Paying your mortgage of in 4 to 8 years with “mortgage rate arbitrage”

Flip the Script on the Banks

Summary: Pay a 30-year mortgage in 5 to 8 years by paying back your mortgage with simple interest instead of amortized interest.

I recently discussed this in my Forbes article here.

Is this something new?

We all know it’s a sellers’ market, with the lack of deals out there and the majority of the Simple Passive Cashflow Podcast listeners looking for something to invest their cash in. Good times, if you ask me. This strategy is nothing new but now the strategies that are, “trending,” like bell bottoms, tights, and neon colors but forgotten. One of these old plays from the playbook is called the Mortgage Equity Arbitrage Strategy also known as, the Australian Banking system.

First off, let’s talk about good debt versus bad debt. Obviously, an 18% interest rate paid on something like a credit card is bad debt. But taking a 4% HELOC (Home Equity Line of Credit) or loan from your life insurance policy can be good debt. Especially, if you are putting the loan proceeds into AHP at 12%, a MFH Syndication at 20%, a Turnkey rental at 30%+, or another higher risk syndication at 35%+. Just don’t buy jet skis or other doodads with the money… I don’t know why it’s always jet skis as the example. Maybe something to do with the fact that it is a mini-boat, and boats are known as the worse purchase known to man.

What you do with the liquidity from the debt is what really matters. Traditionally, it has been good to go into debt for a college education paying 4-8%… unless you are getting a glass blowing degree… or maybe a psychology degree so you can trick yourself into thinking college was worth it… or Asian studies degree because you are going to have to get used to ramen noodles in your adult life… or a Communications degree to be able to spin your financial reality. Ok I admit, I had a pretty depressing college experience…

 

Other Resources:

Podcast #105 – Jordan Goodman – Affiliate connections + mortgage rate optimization + Dolphin mentality

 

SPC028 – Chris Myles explains the downside to using Helocs to pay off mortgages & a teaser on life insurance

HELOCs in Hawaii

 

Leave a Reply

Your email address will not be published. Required fields are marked *