Velocity Banking Is A Complete SCAM

Think velocity banking is your ticket to a debt-free future? Before you dive in, watch this video. We uncover the hidden pitfalls and high risks of this popular mortgage payoff strategy. Learn why it might not be the magic solution it's cracked up to be and how it could end up costing you more than you bargained for as we help you become The Educated HomeBuyer.
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Jeb Smith (huntington beach Realtor/orange county real estate)
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Josh Lewis (Huntington Beach Certified Mortgage Expert)
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[@TheEducatedHomebuyer]

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[@missioncalming7172]

Velocity Banking is working for me. It’s teaching me discipline, consistency and organization. I was drowning and needed some relief. Instead of a HELOC, I went the PLOC route. Also working a side gig to pay off faster.

[@aaronjennings8385]

Me too.

[@austinc.8360]

​@@aaronjennings8385What institution did you both go with? Can you do direct deposits directly into the PLOC?

[@austinc.8360]

What institution did you go through for your PLOC?

[@missioncalming7172]

@@austinc.8360Tower Federal Credit Union I started using it incorrectly in 2019. Now using it correctly and paying off accounts using it as my main operating account.

[@aaronjennings8385]

An overdraft line of credit. Bank.

[@DenzelNapoleonRodriguez]

I’m happy to bring you both on my channel or come on yours to provide the necessary education on this topic that has gone viral over the last few years. I’ve been teaching it and practicing it for 6 years. I’m happy to discuss the good, bad, and ugly you seem like reasonable guys to have a conversation with

[@thestreamreader]

No response? Come on lets have the debate.

[@joegreene8045]

Yeahhhhh @Denzelnapoleonrodriguez let them know!! Respectfully

[@austinc.8360]

@@DenzelNapoleonRodriguez What bank has the best PLOC?

[@losfromla1480]

Obviously these guys are cowards and afraid to learn anything.

[@DenzelNapoleonRodriguez]

You need stronger points to disprove velocity banking would love to help you on this. Discipline is required for any debt elimination strategy so that isn’t a strong argument. Opportunity costs exist for any debt elimination strategy so that isn’t a strong argument either. The economic environment we are in is a much better argument and I agree with that in a lot of situations for today.

[@TheEducatedHomebuyer]

Here's the fun part. You say we need to disprove it. It's magical thinking and NO ONE has an actual documented case study anywhere to be found. Just lots of folks telling you this magical theory that will get you debt free in 7 years....instead of showing how THEY got debt free in 7 years. This isn't complicated math. The theory is make a large payment on an LOC at the beginning of the month, pay your bills from the LOC and the surplus at the end of the month is principal reduction. Do it again next month and it snowballs. Take a look at current household savings rates. Few have excess savings to make this work. Fewer still have the discipline to execute it. And those with the ability to save and discipline to do it find far greater returns elsewhere than paying down a 2-3-4-5-6% mortgage.

[@DenzelNapoleonRodriguez]

@@TheEducatedHomebuyer I agree with you many people do not I have case studies and unlike many velocity banking teachers I show doing velocity banking and extra payments on a mortgage. The reason why my clients have so much success is we don’t throw out basic financial principles in fact we keep them and use velocity banking like a switch when it makes sense and then turn it off once we have a significant lead. I think that is a better financial strategy. Instead of this or that what would it look like if I did velocity banking on my higher interest debts outside of my mortgage which would put me ahead and then by the time I get to the mortgage maybe velocity banking for a few lump sum payments then stop and go back to extra payments to finish it off in that 7 year timeline or less. I’m happy to discuss this with you both on my channel or yours if you are up for this and I have many case studies on my channel laying this out in detail

[@michaeldusek1107]

@@TheEducatedHomebuyer, did you take Denzel on his offer?

[@fortgrove3166]

@@TheEducatedHomebuyer Vanntastic shows how it works with little cash flow kzbin.info/www/bejne/kHWpeHmGZamSl7ssi=YtWh_zmiftB-FRoh

[@thestreamreader]

@@michaeldusek1107yes we are all waiting for this but no response yet.

[@Joce123]

I am smart enough that velocity banking is not complicated for me.

[@TheEducatedHomebuyer]

It's not complicated....it just doesn't work for 99.99% of people. If you're in the .01%, congratulations.

[@claykorth7244]

Get this guy a cookie

[@aaronjennings8385]

It works quite well.

[@DenzelNapoleonRodriguez]

Cmon bro at the 20:00 minute mark talking about earning an average 8% in the market is not true and you are too smart to say that. When you look at the actual internal net rate of return minus taxes, fees, and loses you know that number is much lower. Look at the last 30 years of S&P 500 year to year not average rate of return it’s 2 completely different numbers.

[@TheEducatedHomebuyer]

You may want to look up the actual return on the S&P over the last 95 years (shorter time frames are higher). 1928 to 2023 = 9.9%...plenty of room for fees and still getting an 8% return. You pay taxes on all income, and long term gains are the lowest tax rates you'll find. www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

[@DenzelNapoleonRodriguez]

@@TheEducatedHomebuyer I get that but go year by year on those returns and you will end up with a different number. So yes the average is say 9.9 or 10 or 11 or whatever the number is but if you go year to year you will end up with a different result. This will be very helpful for your listeners.

[@donquique1]

​@@TheEducatedHomebuyerlmao it depends in which period. My 401k made 29 percent last year. I cannot say that if it was 2009.

[@joeycowboy14]

The velocity banking strategy is not a scam. And it is not a bad strategy; especially for those with high debt or those that would sleep better at night by eliminating debt at an accelerated pace. However, it definitely is not the right strategy for everyone. Paying off lower interest debts is not always the best decision. Especially when someone can get a much higher return in the market or on other investments.

[@TheEducatedHomebuyer]

People with high debt are exactly the folks that should stay 1000 miles away from this strategy. The spreadsheet shows it can work but you better be very disciplined and have more free cash flow than the typical homeowner.

[@joeycowboy14]

@@TheEducatedHomebuyer Discipline and education on strategy and other alternatives are definitely critical. Im general, I would not advise someone to do velocity banking on a mortgage, but it could be effective on other consumer debts that have high interest cost or are significantly impacting someone's monthly cash flow.

[@Joce123]

Velocity banking is ultra easy.

[@Joce123]

Most loans are amortized where is alignment credit is simple interest and there in lies the magic.

[@TheEducatedHomebuyer]

The easiest way to tell someone has drank the Velocity Banking Kool Aid is when they tell you the magic is in simple interest vs compound interest. The ONLY difference in interest accrual between a mortgage and a line of credit is that the LOC accrues interest on the average daily balance. Velocity Banking ONLY works if you receive a large influx of cash at the beginning of the month and slowly pay out your living expenses over the course of the next 30 days thereby reducing the average daily balance. If you get paid on the 1st and 15th and most of your bills come due between the 1st and the 15th, you will have a miniscule reduction in the average daily balance that will be more than offset by the increased rate of interest on the LOC. So, if you are a business owner with large monthly revenue that you can apply to your mortgage, then use the "float" before paying your bills to reduce the average daily balance AND you have the discipline to not screw it up, it can work. That accounts for about .01 percent of the population. This isn't hard math. There is no magic.

[@TheKwill32]

It’s only a scam if u you are giving your money to someone with no results

[@TheEducatedHomebuyer]

Correct!

[@brianmayo7407]

There are many different ways to reduce your debt! Velocity banking does work if done the right way but like all other debt payoff models it takes discipline if you don't have discipline, none of the payoff strategies will work

[@TheEducatedHomebuyer]

Again, it's not magic. Unless you have a large inflow of cash early in the month and slowly pay out a much lower level of bills throughout the month, you're just wasting your time.

[@Parrott65]

Seems to be working for us. We paid off our car and credit card debt and now are paying down the mortgage. So, you’re clearly wrong.

[@TheEducatedHomebuyer]

🤣

[@austinc.8360]

@@Parrott65 What bank did you get yours with?

[@Parrott65]

@@austinc.8360 we got ours through our local credit union.

[@mygoodlife204]

not true! It shaves off quite a bit of interest! anything worthwhile is more complex!!!

[@TheEducatedHomebuyer]

Yeah...it actually doesn't unless you have a massive inflow of cash at the beginning of the month and all of your bills are due later in the month. The people who could actually benefit from this strategy know how to invest and don't waste time stepping over dollars to pick up pennies. The math is out there in hundreds of videos from people who actually understand finance but the true believers still think there's a magic answer for people with more debt than income to wish it all away.

[@aaronjennings8385]

Yes it works

[@brandonsanon-jules7223]

​@TheEducatedHomebuyer so your "unless" eludes to the fact that it does work. It's just not for everybody.

[@austinc.8360]

@@mygoodlife204 Do you have a PLOC?

[@tjbean6472]

If your subscribed to this channel, unsubscribe ASAP.

[@TheEducatedHomebuyer]

Are you upset that we can velocity banking a scam? 😂

[@davekohler5957]

I have a fixed heloc at 5.74%. Using a fixed heloc to pay down your mortgage is safer then increasing your payment amount. The problem is in the complexity when you live out of your heloc and applying all your money to pay it down. The other problem is you have a large low interest credit card and you are tempted to spend more then you normally world.

[@TheEducatedHomebuyer]

Great points Dave. Thanks for sharing. It's important to note, HELOC's that allow you to fix the rate on a portion of the balance typically have limits on how many times you can fix a chunk.

[@winniethepoohandeeyore2]

I just overpay my 2.875% 30 year fixed by $40 every month, each COLA we add another $10 ever since our first mortgage payment was due, In Jan 25 we will overpay by $50, Knocked years off the life Of the mortgage already, we have the double home exemption. Once we claimed it our property taxes almost halved, once we turn 65 and bring in less than 25k a year as a single person or 30k for married couples property tax freezes. We paid down 1 credit card, paying down another, Also we Add to savings so wouldn't make a lick of sense for me to get a HELOC

[@TheEducatedHomebuyer]

@@winniethepoohandeeyore2 That's great that you're aggressively eliminating debt. Have you thought about taking the extra principal payments on the 2.875% mortgage and allocating them to the remaining credit card until it's paid off? Since it's likely at a much higher rate, that would help you get to the debt free finish line sooner. Thanks for watching.

[@winniethepoohandeeyore2]

@@TheEducatedHomebuyer I only owe less than 5K Which I overpay on that too. I'm not 1 of the maroons with 10's of thousands of dollars in cc debt

[@thehappydaysapp]

I have been explorig this myself, but the video misses to address two issues: I bought a home at 7% and the First Lien HELOC is giving me a fixed 8%. Put that together wit the fact that Mortgage interest is amortized, i.e. interest is front loaded! you pay most of the interest in the first 5/7 years. Wont the numbers work if i am in the first year of the mortgage?

[@TheEducatedHomebuyer]

We hate to share the bad news, but there's not some special type of interest on a HELOC. Both loans accrue interest on the average daily balance and you pay it in arrears at the end of the month. Also, once you fix a portion of an LOC, it's no longer a line of credit, it's an installment loan. No banks let you fix the rate, then borrow more funds in the future when rates have increased. If you can't pay down, then borrow the funds again as needed, velocity banking can never work. Sorry you drank the kool aid.

[@Stan-x1t]

This is how it works. They charge 1000 bucks for workshop X 100 people = a gross of 100K. They split up the money and then plan their next Workshop, and make Vids of course!

[@TheEducatedHomebuyer]

😂😂😂

[@dixielandproductionco.6989]

Smashed the thumbs up good stuff guys

[@TheEducatedHomebuyer]

Appreciate it!

[@Peter_Wang]

I NEED this! I’m a saver. Trying to figure out the taxes into retirement planning, estate … is a magical yet very illusive formula!

[@TheEducatedHomebuyer]

Be very careful Peter....without large free cash flow, the juice isn't worth the squeeze. Just keep saving and investing.

[@Peter_Wang]

@@TheEducatedHomebuyer Ty, I’ve got 1.m retirement, 30 yr Fed retirement, and about $50k cash left over. Sooo many numbers, I’m just trying to make it work.

[@laquonasurgeon4926]

this is a great video

[@TheEducatedHomebuyer]

Glad you enjoyed it.