Velocity banking only beats plain extra mortgage payments when the HELOC costs about as much as, or less than, your mortgage. This table shows the HELOC rate where the two tie, for each mortgage rate, in our standard example ($300,000 mortgage, $7,500 income, $4,400 bills, 15 years).
| Mortgage rate | Break-even HELOC rate |
|---|---|
| 3% | 4.9% |
| 3.5% | 5.7% |
| 4% | 6.5% |
| 4.5% | 7.3% |
| 5% | 8% |
| 5.5% | 8.8% |
| 6% | 9.5% |
| 6.5% | 10.2% |
| 7% | 10.9% |
| 7.5% | 11.6% |
| 8% | 12.2% |
Below the break-even rate, velocity banking comes out ahead. Above it, you are better off sending the same money straight to the mortgage. HELOC rates are usually variable, so leave yourself room.
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Built by Joe Peinado. About and method | Break-even rates | All scenarios
Educational estimate, not financial, tax or legal advice. Fixed mortgage rate, HELOC interest charged monthly, paychecks at the start of the month, spending spread evenly, no fees. Real lenders, rate changes and fees will change the result. Talk to a licensed professional before moving money.