Simple Interest Vs Amortize Interest

[@evilwillieg]

Simple vs amortization...simple WINS, every time.

[@dukebbb6539]

Wow, simply amazing!!!!! I just found your channel yesterday while searching for a way to better utilize my 2 LOCs. I am still trying to absorb all the info. What convinced me the most is while watching this video I decided to open up my mortgage spreadsheet to try out your numbers....just simply accumulate the 1k cashflow and make an annual payment of 12k would have saved 38K over the life of the loan. Simply mind blowing!!!

[@mrfinanceguru8702]

A principal payment doesn’t satisfy a monthly mortgage payment so your cash flow wouldn’t go up to 2k the first month. Your expenses would still be 4K which throws off your whole time table. Unless you subtracting the mortgage payment from your initial chunk which in turn would mean your first chunk would actually be $12,567~ then the second month the expenses would still be 4K with cash flow eating away at debt which would then take a lil over a year to pay down to zero. This strategy works but the client would have to obtain more cash flow to speed it up. 1k at that chunk can’t be paid off before 1yr. I Been on this velocity thing since 2015 & we have to be real accurate and precise because of it volatility. That’s why I watch and sometimes chime in when somethings are unclear. I understand it but those who don’t can get confused and make the mistake that could cost them. My advice to you would be to make sure you double check the math first because this strategy is like a double sided blade. It can be used to cut at something or it can cut the person finance also. Overall keep up the good work. JUST BE CAREFUL

[@DenzelNapoleonRodriguez]

Mr Finance Guru here’s the beautiful part if I did make a mistake let’s say which I’m going to be cocky, because I’m a millennial and don’t like being wrong. Let’s say I was way off my numbers guess what I have a 5-7 year cushion before I get anywhere near debt snowball ball lmaoooooo. You either get the concept and can do it alone or you hire an expert to help you along the way to avoid errors and mistakes

[@mrfinanceguru8702]

Denzel Napoleon Rodriguez come on man you recite scripture you know to humble thy self. But yeah you were wrong and off lol. I definitely get the strategy I’ve been a investor since 2015. Learned the strategy in 2016 working with fortune builders. It’s apart of my course training I offer new investors to my team. But velocity would clearly be best alternative especially if they can free up more cash flow to make it work more aggressively. it’s going to kill the $1000 additional payment per month method for several reasons. One if all they have is $1000 to cash flow a month then they will be investing every dollar they have a month with absolutely nothing else left to survive off of which isn’t possible nor make sense. For two that initial chunk payment is killing way more projected interest from even occurring than just the initial $1000 of extra payments per month which I may add you have to really discipline to do especially since that will be all the money to your name.

[@shomariwilliams4910]

Mistakes happen keep rocking Denzel.

[@diydamian4996]

Mistakes happen.... But if we want to get technical he's probably only off by 700.00 bucks assuming that half of the 1432.00 is going to principal and interest and the other half is going to escrow... So rather than 9-10 months( what he originally stated... It would be more lime 10-11 months to pay off the first chunk). So worst case scenario it would take you a extra year.. Considering your chunking twice a year and add a month to each chunking time frame.... Still sounds like a winner to me.

[@OregonCashFlowPro]

Mr Finance Guru I think the issue is the words he’s using. When he says zero out the first chunk, I don’t think he means what you think it means. Basically, in the month that your $5000 paycheck zeros out the LOC, that’s when you chunk. The LOC isn’t actually zero because you have $4k bills pushing it back up. So when the LOC ends a month with less than 5k, take your next chunk. First chunk of $14k-2400=11,600. Then $1k cash Flow each month means 7 months to get the LOC to under $5k.

[@mikem2652]

Very good. It’s good to have a recap, it helps me remain focused. Thank you.

[@wes89nh]

Another option is to calculate your monthly cashflow and expenses, create an emergency fund, take out a personal line of credit, and then make extra chunk payments with your extra monthly cash flow directly towards principle. If an emergency strikes you have your emergency fund and also have the ability to tap into your personal line of credit if necessary. You can still pay your 30 year mortgage in 8-13 years. I did the calculation on my daily accrued interest for my personal line of credit and decided against using it unless it is an absolute emergency. The interest rate on the PLOC is 9% and my mortgage interest is about 4.2%. I am trying to throw all extra cash flow towards the principle and make sure I calculate for upcoming expenses. Mint and Personal Capital are two good apps to help you plan ahead. I don't like the idea of accruing interest when it's not necessary. I think Velocity Banking takes some of the thinking away because you are contributing all cash flow directly to the LOC instead of calculating your cash flow and just using that towards the principle.

[@DenzelNapoleonRodriguez]

8-13 years sounds boring to me and not even worth my time looking into.

[@earnesttribble9167]

Denzel I Thank you for your insight with this strategy, it's eye opening knowing how the others do business. Keep up the good work.

[@CerebralStorm]

As something to consider, if you factor in inflation, the 4% interests is really about 2-3% less. You do pay 515,610 if you pay it for 30 years. But 515,610 is worth so much less 30 years from now. Pump your extra $1000 a month into something that earns more than 4% (maybe the stock market at 8% or so) and after 30 years your net worth will be higher than if you paid down the mortgage any faster at all. Only problem with this option is that you take on more risk having a mortgage for 30 years.

[@DenzelNapoleonRodriguez]

most people I encounter just simply want to pay their debts off. I'm also willing to make the bet that you staying with the debt and trying little dollars versus me paying off all my debt first and then driving all my debt towards Investing I'll end up with the higher net worth. And I will not invest in anything that produces me 4% or 8%. I need to multiply money faster if I am investing. I could save my money and earn those rates.

[@DenzelNapoleonRodriguez]

Loretta Lewis 72-t distribution for your 401k and let’s roll over that money into a savings asset and never lose money

[@DenzelNapoleonRodriguez]

look it up its a way to pull money out of a qualified retirement plan without the tax penalty before 59

[@chrisp5002]

You can definitely make a $1,000 principal only payment. You make your normal $1400 payment as usual, and then you call up the bank and tell them to take another $1k out as a principal only payment. I do velocity banking and am a big fan of it. Also I don't see how you can chunk 10k every 6 months if your cash flow positivity is only $1k a month. You would only draw down that 14k to about 8k. It would take about a year to be able to chunk again. Your numbers are off. I don't think there is much difference to making an extra $1k in principal payment each month vs chunking because you do save the interest on the LOC, the strength of Velocity banking is that you are forced to make that lump sum contribution up front without putting a burden on your cash flow.

[@DenzelNapoleonRodriguez]

my numbers are just right your doing math off cashflow when you should be doing math off the amount of income that goes into the LOC

[@chrisp5002]

@@DenzelNapoleonRodriguez I don't understand, you still have $4k of expenses going out. So you have $5k reducing your LOC but you have $4k of expenses going out. You are only reducing your LOC balance by the cash flow positivity. So it would take them 12 months at least to reduce that LOC to 0.

[@tulio3571]

Everything you said i was going to say. $10000 every 6 month with $1000 cashflow ? How do i pay $14000 in 8 months with $1000 cashflow and that does not include some interest on the loc.

[@MattySelvs]

His numbers check out...he is just making the second chunk before the LOC reaches a zero balance. The second chunk of 10k will bring the owing balance on the LOC back up to around the 14k initially taken out.

[@team1275]

Informative as usual!

[@alexchan79]

Great job explaining the difference!!!

[@davidstreit146]

Great explanation between simple v amortized interest!

[@walterromero6078]

YES, YOU CAN DESIGNATE ANY EXTRA PAYMENTS TO GO directly to the principal

[@evilwillieg]

Walter Romero My mortgage will obey my request BUT they won’t apply any additional funds towards the mortgage until it’s a full payment. I found this out when I “used to” pay extra towards it.

[@DenzelNapoleonRodriguez]

evilwillieg thank you evil I knew I was on to something I’ve worked with a lot of households and most of them say before any other payment in that month can go to principal it has to be more than the mortgage payment itself to get 100% allocation toward principal

[@chelseatodd1449]

Correct, you have to make your regular monthly payment first or at the same time, then additional can be allocated just to the principal.

[@swaysway451]

Sounds like Matthew 25:14-30 The Parable of the three servants

[@CryptoWithEnriched]

Excellent video content you're providing

[@DenzelNapoleonRodriguez]

Thank you

[@JDPRL]

If not too late to ask questions..... Can you break down the interest saved on the mortgage (with VB) compared to the interest paid within the LOC?

[@BFlowsFinance]

Sometimes when I read comments I wonder if some are just asking questions without watching or just not paying attention when they do watch. Some questions just on here are asked that Denzel mentioned and addressed in the video. I don't get it. It's like this in almost every video. And this myth that you don't pay the regular monthly payment after making a chunk needs to stop. What would be the point of all this? How would that make financial sense? The point of Velocity Banking is you pay off debt faster by using your income. Just using a mortgage for example. You are attacking the principal on both ends. The chunks are immediate on the back end. Interest on an amortized loan is front loaded meaning your monthly payment is mostly interest for many years depending on your interest rate. 10 years at least. Look at it!! It's right in front of you. When you make chunk towards the principal on the back end so to speak that means you are shortening the life of your loan. Look at the schedule. See where you started and subtract whatever chunk you made. It should be easy since it's right in front of your face. Look at the amount your regular monthly is now going towards the principal. I guarantee you it will be more. Ding ding. That's the whole point. So not only did you shave money off the principal with that initial Chuck, every single monthly payment that you will CONTINUE to make will have more money going towards the principal as well. This will continue until you make the next chunk and then the cycle repeats itself and even more of your monthly payment will go towards the principal because you just made ANOTHER chunk. You are, I repeat, you are still paying your monthly mortgage this whole time. You NEVER stop! I don't know how many times I seen this. People are thinking that you are stopping monthly payments after making these chunks. Nooooooo. I don't mean to come off like I'm being mean but if you listen carefully all this is explained. Sometimes that may require you to listen again. Take the time. This is not easy but sometimes when things are said in the video and then people ask the same question that was answered in the video makes it seem like you weren't really paying attention. Like Denzel has mentioned, especially in his earlier vids, repetition, repetition, repetition. Maybe you should start saying that again sir. That's how we learn. Repetition. Remember school. We get taught a new concept and then we do problems of the same type over and over again and then build on that. Same concept here. If you don't get it, watch again. And again. And again. The lightbulb will go off eventually. All of us is different and it comes at different times. There is nothing wrong with asking questions but some questions asked are answered in these videos if your are really paying attention and listening. Take this seriously. Pretend you are at school. Don't let the person next to your distract you from what the teacher is telling you. We've all seen this in a class in our lifetime. Teacher is talking and explaining something. She notices a few students not paying attention and then she pauses and calls them out. The whole room gets quiet. She then asks the students what see just said and they sit there with a blank stare on their faces. Classic. Don't be those students. Try to be the student in the front row paying attention. This is serious. This is our lives. You have debt. You have families. Take this seriously and you will get the results. Sorry for the long post and thank you to all that read through this lol. Thank you Denzel for all that you do and continue to spread the knowledge. Good day everyone. Be Proud to Pay. Never thought that could be such a powerful phrase.....

[@wierdawgggd7825]

Denzel, I've found you recently and am catching up on all your information. This video doesn't tell me the difference between the two types of interest. Keep up the good work!

[@kennya1425]

Simple interest is calculated daily. Amortized interest Is calculated over a term and front-loaded?

[@fields1336]

Awesomeness

[@brysonromain9484]

Some people will continue to challenge bro. Just expect it every so often

[@evilwillieg]

Bryson Romain it’s only because they don’t understand it. They really need to keep quiet and watch more videos before they speak.

[@wes89nh]

My mortgage company allows me to make payments directly towards principle. You need to make sure that you are making your regular mortgage payment. I think that most mortgage companies allow this.

[@chelseatodd1449]

That is correct

[@chelseatodd1449]

Was your payment current and did you specify the extra was going towards principal? If not, then they wouldn't necessarily apply it that way. They may have thought you were making a partial payment, in that case they would hold until they received the rest of the payment. I currently work for a mortgage company, on the origination side now. I have worked for a very large, well known mortgage company on the servicing side ( more briefly ) and that's how they'd do it.

[@wes89nh]

@@chelseatodd1449 My mortgage company allows me to specify an "other" payment and make the payments directly towards the principle prior to me making the regular mortgage payment. I have my regular mortgage payment on autopay and I throw additional money directly towards the principle each month prior to the scheduled payment.

[@sithlordtodd-o5189]

My Bank of America Mortgage allows me to put any extra towards principal if I choose.

[@guanglefan9266]

awesome man. that’s the best

[@brysonromain9484]

Denzel Great lesson

[@DenzelNapoleonRodriguez]

Bryson Romain thanks man

[@brysonromain9484]

Absolutely man

[@shawnultimatehustlernedd4169]

Great information as always!

[@williamkarmy5808]

one simple question, velocity banking or extra payments toward principal?

[@DenzelNapoleonRodriguez]

William Karmy you decide your grown

[@evilwillieg]

I have an even more simple question: did you pay attention to the words that came outta Denzel’s mouth. Just watching his videos is not enough. You must pay attention. He answered your question in this video.

[@joer5057]

@@evilwillieg the thing for me is, I know my mortgage DOES allow interest only payments. So, paying the extra payment (lets use his 1k example) you are ACTUALLY paying $12k that is NOT effected by the amortized interest. You are still making your regular payments underneath. Also, he assumes that you are starting off with no form of savings. For someone, like myself, who doesn't have access to a lofty $25k/10% LOC, nothing in this video is even applicable. And, unfortunately, I'd venture to guess that the average American is more likely in that same boat. How is someone living paycheck to paycheck (or there close to) supposed to have the massive LOC *required* to use VB. Don't get me wrong, if you have he means to use VB, then by all means do. It does work. But this video is pitting worst case scenario against best case scenario.

[@M0chaJ0J0]

This is amazing Denzel

[@eb6736]

"yes or yes?" 😂😂

[@maxima74]

Most of the banks or credit unions where I live (Illinois) offer PLOCS but they are either fixed or variable rates. Will this method still work the same as simple interest?

[@walterromero6078]

why not get a 1st position HELOC and have only one pymt ?

[@DenzelNapoleonRodriguez]

Walter Romero that’s an option you’d be shifting the debt completely that in essence is still velocity banking which is 5-7 years better than making extra payments

[@dany6711]

Remember that if you replace your mortgage with HELOC and You Can, The interest on the HELOC is not tax deductible.

[@john9inc809]

What about the 10% interest on the simple interest from the heloc sir? Didn’t see you mentioning it.

[@P_Belle]

3:00 yeah that escrow money probably makes money for the mortgage company 😅

[@P_Belle]

10:00 how does putting $5k pay on a LOC satisfy paying a separate amortized mortgage loan? 10:50 14k LOC bal minus pymt of 5k pay = 9k LOC bal. Minus 4k expenses = 13k LOC bal yes?

[@jgarcia9527]

Is it better to ask for a personal line of credit before or after a get a morgage loan?

[@westsidetransport85]

Hey D... end video u compare 2 strategies on emergency funds... Velocity side u say have extra $8k from LOC for this... but other side..straight $1k monthly .. u say where is emergency funds coming from.. don’t have any... well unless I’m missing something... u still have that $25k LOC.. right?

[@hurryletmewatch]

Thanks for the video Denzel! How do I determine if my LOC is simple interest? Statements show a daily periodic rate - does this mean it's daily compounding interest? If so, will your strategy still work?

[@allenmiller3352]

A daily periodic rate will pay down way faster than a mortgage simply because its calculated daily vs monthly. Not to mention its also simple interest

[@bradleybittick1]

Wait....if I pay a chunk,then pay another chunk in 6 mo,won’t the bank come take my house after 3 mo?!?!I don’t get it,and I can’t justify 490$ a mo for this program even though I like this guy and he’s really doing a great thing here.

[@TheGhomer]

You continue to make your mortgage payments every month between chunks. You put all your income into the loc and each month take out expenses needed included mortgage payments.

[@DenzelNapoleonRodriguez]

George Homer somebody was listening

[@DenzelNapoleonRodriguez]

Brad Bittick find me someone else on this big blue planet asking not charging but asking or my same rates. You do know I have lower level price tiers any household could receive this valuable information at 47$ a month for a 30 min consultation who does that I mean really you gotta be a crazy business owner to even think that’s profitable

[@Lyfeastrey]

I have one question Denzel, I understand that your monthly mortgage payment doesn't stop and this is all based off your cash flow. However, because principal payments are being made, is your monthly payment decreasing because the interest is being charged based on the principal amount? As I understand mortgage interest is calculated based on the principal amount. But I know lenders are reluctant to change the monthly amount as that cuts into their interest. Thanks I like watching your videos but I was confused on if your monthly payments stop after you make the chunk payment and if not does the monthly payment adjust based on the chuck payment. Thanks again..

[@alexchan79]

Your monthly payment doesn't stop, you are reducing the total amount of interest you are paying the bank.

[@Lyfeastrey]

Got it, once I factored in the monthly payment I got the same numbers Denzel has. So this is primarily factored off cash flow. @@alexchan79

[@DenzelNapoleonRodriguez]

yeah no tricks cash flow is great to have to make the concept work well. Velocity Banking just leverages the cashflow better thats all

[@Lyfeastrey]

yea I'm hip now. Actually using the cashflow pays down the debt even faster than stopping the mortgage payments, which means more money overall.@@DenzelNapoleonRodriguez

[@SuperHumanJeremiah]

I've heard you say in some videos, fill out the form below, but I'm wondering which form? Is it just the contact form on your site? And is that the form to fill out to get you to make a video of my situation? And if so, how much does it cost to do that? Thanks, Absolutely love your videos man. About to start the Velocity Bank strategy with my paycheck tomorrow.

[@DenzelNapoleonRodriguez]

Jeremiah Gutierrez now I’m just referring to a contact form.

[@ephraimkrausz9262]

Mathematically Incorrect

[@yota97]

CAN YOU MAKE A VIDEO OF HOW MUCH INTEREST YOU PAY ON A AMORATIZED MORGAGE VS A SIMPLE MORGAGE WITH SAME LOAN SAME PAYMENT FOR 30YRS AND IF THERE IS REALLLY A DIFFERENCE??

[@DenzelNapoleonRodriguez]

yota97 that would be an incorrect way to compare results. When doing velocity banking I’m not trying to get a 30 yr simple interest mortgage for the same amount of debt that would be silly.

[@yota97]

@@DenzelNapoleonRodriguez what I am trying to find out is the interest I will pay in a Heloc vs just send the same amount to extra payments..to really see if Heloc is better than amortized.

[@yota97]

@@DenzelNapoleonRodriguez for example..2 loans lets say 100k each with same interest rate and same monthly payment..one Heloc and one amortized..wich one gets paid first?..is there a difference? Thats the question I've been having for a while

[@devine32]

Hey Denzel. Do you have any more room for tier 3 subscribers? Look forward to the response brotha.

[@DenzelNapoleonRodriguez]

yes a few spots left 2 just got taken

[@devine32]

Ok. I’m going to go to your Patreon tonight. Upon completion, what’s the typical turnaround time to have the initial phone conversation with you?

[@DenzelNapoleonRodriguez]

Vincent DeVine I’ll send you a spreadsheet once you sign up to fill out once you finish that then we set the time for the most part it’s based on your availability

[@DenzelNapoleonRodriguez]

Vincent DeVine on average within a week to have that initial conversation

[@devine32]

Denzel Napoleon Rodriguez Tier 3 says sold out so I can’t even click.

[@richroberts8003]

Amortization uses simple interest. There is technically no such thing as "amortized interest." Amortization just spreads the repayment over a set amount of time with a set number of fixed payments. Each month, the amount of interest is calculated using the simple interest formula. It's important to understand this when making decisions regarding these types of financial matters.

[@DenzelNapoleonRodriguez]

Rich Roberts correct although under amortization more interest is being charged up front rather than a daily interest charge. When doing Velocity Banking I get ahead of the amortization rate by paying the principal in big lump sum payments rather than extra payments and my borrowing costs ends up being nothing pretty cool right ?

[@richroberts8003]

@@DenzelNapoleonRodriguez There isn't more interest being charged up front than any other loan. It just seems that way due to the longer repayment period in comparison to the other debt. Just like with any other loan, credit card, etc., the amount of interest that is being charged each month is 1/12 of the annual interest rate multiplied by the outstanding principal. The reason this works is because the person is making additional payments against the principal. I'm not saying it doesn't help people pay off the mortgage faster, I just want to make sure people know how the math works is all.

[@DenzelNapoleonRodriguez]

Rich Roberts I’m not sure if your agreeing with me or disagreeing with me. But if I have a line of credit and you have a loan I’m going to pay less interest than you are because of the way I’m using the line of credit doing velocity banking. When you say there’s no difference don’t you think that confuses people because in reality when a loan is given out your given an amortization schedule and when you look on google they have amortization calculators and simple interest calculators. So did google make a mistake?

[@brysonromain9484]

Great point @evilwillieg

[@avesraggiana]

I think you mean, “AmortizeD” interest. Amortized Interest.

[@Epicpeak1]

Wth this guy saying.. you cant tell the extra payment to go to principal. I think this is for entertainment purposes..

[@DenzelNapoleonRodriguez]

Carlos Monge sometimes the mortgage company will not apply the full payment towards principal. They might apply it to next months payment so 100% wouldn’t go towards principal. I’m glad I entertained you :)