Accelerating Home Loan Payoff to Unlock Financial Freedom - Episode 50

We are joined by Dr. Karwanna Irving and we are diving deep into the world of government contracts, a topic that holds immense potential for small business owners, especially people of color and women of color. Dr. Irving, with over two decades of experience in government contracting, shares her journey from starting as a videographer and photographer to landing her first lucrative government contract, which opened the doors to massive successes. Discover the trillion-dollar industry that is government contracting, where everything from goods to services is in demand. Dr. Irving guides us through the process, including pre-qualifications, certifications, and the mindset needed to thrive in this realm.

About our guest:
Dr. Karwanna D. Irving is an award-winning Small Business Expert who specializes in Government Contracts. She’s the founder of She’s Got Goals, LLC  and the Trillion Dollar Secret to Government Contracts.  As a 20+ year business vet who has successfully built Two small businesses of her own, Dr. Karwanna teaches small business entrepreneurs how to grow their business with government contracts so they can have consistent income,  and get paid top dollars by the #1 largest purchaser of services in the US without chasing customers. Over the past couple years, this Government Contracts Strategist has helped over 200+  business owners generate upwards of 3 million of dollars and growing in revenues.

Karwanna’s been featured on CBS, NBC, FOX, Star Tribune Business, Best Business Digest, SBA SBDC, Ticker News, The LIST TV Show and more and has shared the stage with major leaders including Les Brown, Trent Shelton, Dr. George Frazier, Stacia Pierce and others.
https://shesgotgoals.com/


—-

Support the show

Please join me here, and follow me on social media, Instagram, and Facebook.

Need help getting started on your path to financial freedom? Start Here

Join the Financially Intentional Community

Oh and please subscribe and leave a review on whatever app you're using to stream this podcast.

Get my book Smart Money

Subscribe & Review

Love this episode? Please subscribe and leave a review on your favorite podcast platform. 

TRANSCRIPT:

[00:00:00] Naseema McElroy: What's up my financially intentional people. We are back with Anthony rushing and we are going to take a deep dive into looking at an alternative way to finance your home, your primary property, rental property just a different way to look at financing and I am going to encourage you guys to actually watch this on YouTube.

If you're listening to the podcast, because we are going to be having some graphics up and Anthony is going to, share some slides because this is a new way of thinking about paying down your home in a really efficient manner. But he's going to be showing slides. So I want to make sure that you guys get the most out of this presentation.

So tune into our YouTube channel at youtube.com/financiallyintentional if you want to see the graphics. But I'm going to turn it over to Anthony because he is from First lean HELOC, right? First lean HELOC. I got it off the top of my

[00:01:05] Anthony Rushing: that, that went right there and went right there

[00:01:08] Naseema McElroy: Nice. He's a first lean HELOC and then he's going to talk about this amazing product that he has and you guys can kind of see if this will be an option for you when it comes to financing or refinancing your home purchase.

So, hey Anthony, thanks for joining.

[00:01:26] Anthony Rushing: Thank you so much for that wonderful introduction. And , I really appreciate you opening your space and, my ability to talk on and share about this option. Right. So I'm excited to get to it for those of you who are listening on the podcast and.

Aren't on YouTube right now. It probably would be good to go to YouTube and watch. But what I'll try and do is explain it in a way where hopefully you'll be able to connect with what this is and understand at the end as well. The, the visuals will enhance that, but hopefully the way I explain it.

You can have a good idea about what this is and whether or not it makes sense for you to personally dig into it or not later on too. So, yeah, thank you. But I'm excited to chat. I'll pull this up right now. If it's okay, the same as so we can get started. It's not difficult, but, there are a couple of steps here that we needed to know and pay attention to, to really understand how this works.

So welcome to first thing. He lock. I'm with first thing. He lock dot com. I also work with a bank called first savings bank as well. I'm the sales manager there. And. Lead the team of first and he locks specific loan officers also. So kind of a two part function, if that makes sense.

And from the first thing he locks standpoint, that is basically a free educational resource that's available to teach people about this option. So all in all, , what is this that we're talking about? So basically a first thing he lock is a type of home loan that just works differently.

Then a mortgage does it's just another option that's out there right now and it's known throughout the world. So it's what everyone in Australia uses. It's what. Everyone in South Africa uses across Europe is considered another type of home loan that people use and choose when it makes the most sense.

It's also been around for a long time. So if you take a look at this. Very wonderful and detailed timeline that I've made here. The mortgage was created in 1913. The amortized mortgage, the loan that we think is the only one that's available, at least most of us in terms of home financing, was created in 1913.

Before that there was a product that works just like ours does for home financing. And I'll get to that as well, but so basically this particular loan Is used throughout the world and it's been around for longer, even here in the United States, since the amortized mortgage has. So it's kind of been, pushed aside.

Right? So what we do is we teach people. How to optimize how this loan works, it works differently than a mortgage. Just so we just teach people how does this loan work and how do we maximize this for the most benefit possible? For the most gains, right? So that's basically what we do. And what we want to do is bring this particular.

Home financing option to the forefront of people's awareness, and we want them to choose it when it makes the most sense. And if it doesn't make the most sense, then obviously it doesn't make sense to move forward with it. So that's basically what we're doing and what I'm hoping to to help you guys learn about today.

So what are people doing? Well, 1st, They're paying off their home in as little as 5 to 7 years. They're paying off their home extremely quickly. They're also saving tons and tons. I'm talking tens to hundreds of thousands of dollars in interest costs. It does not go to the bank. It stays with them. They are using the equity in their home to invest in.

Income producing assets to build a portfolio to increase income to create generational wealth for their families. They are creating emergency funds and a level of financial security that they don't already have without it. And they're simplifying their life. As well, when you do all these things, so.

I think the most important thing is for us to understand what is this, right? How does it work? Well, 1 thing I want to sort of help people understand is the, he like it's different than the, he locked at what people usually think of usually when people think of a 1st and he lock.

They think of, well, I've got my mortgage right now. So I have this mortgage on my house per, this picture and what they think of is , I'm going to open up a line of credit on top of my mortgage and keep my mortgage. And that's a second lien HELOC because it's basically on top of your mortgage.

What that means is the first lien position it's the entity, the company, right? The organization that gets paid back first, if someone defaults and then the second. Lien holder gets paid after the first gets paid. So, with the regular mortgage you have, with the regular HELOC, the second lien HELOC that people usually think of, you have a first position mortgage and then you open up a line of credit.

So you've got two loans at the same time. This is different than that. What a first lien HELOC does is it's in the first lien position. So what it does is when you have a mortgage, your first lien HELOC comes in and pays off your mortgage, completely pays it off. It's a refinance, right? So you refinance into this new type of home loan and this new type of home loan has a balance and that balance is basically the balance of your mortgage, right?

But then this loan also has a limit that a lot of times is higher than what you owe. So, like any line of credit, whether it's a HELOC, whether it's a personal line of credit. I don't like to compare it to credit cards often because they have a bad rapid in the same way, right? Credit cards, just like any other line of credit along with this to have a limit.

And they have a balance and you pay interest on the balance, which also means that you have access to the amount of money, right? From. Your balance up to your limit, which can also offer different options and benefits as well. So it's different than a secondly.

He like, I think it's important to know that.

[00:06:53] Naseema McElroy: Can I just ask you really quickly, Anthony, is there a upper limit to how much you guys can finance these loans for? Like, can you do jumbo loans like our California mortgages?

[00:07:02] Anthony Rushing: That's a great question. So, generally speaking up to 750, 000 dollar line amount. I can go to. 89. 9, roughly 90 percent of. The home's value, so that would mean if the home's value is 833. I can go to 90%. , 89. 9 between. A line amount of 750. And a 1M, I can go to 80 percent loan to value.

And between a 1M and 1. 5, I can go to 70 percent loan to value. So. California homes, a lot of times are teetering between those 2. Valuations a lot of times the one that we're working with having an 8 33 valuation it's a number , that most people that we tend to work with , are below.

However, if you need more, we have the ability to do that. That's a really great question. Also, I may not hit everything, so I'm glad that you did that. And if you recognize anything that would be helpful for me to add, or if I miss anything, I would love for you to hop in Bring it to light if that's fair.

So

so now that we know what this is, you know, there's a particular way that we use this, or we teach people how to use this loan. Well, then the question is, how does this work? How is it different? Then an amortized mortgage, because an amortized mortgage works a certain way, we know we can do certain things with that particular set of rules, we'll call it.

And we treat it a certain way to enhance that, or, or just to pay it down. This loan, this first thing, he like doesn't work like that. So we have to treat it in a different way to maximize how it works for the most benefit possible. So we have to understand how it works first, right? So two main ways it's different.

One has to do with money flow. So the money flow between the two types of mort of mortgages, we'll call it first thing you like in the amortized mortgage are different. The second has to do with interest calculation. So I'll go into both of those so we can better understand the differences between that because we have to use those differences to our advantage.

So if we think about money flow, your amortized mortgage is called a closed ended loan. So what that means is money can only flow in so , you can put money into your house. You can pay it down as much as you want. But once it's in there, it's locked away. You can never take it back out. And that's how a closed ended loan works.

The fact that that works that way does allow for certain things to happen. But that's just a reality of how it works. A first thing HELOC is different. It's called an open ended loan. And what that means is money can go in. And money can come out freely. So what that means is you can safely put as little, you can put as much, you can actually safely put everything into this home loan, which sounds kind of crazy, but because it's open ended, you can safely do that because you can take it out if you need it at any point.

And so that's a core understanding that allows for the strategy to really be possible. The other way it's different, it has to do with how they calculate interest. Now, this gets a little bit more into the weeds, but it's important to understand this cause this leads into the first part of the strategy.

So if we think about your amortized mortgage, your amortized mortgage, what it does to calculate the interest payment is it uses what's called a monthly calculation and it uses The previous month's end balance. So the balance on the last day of the previous month, it uses that balance against your rate to calculate your payment.

And that's just the math, right? That's just how it works. First thing he locked just uses a different type of calculation. It uses a daily calculation. So what your first thing he locked does is it. It uses what's called the average daily principal balance. It doesn't use your previous month's end balance.

It uses the average daily principal balance, which takes an average of every single individual day's balances throughout the month. And it uses that average balance against your rate to calculate your payment. So if we think about that, we can manipulate the average. So, if your average balance is higher.

For the month, your payment is higher for the month. If your average balance is lower for that month, out of all those 30 or 31 or 28 on February days, if the average of all those days balances is lower, then the interest payment for that month is lower, which means we can control this a little bit.

Well, then the question is, how do we create the lowest? Average. I mean, if we want to create the lowest payment possible, we create the lowest average possible. And so how do we do that? Well, suppose we've got 31 days. So for those of you that are on YouTube you can see this for those of you who are listening I've got 31 different little sticks here and each one of those represents a day of the month, right?

So if we want to create the lowest average balance, we need to create the most number of days. With the lowest balance possible, because what that does is that creates the lowest average possible. So I'll say that again, in order to create the lowest average possible, the most number of days needs to be as low as possible.

To create the lowest average, which then results in the lowest payment. So how do we do that? How do we create the most number of days? Well, it starts with the 1st day possible. What we want to do is we want to create the lowest balance as fast as we can, because that starts this lowest average possible, So I know that's a number of steps backing into this, but all in all, we want to create the most number of days with the lowest balance, which means we have to start with the lowest balance as quickly as we possibly can. So that understanding we need to create the lowest balance as fast as possible.

That leads into the 1st, part of the strategy, the way we create the lowest balance as fast as possible is when we get paid, we deposit all of our income into the 1st thing. He locked because that creates the lowest balance possible. So if you take a look at the graph, right, start at the top, when you deposit all your income in, it drives down the balance as much as you possibly can to create the lowest balance affecting your average, right?

Well, you could do this with your amortized mortgage. They would allow for you to take all of your money and put it into your mortgage to pay down the balance. They would allow for you to do that. However, people need to eat food. And like pay for bills, so you can't, I mean, no one does that because it would be a really bad idea because remember with an amortized mortgage is closed ended.

All the money is locked away. Once it's in there, this, that's not the case. Money can be taken back out as needed. So the 2nd, part of the strategy is to use your heel lock. You pull money from your heel lock to pay all of your bills for the month. And what that does is that increases your balance throughout the month.

With the amount that you use to pay your bills. So if you think about it from a month long picture per se, right, all of your money goes into the HELOC. That's like your principal payment, right? This is opposite of an amortized mortgage where with an amortized mortgage, you make your payment at the beginning.

Most of it goes to interest. Some of it goes to escrows and whatever's left over then goes to principal. This flips the script. This is one where all of the money goes to principal first, and then you take away for the other things.

[00:13:51] Naseema McElroy: Quick question with that, do people usually when they have this account, do they usually link all their bills to this account or do they set up a separate account? That then pulls the money out like whatever primary checking account they're using now for all their, their bills and they set up automatic transfers between those accounts.

[00:14:13] Anthony Rushing: That's a really good question. For most first lane, he locks. They have to do it through an external checking. First savings bank. We built a first lien HELOC specifically for this strategy. So with our first lien HELOC, you get a checking account and it's attached. We get a checking account through our bank.

When you close with us, that's attached to your HELOC and it automates that transfer. So there's the number strategy here, which is the numbers have to make sense from, from a budgetary standpoint for the loan to make sense. But then the question is, how do you implement the loan on a day to day? Like, what are the logistics look like?

And that's a huge challenge as well with most first thing. He locks. That's an issue with most first thing. He locks because. If you're using this , for every expense that you're doing. You're logging in and moving money from your lock into your checking account for every transaction that you're going to do for the remainder.

Of your loan, which that's every haircut and every. Gas station, every grocery store and every light bill and every car payment. We're

[00:15:16] Naseema McElroy: Most people have a couple hundred transactions a month.

[00:15:19] Anthony Rushing: Right, and my experience is that after about 6 months, no matter how excited someone is. That the, the, the weight and the reality of having to log in and move money.

For every transaction, you're going to do for the remainder of your loan is daunting and. It's not a recipe. It's not like you're automatically going to fail. Some people do still succeed with it. But when people fail, given that whoever they worked with, given that whoever they worked with, check their numbers to make sure that budget is in line for this to work, the main reason why people fail is because implementing it without some sort of automation is too much for most people.

And so they just quit or they get apathetic and they stop doing it. And then it's not effective and they're not paying down their home anymore. So, that's a good question. So , we built it in a way that when you get your HELOC, you also get a checking account through first savings bank that works like every other one does it.

We actually use the same one that was already here at the bank, right? So we didn't even build a new one. We just attached it to the HELOC. So whenever you deposit money to the checking, it automatically pushes all that money into the HELOC for you that night. If you want to use the HELOC to pay your bills, which is the second part of the strategy, then what you do is you just use the checking.

So you swipe your debit card, you write a check, online bill pay hits you know you pay your friend through them. What happens is that when you do that, it pulls money from the HELOC automatically to cover that, to what you spent with the checking account. So that means that with our particular first thing, he locked that we built here.

If someone's going to implement this strategy into their life, it doesn't require any new process, no new procedure for you to succeed with it. You just need to follow your budget. So, that's a great question. So, if we think about this, the strategy, all the money goes in, creating a decrease.

In your balance, then you pull from your heel lock, which creates. An increase in your balance. So if we think about that, let's say someone's take home pay is 6, 000 and let's say that their expenses are 6, 000 too, right? Well, I drive in the income and then it goes down by 6, 000 and then my monthly expenses, whether it's required or chosen or a little bit of both That increases the balance by 6, 000 right back to where I started next month.

6, 000 goes in to reduce your, your balance on this loan, and then you pull out 6, 000 for your expenses, bringing the balance right back to where you started. This loan doesn't work in that scenario. This loan is a bad idea in that scenario, because if your income and expenses are the same, then your balance doesn't go anywhere.

So this really only works when people live below their means, when people make more than they spend. When people live in a way, Naseem, that you did, while you were paying off gobs and gobs and gobs of money in a matter of three years. So you would have been an extreme example, but like, that's who it works for, if that makes sense.

So. Whatever is left over from what your income , is what pays down your house. So I've got a couple of examples here kind of run through this quickly. We're assuming, you know, for this example, someone has 300, 000 in their house. They bring in 10 grand a month. And they spend 7, 000 a month, right?

So take home pay is 10, 000 total spend is 7, 000 a month. So what happens is if we're starting at 300, 000, we deposit 10 grand in bringing the balance down to 290. Well, then we, throughout the month, we pay our bills of seven grand, which increases the balance up to 297. So the money that is not spent, that 3, 000 is still in the HELOC because all of it went in there first.

We just take seven out to pay for everything. We still have 3000 in, well, that's a 3, 000 reduction in your balance that month. Then the next month, 10, 000 goes in 297 goes down to 287. Then we gotta pay our bills of 7,000, which brings the balance from 2 87 up to 2 94. At that point in time, that's $6,000 of income that has not been spent.

That's the principal production for that month. If we compare this to a mortgage three, 300,000 to 2 97 to 2 94, that's a $6,000 reduction in your principal balance over two months. If we compare that to a mortgage at a six and a half percent rate. 000 your first month you pay down your balance by 515 not 3000 next month you pay it down by another 516 not another 3000 which you know we're making some assumptions but that's a 4, 970 difference in the principal reduction pay down for this particular comparison the result The payoff time in this scenario for the first thing he lock is a payoff time of 6.

58 years. The total interest cost is 83, 838, which is the same as the cost of a 30 year fixed at 1. 712%. Now success of this loan is dependent on three things, mainly one is it's dependent on how much you own your home. It's dependent on the take home pay and it's dependent on the monthly spend.

Notice I haven't really brought up the interest rate and we can go into that too in a little bit once we're looking at Nassima's numbers as well. But when this works this well, the interest rate is less of a factor because you're paying it off so quickly and because you pay it down to a low balance in such a short period of time, that.

When, even with a high rate against a low balance, it still results in a low cost. And I know I'm oversimplifying this, , but when those things, when basically the theory behind that mathematically is true, so but again, it's solely dependent on the balance and then the income versus the expenses. And so it really comes down to what is the household budget look like?

Right. And is the household budget you know, do we live below our means? We make more than we spend. And to what degree does that look like we'll call it. And is that enough to make this outperform the mortgage you have right now, or the mortgages that are available right now, if you're looking to refinance or something else.

[00:21:34] Naseema McElroy:

None of them will get into this more, but I just want to reemphasize that most people have 30 year mortgages and it takes them a minimal of 30 years to pay them off. But this is decreasing the amount of time that you spent on paying off your mortgage totally. So then you have no more mortgage debt from 30 years or however long you have left on that mortgage.

And that one, that was a 30 year example, but it takes it down to six years, almost seven years. So like that is a huge saving in itself.

[00:22:07] Anthony Rushing: And you're right and again. I want to emphasize that with that scenario, this is what happens if the mortgage balance for 600, 000, it would be different, right? If if the take home pay were 10 grand and the expenses were 8000, it would be different. And so it's really. A very individualized type of loan, because each.

Household controls the outcome where with an amortized mortgage amortization schedule set the amount of time that you're paying is set. The balance that you're paying on is set per the schedule interest rate is set. So you have very little control. You're kind of at the mercy of an amortized mortgage, which is good for some people.

Because it can function as sort of like a forced savings account. It's like a forced wealth builder, which is great. It's really good for a lot of people. So I'm not trying to bash the amortized mortgage while I bash the amortized mortgage. But I am trying to say that it is good for a lot of people.

However, see every day. If that makes sense, and a lot of that's because we try and educate and teach people and have them understand. Am I in the classification where, where this would work like, yes or no, is that likely or not? But you're right, I mean, these types of results.

This isn't like my best case scenario. I didn't cherry pick. The numbers. For this to show the best ones that we have, like, this is kind of like our average. So we know, I didn't. Look to try and find the apps if I found the absolute best 1, it'd be someone who paid off their home in 8 months.

Or 6 months, something like that and so I don't want to use that to set improper expectations, but when this works, this is, anywhere to 5 to 10 year payoff. When it works is what we find a lot of times. I kind of went ahead and already explained this, but, you know, if someone's living on a month to month budget, right?

This is kind of what you'll see with the decrease of 10, 000 income and then increase of 10, 000 expenses. Decrease of 10, 000 income increase of 10, 000 expenses. The balance doesn't go anywhere because there's nothing left over at the end of the month to stay in the heat lock. And that's really what pays down your home.

So that's basically what this is, how it works, how people use it and the general idea of who. Who it's a good fit for,

and so that was kind of what I wanted to introduce 1st, because without that, it makes it tough to understand and walk through, Nassim's experience with it and we were talking about maybe doing the calculator that we did together to show people what your scenario looked like, the different ways that we changed, we ran different exercises and then kind of what the outcome for you was.

[00:24:49] Naseema McElroy: Sure. And the reason why I wanted to do this is because it's kind of hard to conceptualize. I mean, he did do a really good provide a really good example, but it's kind of hard to conceptualize unless you walk through it yourself. And so I wanted to give an example of what it would look like for me and my situation with my interest rate with my amount, do my income and all of those things.

So you can understand that, like he said, this is an individualized product. So it's something that you would have to figure out if it works for you, and it doesn't work for everybody. And so we're gonna walk through an example of what it would look like for me, and then we'll determine if this is something that can work for me.

So you guys can understand a little bit more of how this product works.

[00:25:31] Anthony Rushing: To piggyback on that just a little bit. It is something that. Each individual person. Would need to look into and see if that works for them. That isn't all on you for what it's worth. We have resources and people that help with that too. That's part of what we do. And we'll give you all the website, we have a calculator that you can use.

You can check it out. There's a bunch of free education in terms of what this is, how it works. So you can dig into it even more case studies and that kind of stuff. So it's not like, hey, we're going to show you this thing. That could be awesome later. You know, go there. There's support that we can provide too, but you're completely right.

It's not like we can just say, like, a mortgage if these are the parameters, right? It doesn't matter how much money you make. Here's how much it's going to cost. That isn't how this works. This is a very individualized. Type of loan product where. Your behavior is what determines your success.

And so for people that practice that, And who basically live in a way that lines up with what this needs. There's an extremely high likelihood that it would be a good idea, right? At least to look into and learn about like, there was a point where I had 3 kids and they were all in daycare at the same time and my, you know, I had just got into this business and my wife's a teacher and I had been a teacher.

I didn't know anyone. Right? Like, I didn't have this. Let's be real. We didn't have any money. I was born for my parents. , that was true. And if there's a season of life and it's not because you're irresponsible, it's just what it was. So it's important to know that. You know but if you're in a season where you think this could be a good fit, then it may be worth looking into.

So, okay. So do you want me to pull up the calculator now? Should we talk about your scenario and I can fill it in and then we can share the calculator. What do you think is the best way

[00:27:12] Naseema McElroy: We can walk through it with the calculator.

[00:27:14] Anthony Rushing: Okay, So,

this is this calculator that I'm going to show is what we. Use on pretty much every single phone call that we do.

With anyone, even if someone knows this backwards and forwards, even if they've created their own spreadsheet, even if they can teach it to me and know it better than I do, right? Or the loan, you know, our team, we still believe we have the obligation to do the due diligence to make sure that this is a good fit for someone because our goal is to help people 1st and we do that through this product.

We make it very obvious when this is not a good idea so that people don't move forward with it because that's the last thing we want to happen.

Okay. So this is the calculator that we use. The top portion is the input. And what we'll do is we'll kind of change the numbers as we go.

This is the summary, which kind of tells us the basic idea about what we sort of look at. And then we have the payment schedule down below, because I want to be transparent with, with what's going on in the math in the background. The reality is we built this ourselves. Okay. And we could have done anything with it.

So, you know, I just want to say, look, here's what's going on. I want to make sure that lines up with what people expect and with what the strategy, how the strategy works. So so I think we talked about the amount that you owed on the house, right? What is what did that look like?

[00:28:32] Naseema McElroy: Yeah. So I think I sent five 80.

[00:28:36] Anthony Rushing: Okay.

So we probably used 584. Is

[00:28:41] Naseema McElroy: Okay. Probably now.

[00:28:44] Anthony Rushing: Just to include closing costs. You know, I,

[00:28:46] Naseema McElroy: Yes, yes,

[00:28:47] Anthony Rushing: I feel like I came pretty prepared

[00:28:49] Naseema McElroy: yes,

[00:28:49] Anthony Rushing: except for this part. So.

[00:28:51] Naseema McElroy: I have it. I have it

[00:28:52] Anthony Rushing: Let's take a look.

[00:28:53] Naseema McElroy: Yeah, I think, yeah, I did 571 and I think we, did like, yeah

[00:28:58] Anthony Rushing: okay. repeat that one more time?

[00:28:59] Naseema McElroy: so it's 571 actually. So I think we did 575 or something.

[00:29:05] Anthony Rushing: That sounds, yeah.

Okay, so we used an interest rate of 7. 75 percent. We have two different options. One locks the rate at 7. 75 percent for Five years, and then , it's a 10 year drop period. So for the next 5, it flips to a variable rate product that looks at the 6 month treasury bill.

6 month treasury bill is an index, kind of like prime, kind of like libel. It's doing the United States bond market. So it's a 6 month treasury bill and when this flips variable, it looks at the 6 month T bill each month and adds a margin of 4 and a half. We have another option that.

Right now, and today is Halloween, October 31st, 2023. These are the options per today. For what it's worth, I have to say that for liability because they can change. And then the 6 month, so the variable rate product looks at the 6 month treasury bill for the life of the loan and adds a margin of 3.

25. So if you choose the variable rate product, it ends up being a point and a quarter. Lower than what would you would get on the back end of the fixed rate product? We believe that. It's reasonable to think that rates are going to decrease. Over the next 5 years, much less the next 2 years. So we believe that the variable rate product that we have will outperform.

A 7. 75 percent interest rate over the next. 5 years. So, I use the most conservative. Number, so I do believe that the five year fixed is the most conservative option that we have for the long run. So that's why I use that one. So then we talked about your income, right? Your take home pay, I think we started with 14, is that right?

[00:30:38] Naseema McElroy: 14,000 mm-Hmm. .

[00:30:40] Anthony Rushing: And then we looped in your expenses. Now, when I do this, we want to think about . What's happening in the future, right? If we get this loan. This loan comes in and pays off your mortgage. So you don't have a mortgage payment anymore. However, the strategy calls for you to deposit all of your money into the HELOC.

So there's only one place for you to pay for everything, all your bills, right? So it's not just your, credit card stuff. It's not just your. Entertainment, this is everything that you spend money on, right? And this is a number that I always advise people to be a little bit conservative on. We don't want to ruin the loan on purpose, but we also, you know, we can put in pretty numbers all day and get a great outcome and then feel confident it's going to work.

I would rather be, cautious with it because life happens, right? We know that things are going to cost more maybe than they do now. Right? We know that we can have a month. That's more expensive and then we get back to it. So I was sort of Aaron's side of caution in terms of, you know, your monthly expenses.

Let's be brutally honest. With how much we spend

[00:31:40] Naseema McElroy: So for that one, for me, it's gonna be 12,000.

[00:31:43] Anthony Rushing: Is that what we used?

[00:31:44] Naseema McElroy: Yeah. I think that's what we use.

Yeah. Oh, yeah. Yeah. You took out the mortgage payment

in there?

My mortgage payment is 34.

[00:31:51] Anthony Rushing: I was like, man, I don't remember that, but this is, this

is,

[00:31:54] Naseema McElroy: Right, right, right. We

[00:31:55] Anthony Rushing: I was like, oh, oh man, this podcast is going to go a different direction than what we thought it was going to go. Okay, good. All right, here we go. Good. And then so, so what we're saying is each month, Nassim is going to deposit 14, 000. That's her principal reduction, right?

And then from that, she's going to take out 8, 600 from that principal payment, right? To pay for her bills. And then the last thing that's going to happen is we're going to take out the interest payment. The interest payment changes because it's dependent on your balance. So it's not a static number. It doesn't stay the same.

And I'll show you where that happens too. So this loan doesn't escrow. So what that means is you're not sending money somewhere else to someone else's bank account each month for them to store it there, right? For your insurance and taxes. So you use your HELOC basically as your escrow account, which is to your benefit.

Because if you think about it, the way this loan calculates interest is daily pretty much. So every single day is balanced matters. Remember, if we go back to the average daily principal balance, you want to create the most number of days with the lowest balance possible, which means you need to store money, keep money in here as long as you can, because that creates the lowest balance for the most number of days.

So you store it here. That helps. But what that does mean is when. Your insurance bill comes due and, you know, property taxes come due, they're going to mail the bill to you and you use your HELOC to pay for those things. And that increases your balance once a year, which this does. So, Naseema, do you remember what your annual insurance and annual property taxes were?

10

[00:33:23] Naseema McElroy: And then the property tax 9 227

California.

[00:33:32] Anthony Rushing: California. So, yeah, that's a lot. Chicago's worse. New York's worse. Grateful you're not there, but that's that. That's pretty hefty. Okay. So I usually scroll past this, right? So I like to look at the payment schedule 1st, just to make sure that this lines up. So I'm going to walk through this quickly.

So I'm going to be looking at this 1st month. Okay, so. The 1st, the beginning months balance is 575. 575, 000. There are two things that we don't see here. One is we don't see what happens when the SEMA puts in her 14, 000, right? So I'm going to simulate that. So 575 minus 14, 000 is 561. So that's where the balance goes when she deposits all of her income into this.

That's the maximum. That's the, that's the lowest balance she can create. Right now, right? She's controlling the balance with everything she has. Then she pays her bills, right? That isn't shown here, but her bills are 8, 600 too. Right? So when she does that, that increases her balance because she's pulling money out from the heel.

So I'm going to add 8, 600. So now I'm at 5, 69, 600. Then the last thing that happens is your interest payment gets paid. So here on the payment schedule, you can see the 1st month's interest payment is 3713. So I need to add that as well because that takes away from that principle reduction. So I add 3713 and the number that we get is the end balance.

Well, here you can see on the payment schedule, the end balance is 573, 313. So what that means is out of the 14, 000 that she put in, so she put 14, 000 in, she took out her expenses and the interest payment gets paid. She still has 1, 686 in the HELOC that's dedicated. That's pretty much her principal reduction for that particular month.

So that's kind of what we're looking at here. The ending balance for month one, the month rolls over. So the ending balance for month one is exactly the same as the beginning balance for month two. The interest payment goes down month over month because the balance goes down. And really, as the interest payment goes down, all that means is Fewer dollars leave the HELOC to pay the bank.

So by default, more dollars are in the HELOC month over month. So as the interest payment goes down, more money goes toward principal reduction month over month. And then for those of you that can see this month 12 and 13 the ending balance for month 12 is 553, 899. When this month rolls over, it's not the same, it's increased by 10, 200, which is the amount of not escrow, but insurance and taxes for the year.

So it's reflected in a way annually where the annual balance is increased by that amount because the scene is writing a check for that. So that's what's happening behind the scenes. And so I kind of like to walk through that just so people can see it. So now let's take a look at the outcome, right?

So. we look at the payoff time right now, this payoff time is 21. 3 years. How much longer do you have on your mortgage right now on the CMA?

[00:36:32] Naseema McElroy: Sorry, I have 27 years. Mm-Hmm.

[00:36:37] Anthony Rushing: So

The time is better, right? The time is shorter. We're not looking at five to nine years, but the time aspect is shorter. So now let's compare , the cost aspect, right? One thing people get caught up in is this 7. 75%, and they're like, why would I switch out my 3 percent or 4 percent mortgage for a 7.

75 percent rate,

You know, home loan, right? Which it's a valid question. If those two home loans work the same. Well, these right? So then what we have to do is think about. What that means is basically that seven point that rate that's on this different home loan. We can't assume that it means the same thing, which means it's arbitrary.

So then the question is, how much is it going to cost you in terms of interest costs that you're giving to the bank? And how does that compare to your current cost? So when we look up to the top of this calculator, we can see sort of a cost breakdown. Total principal paid is 575. The total interest paid is 598, 139.

So in this scenario, you're essentially buying a house for yourself and you're buying a house for the bank, right? So what we've done is we've taken this cost, because here's the thing, I haven't talked with one person who actually connects with the total interest paid and can tell me how it compares to a 30 year fixed.

Not one. And so I wanted to make that number accessible. So what we did is we took that total cost amount against your principal balance, and we calculated the interest rate that you'd need to have a 30 year fixed for that to happen. So that's down here at the bottom of the summary under the purple. So this total interest paid is equivalent to a 30 year fixed rate mortgage at 5.

483%. So Nassima, what interest rate do you have on your mortgage right now? 2. 85. So right now we're in a scenario that depending on what Nassima's priorities are, right? And depending on which one of these is more extreme or not, because I can't determine whether this is good or not for her, right?

If Nassima's main goal in life... It's now for home faster, this accomplishes that. And if money is not a thing, then this works for that. Now that's pretty extreme, right? That would be a pretty extreme priority, right? But at this point, we know that it's going to pay off for home six years faster, right?

But it's going to cost her a lot more in interest, so this scenario, with this particular cashflow, Missima and this payoff time. What conclusion did you come to.

[00:39:20] Naseema McElroy: Well, right now, it would not be a viable option because it just wouldn't make sense as far as, how much the total interest pay would be and the interest rate, because it's not any cost savings. So we're just like, yeah, it's probably not for me right now in my current situation, but we did

play around.

[00:39:41] Anthony Rushing: I have a question for you. Did I try and. Convince you that it was a good idea.

[00:39:45] Naseema McElroy: No, not at all.

[00:39:47] Anthony Rushing: Right. And that's the thing, right? Like, was there any part of me that try to convince you that with this particular scenario, that this could be good for you.

Right,

[00:39:57] Naseema McElroy: that's what I love is that it just doesn't

make sense. And if it.

doesn't make sense, just don't do it. The thing that I do not like about the traditional mortgage industry is that they will say. If they will justify how it makes sense, even if it doesn't, especially like they'll start using gross income numbers and start playing around and make it so that it seems affordable.

And I feel like that contributed to a lot of people being housed for. And so that's why another reason why I really like this product and really want people to learn about it is because it has to make sense for you to do it. And it has to make sense for your budget. In your time of life that you're in right now, not for the future, not for what you used to make, but right now where you're at.

[00:40:43] Anthony Rushing: I agree 100 percent and that's 1 thing that I love about this too. I come from an education background. And helping. People improve their lives is what drives me. And so I feel really grateful that I get to work with this particular product, because if it doesn't work, I have an obligation.

Not just personally, but in how we run our branch, our company, we have an obligation to make sure that if this doesn't work, that we name that and it's not about, Hey, look, like, you know, you could, you could cut out 2000 worth of expenses. What would that take? Right? Let's, let's do that to try and make it work.

That isn't our conversation

ever. Right. Now, if the. Okay. Person we're talking to wants to run scenarios to see what if right. Well, that's why we give the calculator, right? So you have a tool that you can work yourself to see what would it take for this to work? Is that in the cards in the future or not?

But this isn't. This isn't a a coaching program where we help people budget better so they can get this we look for people where this works because the hardest thing to change. You know, the same what you do, and when you succeed with people that you work with, , I don't think people realize how valuable.

It is when you can help people change , their behavior. Because you're talking about intrinsic, not just habits, but routines and things that they give people. Meaning in a way, right? This is who I am, and this is how I function to change someone's. Financial behavior. Behavior in general, but even financial behavior that's based on things that are really obscure already.

That's huge and so I'm not good at that. Right? But what I can do is with your budget. If, you know, this is how you function, I can tell you whether it's a good idea or not. Right? And. We can help you see the potential outcome of. The debt reduction piece, being able to become not just consumer debt free, but.

Completely debt free. There's a whole other piece of this and now you're sitting on a 500, 000 dollar line of credit that you can borrow against at. 7. 75 percent investment we haven't even gone there. Right? That's true. But the reason why I wanted to introduce this to you guys wasn't to talk about leveraging this for investments.

That's a different conversation, but at the same time, like. That's an auxiliary benefit, but, you know, when this works, it's just 1 of these things where. It can. It's just math. It's like, it's not magic, you know?

[00:43:08] Naseema McElroy: Right, so the bottom line is going to work for people who spend less than they make routinely who already have formed a habit around that. And, it doesn't necessarily even depend on, like, what's your current interest rate is because it can accelerate your mortgage payoff so fast

[00:43:27] Anthony Rushing: Yep.

[00:43:27] Naseema McElroy: that interest rate is kind of minimal.

I do want to quickly just touch on. Why a first line HELOC is traditionally a higher interest rate just, just in numbers from a numbers perspective, not over time, but why is it traditionally a higher?

[00:43:46] Anthony Rushing: So. This is usually a portfolio product, which means banks keep them in house. So the individual bank that that keeps it in house they're going to be responsible for. The profit that they receive from any product that they offer, right? With amortized mortgages most of them are I don't know if you guys have noticed when they change servicing companies You're loan gets sold Fannie Mae and Freddie Mac are these Institutions I'll call them then I guess they're companies but institutions that buy By far the most mortgages that are available on the secondary market.

So, what that means is the bank originates it, and then they sell your loan to Fannie Mae and Freddie Mac, which is these monster, monster institutions. They have billions and billions of dollars of loans. So, what that means is because of that, because of the sheer volume of loans that they have.

They still have this profit margin, but with more volume, you require less of a margin to be extremely profitable. So that's why. So one has to do with profit. Another piece has to do with risk. And so there are different ways that, that financial institutions help to reduce the amount of risk in terms of their.

Products and their assets that they hold and 1 way to do that is to increase the interest rate a little bit. So, if you increase the interest rate a little bit, then it pads for the risk that's associated in the case that someone defaults, then they're not out as much from a holistic standpoint. So, to just kind of touch on it.

That those are the reasons 1 has to do with volume in terms of sale. And the other 1 has to do. Thank you. With risk, mainly because first thing, he locks are held by individual banks and they're not sold to some monster institution, unlike amortized mortgages.

[00:45:29] Naseema McElroy: Got it. Okay. So how can people work with you or learn if this product is good for them? Because obviously you're not, you're not going to give them this product, offer them this product, if it's not going to be a good fit. So where can people, where can people reach out to you and do their own personnel analysis?

[00:45:48] Anthony Rushing: So the 1st thing I would do is if this is still confusing, I would go to 1st thing. He locked dot com and I would look into the different lessons that they have available, you know, the different educational opportunities. YouTube's a great place as well. If you look up velocity banking there'll be a lot of people.

Some of them we know some of them we don't, but a lot of people that are teaching this velocity banking concept, you can do it with a 2nd, lean he locked to that's going to be more complicated, which you can also look into as well. It's, it's not a bad practice. Obviously, I'm a little biased since I was just like, but but. If you're looking at velocity banking, you can find some really great resources there. Our website, first thing he locked dot com does have a calculator that you can fill in your loan balance. You can fill in your income. You can fill in your expenses. Remember when you do your expenses, take out your mortgage, but include everything else everything.

Right?

[00:46:42] Naseema McElroy: credit card payments everything.

[00:46:44] Anthony Rushing: everything, right? But you want to remove your mortgage, right? And you can kind of get a good idea as to the projected outcome. If that works out, even if you're looking at 15 years, 14 years 18 years, there are different ways for us to move debt around to increase cash flow to make it work.

But you know, if you're looking at 22 year payoff. It's probably not going to be a great fit anywhere from like 17 down. If you do the calculator on your own, then it might be worth scheduling a call, which then you just go to the signup. It's in like the top right of first thing he like. com. And what that'll do is that'll book a call with one of my team members or me.

Usually one of my team members managing a little bit more these days, but and it, they all specialize in this. We're very purposeful with the conversations that we have with people in terms of knowing what their goals are teaching the strategy running the calculator.

And then after that, we, after all that happens, we then go into what the loan looks like. So, because again, the most important thing is making sure that this. Strategy that the program will call it works before even thinking about, do you qualify for the loan? We don't like qualifying for the loan is like, once we make sure that this is a good idea for you, then it's like, Hey, do you want to move forward?

If you do, we'll get the loan application going and then we can pull credit, you know, do all this stuff, do the income calcs and all that. So,

[00:48:00] Naseema McElroy: question , is the loan process, like, the same, like, qualifying for traditional mortgage, like, all the documentations that they're going to need tax statements, banking statements, all that stuff. it's

It's

usually

the same process.

[00:48:13] Anthony Rushing: It's annoying. I mean, we can just name it. It's true. You know, like, call it for what it is, you know, it is. So it's

the same over process. This transaction is a refinance. So it's important to remember that. So we treat it like any other refinance. We get your application. We pull credit.

We get initial. Income docs and identification docs, that kind of stuff to get you initially qualified. Usually when you're buying a home, that's the process you do before you buy a house to get your pre approval letter. So we do that first. And then once we do the initial qualification, then we send it up into underwriting where then they ask for everything, which is also annoying.

But

[00:48:51] Naseema McElroy: Haha.

[00:48:52] Anthony Rushing: if we cover our basis on the, you know, the meat of what this is, is this a better option for someone or is it not? And to what degree is it better? And if it is, sometimes it's like, hey, So, I'll do underwriting four times in a row if I have to, right? Because the outcome is that different, that much better.

And sometimes, you know, it doesn't. But really, again, what we're trying to do is just bring it to the forefront of people's attention so they know what it is and they understand it in a way that they can choose it when it's a better idea. And that's really all that we're hoping to do.

[00:49:28] Naseema McElroy: So, it's not, it's not for everybody, but the thing is, most people just don't know about it because it's not the traditional way that we typically do mortgages here. Although, as Anthony stated, like, they've been doing this in different countries for a very, very long time. So, just wanted to bring your awareness to this, because I think it would be a really good product, especially for people who are interested in being completely.

Debt free, completely free from any kind of debt in the long run, people working towards financial freedom who are already massively saving. This is going to be a great product for and people, especially I think, like, I think of this as a good product for people who like to Board like money in their savings account.

And I know women like to do that too. Like if you have a huge savings account, why not make that savings work for you and just leave it there. And it's paying down your mortgage on top of, you know, your, your supplemental income that you have that you're not using for your bills. So

[00:50:28] Anthony Rushing: And that's something we didn't necessarily hit on today, but or, you know, we really didn't hit hard, but. If you've got 20, dollars sitting in a savings account, that's great. Like, that is awesome and that's your emergency fund. This can do that too. Right? And that's the thing is no, 1's going to put.

That much emergency fund into a place that they can't take out again. So no one puts it into their mortgage for paying off your home. That would make sense, but not for security, you know, household financial security. So you keep it in a savings account where it doesn't do anything for you here.

It decreases your loan amount, decreasing your interest costs and speeds up how fast you pay off the house as well.  That's a really good point. So, and that's something else that we go through as well with that calculator. I would just reduce the balance by the amount you have in your savings account just to simulate what does that look like?

Hey, and it's not a, it's not saying you should do this, right it doesn't mean that, you know, you have to, but it does mean that, that it helps you better see what happens if to help you know, if, if it would make sense for you.

[00:51:39] Naseema McElroy: So again, if people wanna see if this works for them, make sure you head over the first scene. Keylog. com. Run the numbers. If it really looks like it'll work for you, go ahead and schedule an appointment so you can talk with one of the loan officers there and they can hook you up. But thank you so much, Anthony, for this, because this is really eye opening for me.

I had no idea that these products existed, and I just think, like, from a math standpoint and from a financial freedom standpoint, it'll make sense for a lot of people. I just want to

make people aware that this was an option. So thank you again.

[00:52:22] Anthony Rushing: Well, no, thank you. Thank you for your time and, and. And offering your, your space and hopefully if anything, people learn about something that's new and would be even better as if it does work for them, we can get some success stories from them as well. So that'd be awesome.

[00:52:37] Naseema McElroy: Definitely. Definitely. I love hearing the success stories. Well, thank you again, Anthony. And remember to head over to first lane. But I'll have all the links in the show notes for you guys.

[00:52:48] Anthony Rushing: Awesome. Thank you.

Hey there I’m Naseema

My dream is for everyone to know that financial independence is attainable with a little intentionality. Learn how I can help you finally break the cycle of living paycheck to paycheck.

Learn about the course

---

Join the Facebook Community

Join the Financially Intentional community and get access to resources to guide you on the path to Financial Freedom.

---

Watch these Videos To Learn How to…

---

Keep Listening

Here are some more episodes you may enjoy…