My buddy took me to a meeting where a guy was talking about this, but it doesn't make any sense to me. The idea is to take out a line of credit at a higher interest rate than your mortgage, use some of it to pay down your principle to save on interest paid, then start paying back the loan and continue with normal payments. Their example was to take out $25000, use $15000 to pay down principle on your mortgage and save on interest. Then pay back the $15k over 6 months and repeat. On a $300k house with 30 year mortgage, at 6% interest on mortgage and 7% on heloc, you save over $60k doing this (according to their numbers) but when I asked what would happen if instead of taking a loan, I paid $2500 extra to principle each month? They didn't have the numbers, but assured me that it would still save 10s of thousands of dollars to use the heloc method. Am I missing something? Does this method actually work/make sense? If it does, why isn't it more popular?
They also showed a video by Mark Kohler, it was about taxes and paying your kids through your small business so that you can write off the money, and it can go into a savings account for them or they can use it to pay for school lunches, clothes, etc. It sort of made sense, but I was skeptical/unsure of what to believe was allowed and what's not. Wouldn't the kids need to provide a service? How would that be valued? He also said you don't pay them as employees, but as an outside service. Could anybody explain that to me?
Thank you for any and all help!
Tl;Dr
Paying off a mortgage by using a heloc for big payments, is it better than just paying extra each month?
Are Mark Kohler videos good to watch for tax purposes?
Submitted March 07, 2017 at 03:51AM by joeprentice90 http://ift.tt/2mdTlTu
