paying on the mortgage. Sure. And I understand. And I don't like the word always in our business. In fact, in the financial industry, I really think, you know, when somebody comes up to you at a cocktail party or something and says, you know, you hear this all the time, oh, you're in the financial services business. So what should I invest in? It's like. If you answer that question, you are not doing a service for that individual, right? Because the only answer that you can really give is it depends. And I know that sounds like you're skating the question, but the reality is it all depends on what your current situation is. And so there's really no always in this. There's some pretty good principles that you can work off of, but you still have to look at the big picture and say, what is the financial environment right now? What is going on in your life? What is it you're trying to accomplish? And it's all of those kind of things. But for me, I would even give up a little bit in the future not to have my money locked up in a house. I would rather have it outside where I am free to do what I want to do with it. And I realize, at least in the first 10 years, like on the HELOC, on the first 10 years, you do have the ability to put and take from that HELOC. After that, not so much. And I don't ever want to. I would. I would give up some money in order not to have to answer to somebody else, depending on what happens in my life. I know that tomorrow everything could come crashing down, and they say, you know what? We're not loaning money to anybody anymore. I don't care what the value of your house is. Now what do you do? And so I would rather I like having access to cash that I decide when I get it. And so that weighs a big picture for me in my life. That's not for everybody. Todd, I got a question for you. In doing the deep dive with Velocity Banking and HELOC, is there Is there a scenario that you're like this after looking into this, like makes sense? Like, for example, if someone wanted to aggressively pay off their home and that's what they're going to do and you couldn't change their mind, I would say aggressively paying it off via the HELOC gives you more options than doing it just with a 15 year mortgage kind of deal. But was there is there other scenarios that you're like, OK, I can see where this strategy is good for or beneficial for this type of person or. Do you still stand by the I wouldn't touch it, touch it strategy kind of deal? No, and part of what I alluded to, and it's something that we can look at later, you know, if you've got other debt, that might be a great place to use that HELOC strategy because then you could still claw it back. See, that's the problem. You know, I go in and pay off my student loan debt, but, you know, something happens tomorrow and, oh, I wish I had that cash back. Okay, well. If you do it through the HELOC, at least for the 10 years, you would have the ability to access those dollars, and maybe you could extend it and have it even longer than that. But the point is it would be a way to pay off that expensive debt, especially credit cards, without being in a position of, okay, now I'm cash-strapped and an emergency came along and I have to go back to my credit cards or whatever it is, right? This could help be a buffer between that until you can get some financial freedom and some cash actually in your pockets. Another way to say that is because the heat lock. technically, even let's just say it's an 8% loan, which you would only have to pay interest only. And so which would allow you to actually take more money and pay off high interest rate debt versus at a 30 year mortgage, even if it was at a lower rate, you're still paying some of that principal. And so what you're saying is if someone has other debt, like credit card debt or student in loan debt, it potentially could get not. not for the reason to pay off your mortgage faster, but it gives you options. It might give you more cash to stay in the house you're already going to stay in and pay off high interest rate debt. Is that what you're saying? Absolutely. And see, I mean, looking at this, and I don't know if there's quite enough, there actually is. So even if you look at this graph here, see, I would much rather, I wouldn't, like I've got enough in that same 97 months, not applying the extra cash there. I've got enough to pay that debt off, every bit of it. I would much rather be in that position and have that cash along the way in case something didn't go like I wanted it to. And think about this. If I apply that extra money to my mortgage and I get into trouble and I've paid a bunch of that and I have a good amount of equity, is my banker going to be real willing to work with me? Probably not, right? Because they could sell it at auction and get that off the books. However, if I've got a minimal amount of equity in there, maybe they say, you know what? I see you've got some problems. We're going to extend that. You don't have to pay it for a couple of years or a couple of months or whatever it is. They may be more willing to work with you. And if they weren't, what you've lost by giving up the house is certainly not as much as 90% equity and losing the whole thing. And here at the 97th month, I have enough in cash that I could go ahead and pay it off. And then it would be free and clear and be mine. I wouldn't have to answer to the bank. And so now I could sell it myself. if I wanted to and I needed the cash. So it gives me options that aren't available when I'm socking money against it and not paying it off yet. So Todd, if you're an entrepreneur and you're always looking for opportunity, we'll pretend that risk doesn't exist. I think that's part of the issue is we don't factor in risk. Right. Let's say you're an entrepreneur that... is always looking for opportunities and daniel's in this position he chose he doesn't have a ton of debt right but he chose to do a he lock on his house and he's he's aggressively paying it off um and all but the idea is and he's got it's like an emergency fund for him and he could deploy that capital to reinvest in other things what are your thoughts on entrepreneurs using the HELOC strategy versus a 30-year like I'm doing the 30 year saving the difference so I'm like 30 year not putting a dollar more than I need to putting in money in other side accounts building up my emergency over here I kind of like the fact that I feel more in control less levers but you could make the argument that I might my interest if I actually did the HELOC strategy short term I would be better off because technically because my mortgage right now is 5.75%. So even at that rate, that is a higher rate than what I'm earning in my life insurance policies or high savings account. I'm still okay with that. But from a mathematical standpoint, if I shifted all of that money to the HELOC, I would actually have a better short-term deal. Is what I'm saying making sense? How would you go about that process? And Daniel, if you want to clarify anything or if I didn't state that properly, let me know. But I just, I'm curious to hear Todd's view on that. But for me, if you're looking purely at the pure economics and you're not earning enough to cover the 5.75 after if it's deductible or not, that's going to weigh into that as to what that net cost of that mortgage is. Accelerating additional payments against it versus what a HELOC rate right now is going to cost you more than the 5.75. So you're really going backwards. by going through the HELOC on that cheaper debt. I understand. But at the same time, you're not earning 5.75 in a life insurance contract, but the debt might not be costing you 5.75. You just have to look at it. But the other thing that you have to look at with a life insurance contract, as an example, and that's what we're always looking for, is trying to find assets that do more than one job. And see, when you have a life insurance policy, you've got cash that's growing that you don't have to pay taxes on on an annual basis. you've got a death benefit to protect your family, and you've got some disability waiver of premium in there in case you become permanently disabled, and they'll continue those payments. Well, if you added the cost of that other stuff in there, the return on that life insurance policy is probably as much or more than what the cost is on that mortgage. So it's kind of a wash because, you know, you're not having to go buy term insurance. which you hope you'll never collect on, right? Ideally, term insurance is a pure cost that you pay for and it goes away and it was just a cost versus having whole life insurance that gives you that short-term death benefit in case the unlikely event of a premature death, but is there at the end. Yeah, and then the last thing I'll say, and Daniel, then I'll let you pipe in. Even if as an entrepreneur, if your HELOC was like, let's say, 8% and... Then that's the cost of money if you wanted to go invest that or deploy that capital somewhere else. That's the cost of capital is 8%. Whereas for me, let's just make things simple. If my money was just sitting in a high-yield savings account, the cost of my capital is whatever I could be earned, like the opportunity cost. Just talking out loud, I'm just trying to look at different scenarios because I know that it's not a one-size-fits-all across the board. And I think Denzel, to your credit. you work with a lot of people that have debt in other places and you're using this as a consolidation, but a more flexible consolidation. You know, you're helping them consolidate debt, but doing it, utilizing their home as, as a creative way to do that. And so, um, I know I opened up a few, few pieces. I want to wrap this up somewhat soon, but Daniel, I'll let you take a first, if you have any questions, you've been kind of quiet. Um, and then Denzel, I'll let you go. If you have any other follow-up questions. I'm just glad my wife's going to be able to see something where I didn't talk for like almost an hour. So that was, that's, I'm glad I have proof. But no, I just want to say a couple of things. And I hope we can't, we can't wrap up quite yet because I feel like I didn't even start yet. So I got, I got a couple of things I want to add. But first of all, you know, the fact that I'm on the other side of the debate or conversation table from, from Todd Langford and Kim Butler is just, I would never have believed that I would have been. been doing something like that. I have so much respect for these two and Truth Concepts and everything they've done for our business and our industry. And I really appreciate the fact that it's, and I hope other people do too, it's not easy to put something like this together. Like Denzel and I were talking before this, to be able to see all this data in real time and make the adjustments, I don't know of really any other tool or video where you can see that. So to me, I really appreciate that. And I, and I, and I liked that a lot. You know, I think for me, what it comes down to is I just made a couple of notes and I do have a couple of questions. You know, to me, the whole reason I'm even here, I'm not a velocity banking specialist. I help people with retirement. And so I kind of have the benefit to me. It's a tremendous benefit of seeing people in their 60s, 70s, 80s who have now lived with the consequences of the choices they've made over 30 years. And so to be able to see that I have moved into the camp of, yes, I'm going to use velocity banking to pay off my mortgage faster. Now, Caleb and I are in. unique situations, but similar situations in terms of mortgage size, maybe I don't know about in terms of income, but in terms of savings, like, you know, and we're both on like opposite ends of the spectrum and we're in the same business. So to me, that's kind of what, why I'm here and what's interesting. I want to learn first of all, but I also just think it's interesting that we, you know, even though we can still see the math, I'm not convinced that I'd be running out and refinancing my HELOC to a 30-year fix. I still think I'm on a great path. because I do have a couple other questions I want to follow up on. But the key for this to me is like what Todd said. You know, there is no winner. Like there's nobody that's going to win or lose a debate. And that's not what any of us care about, right? It's about how do we help create great information for the people watching the video so they can take it and apply it to their own situation. That to me is how we would define a win if people got something out of this. You know, for me, I still have a lot of conviction that I like my first lean HELOC compared to 30-year fixed, especially, you know, and again, to Todd's point, It's not all about you know, the interest you pay is about the end result, right? But to me, I'm a big believer that I don't think time value of money is as important to people as the value of their time. You know, I heard Caleb speak one time about Warren Buffett and, you know, how wealthy he is, but because of his age, a lot of people wouldn't trade places with him because, yeah, he may be worth a lot in the end, but to most people, they're saying their life and their time that they'll be able to use their money is more important along the way. So I think what I'm you know, advocating for. And I don't want to abandon the idea that the first lane HELOC is less efficient than the 30-year fixed mortgage, or it's only efficient if you have other debts. I think that, you know, and that one of my questions was like, you know, what if we change? And I know we're looking at one example that we created. So I want to be fair to that. I don't want to just start switching stuff around. But I will say if we made the interest rates the same, you know, I'd be curious to see that. And the other question, I don't know if that was phrased as a question, but basically, can we do a scenario where we see the 6.75% interest rate on the 30-year fix compared to a 6.75% HELOC rate the whole time. I'd like to see that out of curiosity, just for fun, because I think that'd be cool to look at. And then I do want to come back to that point we were discussing before about just apples to apples, the 30-year fix versus the HELOC. Is the 30-year fix more efficient for paying off the debt if you make the extra payments? That's something that I just want to get clarity on too. But my main point was, I think it just depends. You know, that's what I think it comes down to is everybody's situation is unique. And if you look at this graph that we're looking at right now, and I just want to make sure I have this right, but the red line on the right or scenario B is the, I'm sorry, the scenario B on the right, that is the HELOC, right? And those red lines down there? Yeah, that go away there in month 97. Month 97. Okay. You know, month 97 is year what for this gentleman? Is that year nine? A little over eight, eight years in one month. Eight year, one month. Okay. So, and in our example, the guy's 40, right? With a one-year-old son. Yeah. So, so like, to me, that's what I like to look at is like, okay, so the guy's 40, he's paying off his mortgage in nine years. His now one-year-old son is now 11. You know, maybe that gives him some peace of mind, some comfort to maybe enjoy some more time, take some days off work, go to some, you know, volunteer things at his son's school. You know, maybe that season of life. is more valuable than even money. And that's kind of where I was coming from was like, you know, if he's able to pay off the mortgage and he feels the alleviation of not having that debt, which a lot of people have described is a big stressor, even though, again, Todd, to your point, it is an emotional thing, right? Now we're talking about, we're not talking about math. We're talking about the emotions of, hey, I don't have this mortgage hanging over my head. I feel more abundant. Therefore, I'm going to show up more powerfully and do more things intentionally in my life, I think to me there's an argument there. You know, because some people do feel that way, you know, and I think that's just important to touch on. Yeah, I think I think understanding a little bit, stepping back and understanding the big picture. See, like if we look there at that month, 97, as an example, you have no debt and you have no money. versus having debt and having money that will cover it. You're not in debt at that point in time with the other option. If you understand, we look at month 97, option B with the HELOC, the debt's paid off, right? We have zero debt and we have zero money. Whereas on keeping the mortgage strategy, if we're equivalent with our cash flows and we keep the mortgage, I have debt, but I have more than enough assets to pay it off. And so at that point in time, I'm not in debt because my assets are slightly more than my debt. And so I should feel the same freedom right there because at any point in time, if it became beneficial, I could say, you know what? I'm going to pay the mortgage off. So am I really in debt? Why am I stressed at that point in time if I've got cash equivalent to what the debt is versus having no cash and having no debt? I mean, it's kind of the same place, except I personally feel like I'm in a more opportunistic. and more risk-averse place having the debt and having the cash because now it's a choice of where that goes for me versus being stuck with nothing. See, and I agree 100%. And that's what's interesting to me about this debate. And this is where Caleb and I had a great conversation before we all came together. And this is where we're on different ends of the spectrum, right? Because if you have a HELOC, and again, we're using a scenario where you paid off a mortgage, so maybe you don't have access to that HELOC anymore. But if you had access to that HELOC, neither person has debt, right? But then again, if you use that example, yes, you have money in a savings account, but yes, you'd have money in a HELOC, which is theoretically like your savings account. So it's like, I agree with you that mathematically there's no difference and it shouldn't feel that way, but for some reason it does. And so that's where it gets into a point where it's like some people just feel better. Like I'm in that camp. I feel better knowing that I don't have the debt versus having savings in a savings account. And that's perfectly said. It's like I wouldn't feel less secure having my money in a HELOC at a bank than at a savings account in a bank. That's just, you know, and I think we could maybe go through the checks and like it costs you more money to access your money. And potentially the bank could easily, more easily change the rule, whereas they're not just deleting bank accounts at, you know, popular banks. So that would be like the only thought process, but you're not wrong. Daniel's not wrong. Like a HELOC, the whole concept of the HELOC is you still have access to that money. Now we could just debate on what's more secure. And there is some debate there, right? But there is precedent for both. I mean, you know, if you read your checking account and savings account agreement at the bank, they can custodialize those assets. It's not like, you know, that there, you know, that can happen and that has happened before. So I think that's what I'm saying. I'm not, and again, I'm not, not keeping money in a savings account because I'm worried about that happening. I'm not. I'm just saying if we're going to make the argument that they could shut off your HELOC, I think we also need to make the argument that, yes, they could take away your savings account. It happened in other countries before. Well, and I think, too, on the HELOC, if you look at the documentation, most of the HELOCs, and I don't know if this one's different, most of them are you have access to put and take for 10 years, but then you have to do a 20-year amortization after that. So it's not an open-ended I mean, my checking account's open-ended. That's really not open-ended on the HELOC. There are rules around how long we have access to those dollars without re-upping the contract. Right. Yeah. And I would just say we did address the fact that under all the variables presented, that velocity banking, starting at 5.99, then going to 8.5, produces the same exact result as if a person was making $4,500 extra payments. And so to almost like kind of defend velocity because obviously I'm on this. side of velocity here, I would only inject that. You as the customer, you don't have to stay at 8.5% with that home equity line of credit. Obviously, if I can get a better rate somewhere else, if I can use 0% credit cards along the way, then you're going to get those variations. And that's where you have a whole lot of options and flexibilities and different things that you could do that the person that's making an extra payment would not. And I also want to just simply add. The person that is also doing velocity banking on their mortgage right now, a lot of them are removing escrow payments. And there's a lot to be said there in terms of what does that person pay on their property taxes and insurance. If I'm paying it in full, you usually get an incentive to pay your property taxes and insurance in full. I know I do with my property taxes when I pay it in November as opposed to paying it in... you know, January or February, there's some savings there. And there's a whole lot that could be said with, okay, you've got, you know, $10,000, $15,000 or so that's just parked in your home equity line of credit. So for 364 days or however many days out of the year, that money's just paying down your HELOC or helping with your interest costs. There's a lot of little nuanced things there. And, you know, back to Daniel's point, my goal was to try to Try to keep as much emotion out of it as possible. And it's almost impossible to do that when you actually get into the real world. Because for someone like myself, and I'm pretty sure everyone would agree here, in terms of the types of clients we serve, for me, I'm serving low, middle-income America day in and day out. And it's like no matter what I show them when it comes to calculations like this, even to make the case for, hey, you shouldn't. pay off your mortgage right now, it's so hard, nearly impossible for them to get over that reality that you may end up with more money if you don't pay off this mortgage. So I think there's a whole lot to be said there where I'm dealing with single dads, single moms, divorced moms, widows, where it's like, hey, if we're able to get rid of 40% of your living expense in the next three to five years, and now you're only 49 years old, or you're only 53, 55 years old, and you started on is personal. financial journey, there's a whole lot to be said there that maybe the opportunity cost is for them to pay off their mortgage because then they'll explode or have the paradigm shift for them to listen to a Caleb or a Todd at that point in time, you know, or a very brand new entrepreneur. I mean, there's so many people I work with, different cultures, even different backgrounds, where faith backgrounds, cultural backgrounds, where you're just not going to convince these people that they should. hold on to their mortgage. You know, when I talk to the Indian culture, Hindu culture, African American, you deal with some Spanish cultures, it's like they refuse to hold on to their mortgage and they're trying to pay it off as quickly as possible. It's like a cultural thing or even a faith thing where it's like God told them to pay off their debt and it kind of just, you know, obviously takes out the economics in this. And so I think what we've done here is laid out some beautiful, you know, groundwork and I just wanted to, you know. Dump all that information. I get so excited being able to have this conversation with you, Todd. And hopefully it clears up those that may be doing a strategy and can sit there and say, you know what, taking all the emotion out mathematically, what I'm doing is inefficient as of right now, as of this moment right now. And then inject the emotion back in and you can say, all right, I'm going to make a tweak to Denzel's side or I'm going to make a tweak to Todd's side and, you know, move on from there. But Back to you, Kim, I think we did address the initial part of the extra payment. So I think we're clear there in that sense. And the only way velocity banking can even produce any kind of better result is if your rate is lower, right? And then you have to have the wisdom to know when to stop, right? Because you're going to have diminishing returns. Can we put the rates at equal? Can we make the rate just going back to that example, Denzel, that's the only thing I did want to see if that's okay is are we able to make the rates equal to see what happens yeah which is kind of where we started that was what i was looking at to show the difference between the daily and the monthly but go ahead and put 6.75 there kim and zero out the eight and a half so it doesn't go up and then the question does become what are your chunk amounts at that point throughout the well yeah so what do you want to do there do you want to do the whole six seven six fifty so no so the uh the 74 and the 60 that stood the same at 5.99 correct Or are we changing it to say... No, now it's at 675. It's all 675. Okay, this will be really interesting. So I'm going to take a guess here and say that... The results are going to be pretty much the same. It almost doesn't matter what your... Pretty much the same except that the tax deduction, if you turn the tax deduction off, they're going to be pretty close to the same because you're eating up that tax deduction faster in that shorter mortgage. So it actually, without the tax deduction, the HELOC is $206,000 better across here. It catches up at the end. And the reason for that is we've got 6.75% cost. and we're only earning 6%. If we're earning 6.75, should be almost the same. Yeah, this is beautiful. Again, this is saying option A, the person didn't pay off their mortgage, kept it the same. And then option B is velocity banking and then earning later. So the results are pretty much the same there. So someone that's sitting with a... As long as our interest rates are all the same, they're basically the same. I mean, yes, there's $5,000 difference in $5 million. I call that the same. So, Todd, I'm going to ask you a question you've never been asked before. If God told one of your clients to pay off his debt and there's no questions, this person is going to pay off their mortgage and nothing that you say is going to change their mind and they could pay it off with a HELOC? or with a 30-year mortgage, first, if the rates were exactly the same, would you give them the blessing on the HELOC because of flexibility? Okay. So here, all right, you're asking me a question that goes to depends, but here's part of the depends. Are they disciplined or not? If they're disciplined in achieving that goal, then as we look right here and we see that 97th might If I'm plowing a bunch of extra money to it and I get into trouble and I can't make my mortgage payment, I'm going to lose all of that. I mean, I'm going to lose the whole thing. The house, the equity, everything's going to be gone. On the other hand, since there's not a difference here, I could keep that money separate, hang on to my 30-year mortgage, and still pay it off in the 97th month with that cash. I would feel much more comfortable doing that. I'm outside of it because as long as I've got the mortgage, the bank has say-so in it. Right? Yeah, I hear you. And the fact that I'm pouring money towards it doesn't give me any more say-so in that until it's actually paid off. So I would rather wait until I can actually pay it off, and then the bank doesn't have any say in it. Send the check. Right. And if that person was against that, though, I hear you. Yeah. It's paid off at the same time. Right. I actually had a conversation. Yeah. Assuming. I had a conversation with a person here. Denzel, just one second. I had a conversation with a person recently on my YouTube channel. His name's actually Caleb as well. And we were talking about credit cards. And he's paying off his mortgage, 15-year mortgage aggressively. And I got him to admit that it would be better. It's like a, it's a super low interest rate. And his savings account's actually earning more. And I got him to admit that if he just would have done that, that he would actually pay it off sooner. And his whole argument to me was like, I just, I feel like I have to pay the bank. And I'm like, okay, but as long as you acknowledge that you're actually paying it off slower. by you paying the bank directly. And he acknowledged that. So that's like, I'm, yes. Daniel, and then we, I do want to wrap this up soon. So Daniel. Okay. Yeah. Let's wrap it up. I just have a question. Is there a way to see what it would take to get a risk adjusted return of 6% every year? Do we have the ability to show that within this or? I'm sorry. So what rate of return would we actually have to earn? to net six of taxes, risk, and fees every year? That's the question. Oh, it all depends. Like I said, I like hanging on to the cash. I'd rather see this more in the four and a half percent range with the ability to know, hey, I could jump out there and buy a piece of real estate that might easily net 8% or more. Yeah. So if we took 6.75 divided by a point 6.8 in this case, right? Didn't that get us there? Just get a basic calculator. Yeah? Divided by 0.68. I think that's right. I'd say mine's fine too. What does that say? I mean, what an amazing question. Because, like, that's, I think that's... I think it's relevant, right? I mean, we're talking about, hey, we're making these decisions based on comparative rates. What does it actually take to achieve... You're taking a 32% tax rate, Todd, right? That's too much. Oh, you're right. Divided by, thanks, 0.78. That's a 22% tax rate. And that's not fee adjusted. So that's my point is, what actual rate of return do you have to earn to get a 6% earning on your savings every single year? Well, but also understand the 6.75 is also tax deductible. So it doesn't really cost that. So to exceed the 6.75, what we really need to be awash is 6.75 times 0.78. It's 5.2. So we need a net 5.2% rate to be awash with the 6.75 mortgage rate in a 22% bracket with the tax deduction. Okay, so that's tax-adjusted, but still, like Kim was saying, not risk-adjusted. Yeah. So you'd have to get a, what is it, what did you say, Todd, a 5.2% rate of return every year? Okay. It would be awash. It's just, I mean, I don't know if we could agree that that's unrealistic, but. Well, sure. And I don't know that it matters a lot. The thing about it is, the reason I say that is we accelerate the payoff and then we can earn five point whatever it is. So my point is, in either scenario, it's going to be close to the same. So if we take this down, go back down to the four and a half percent, which is a super safe. rate of return. We're looking at 4.61. Now turn on our tax deduction for our mortgage. Yeah. So the HELOC would be $461,000 better, assuming we didn't apply extra money to it on the other side from option A. So we have $153,000 better if we acknowledge the tax deduction we get on that long payout. But we're going to lose the tax deduction also if I accelerate the early payoff. But that would be even cheaper than paying 6.75 on the HELOC. And so if we're looking at purely what's the best option in this scenario, then it would be just to accelerate the payoff on the mortgage. It puts us in a cash risk position. So turn that off or, sorry, turn it on, the extra cash flow to debt A. And, you know, it's going to be right about the same. Okay, so can we flip? I just have a quick question. Can we flip whatever that was, the cash flow back? Can we see that? Thank you, Kim, for clarifying. And thanks for working this calculator. I think I'm having so much fun. This is, I love this stuff. So, okay. So we're looking at, oh wait, what happened to the current HELOC? There was inputs there. Is that, is that still there? There is, it's on B. Oh, it's on B. Nice. Okay. So I have a technical question on the calculator. Do you see where it says mortgage and it says tax deduction and Kim was able to click that box and it turned green? Yes. Does that, clicking that box, does that make the tax deduction? for the HELOC as well or do you have to click that box right there? No, we can turn it on. If we're getting it on the HELOC, which we could get it on part of it potentially, we can turn it on on the HELOC as well. Okay. Did that change anything? Yeah, a little bit. A little bit. Okay. So just a little. Because you're paying it off so fast, you're eating up the tax deduction either way. Right. Yeah. And that was my question last time, which Denzel and I covered, which was we were talking about servicing debt versus accelerating debt. And that's where I was talking about servicing debt. But for accelerating debt here, you lose the tax deduction much earlier with the HELOC than you do the 30-year fixed. And so, but I just want to highlight- If we accelerated the payoff on the mortgage too, we would pay it off quick. We would get rid of the tax deduction also. But what we're looking at here is not accelerating the mortgage, right? We're just keeping the mortgage. So if we're keeping the mortgage, accelerating the HELOC, the rates are the same, but we're earning 4.5% on savings instead of 6%. Are we saying that you end up with 158,000 more doing the HELOC strategy? Yes, but you, again, put all that cash in there. And so if in this scenario, if we were looking at the pure economics, why wouldn't we accelerate, just not go through the HELOC option to push it up to 6.75? And if we did that and just applied the extra money there, then we're basically in the same place. Okay, cool. And I like that. I think that that's... really important to show because I think I was looking at, hey, what's more efficient, a HELOC versus keeping the mortgage? Can we go back to that one real quick? Yeah. Just turn that off, Kim. Thank you, Kim. Sorry, that's my last switch. A lot of real quick questions are adding up here, Daniel. All I'm saying is I think this was our original conversation, right? It comes back to what Todd said in the very beginning, the rate matters, right? So the rate that you... earn matters on the savings and the rate that you're being charged on the debt matters. And so for argument's sake, if you could go get 6% every single year, then yes, I think we've proven the calculator shows clearly, you know, you're better off keeping the mortgage. But my question is just how realistic is it to get 6% on your savings every year? Is it a more realistic environment to say you get 4.5% on your savings every year? And if that's the case, then you end up with more money. to Todd's point. then why not just accelerate the mortgage? So again, that's where there's no... Winning or losing, you could flip it either way. Yeah. But then it becomes what is actually reasonable and what is someone actually going to follow through on. Correct. Correct. Yeah. And we're not factoring in risk because it's like you're accelerating the mortgage. But if you're factoring in risk and unknown, I personally would rather have it be a little less efficient and hold on to cash because of gray swan events, Todd, or black swan. So it's like... There's, there is, that's why planning, understanding yourself, understanding outcomes are important. I will just say, thank you, everybody. Kim, you added so much to this video. I'm so glad that we, we let you speak and you, you were like the mother hen of the let's move things along. So thank you, Todd. You're amazing. Appreciate, appreciate you walking. Thanks for having me. Denzel, I feel like you had many epiphanies and key takeaways and I love that. and I uh And even for me, like I'm starting to see these, I'm starting to see like straight up for how you're working with a lot of people, the strategy using this strategy is like awesome. And so I think it's like it's good from a standpoint of that. And Danny, I appreciate all your quick questions. And it was wonderful seeing you be quiet for an hour. We have proof that that's possible. That has not happened for me yet so far. the jury's still out about that but i think yeah in summary rate matters a lot and uh i think todd you did a phenomenal job fleshing that out i will have all your guys's info down below i would encourage you if this brought value number one if you watch till the end let us know um you are a nerd and we appreciate you so thank you literally just let us know like i want to see new comments and then i would just ask you to support everyone on this video all of you guys have youtube channels If you are a financial professional and you're not using truth concepts, I would highly encourage you to do it. Like do it. Go to a true training where you can spend days with Todd and Kim and other amazing community. Get the software, use it, and then make sure to subscribe to Denzel Daniels channel. And man, just so grateful and excited to see the questions that come out of this. Thanks. This was fine. And I think it's really important to get this clarity out there where people can actually make. informed decisions and not everything we make is purely mathematical and that's kind of what we talked about right most decisions that we make are emotional we use the math to kind of back up an emotional decision that we want to make so depending on how far out of line that is with our emotions it's going to kind of dictate what we do right and that's where i gave denzel his followers because he's working with people that you know based on their where they're at that they he had he can't necessarily just they're not going to watch this video They're not the type of people to thrive off of a video like this. And so you have to take someone's input and then work with and then do your best thing based on what they want. And so, yeah. All right, guys.