The Mortgage Mistake That Could Cost You Everything

0:00This is an iHeart Podcast. Guaranteed Human Earners, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partnered with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower personal dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money. Now make sure it's working hard for you. Download the Empower personal dashboard or visit Empower.com.

0:37Not an Empower client paid or sponsored. Earners, what's up? Look, when you think about discovering small brands, what store pops in your mind? Well, it should be Walmart. Seriously, Walmart has thousands of small brands and they're all in one place. Just go online or in-store, discover and shop. It could not be easier. Every one of these brands has a real story and real people behind it. They're true American success stories, and you can find them all at Walmart. Discover thousands of small brands at walmart.com today. When traveling for events or festivals throughout the country, every dollar matters.

1:14We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check Lyft before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, taking a few seconds to check lift could leave you with more money to enjoy the experience. Save money. Check lift. Today's episode is brought to you by ChatGPT for Business. As a listener of this podcast, you're looking for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use.

1:51Chat GPT for Business can help. Chat GPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in Chat GPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using Chat GPT for Work. Download the Chat GPT desktop app or contact sales to learn more. And that's right. Watch Market Mondays every Monday. You got to put... Look, guys, first of all, if you're in chat right now, how many of you guys got$10 ,000 right now? Type in chat. If you got$10 ,000,$15 ,000 right now, type in chat.

2:34And if that's like all your money, right? Not you folks out here who got green jackets on, you're part of Red Panda, right? Because you guys are just killing it out here. But there's a big market of us, of people out here and our followers who watch the show that got$10 ,000 to$15 ,000. In all honesty, I don't think you should even be thinking about home ownership. You can't afford it right now. You need to really think about how do I flip this money? How do I turn this$10 ,000 to$15 ,000 into$30 ,000,$40 ,000? And then how can I offset that capital gains? You do that by buying real estate and you do it smart, right?

3:12You just don't go out here and buy a single family. You got to buy a multifamily because that's going to give you more tax benefits and more tax breaks. And that can offset that capital gains that you'll get from, you know, investing and taking from your brokerage account to put it into the real estate. Right. So I just feel like there's a lot of people out there that want to buy real estate, that want to get into the game. But that that entry barrier is just too high for them. So why not? Why sit on the money? Why put it into your savings account? or even the high yield savings for that matter, right?

3:47I know people want safety. Hey, I want to get 3%, 4 % and that's great, but you got to be a little bit more aggressive. Scare money don't make no money at the end of the day. And like you said, Magic said last year, you got three years. We on year two now. One year is down, two years now, right? And it's going by fast. So we have to now accelerate that, take calculated risk and learn the game to kind of increase our net worth. So that way you can really go out here and buy. real estate Troy. I've been looking at the housing market here in Houston like the last year and then like in the last two or three months a couple people have asked me about all in one loan.

4:26Can you walk us through what that is and also can you tell everyone who was hoping for a housing market crash that one is never going to come? I've been saying that for fucking eight years, nine years bro like everybody was killing me in the comments back in 2020 when i was like yo go out here and buy real estate this is the best time to buy and everybody was telling me i was crazy the market's gonna crash but they just don't understand you know they don't understand the history of this right um right now there's not enough supply this is why you have a new law that just came out to help increase supply because there's a housing shortage so no matter look and i'm not going to take away from the debt that folks have right now, consumer spending, the rising housing costs of insurance and property taxes.

5:20But ultimately, there's not enough supply on the market right now. And at some point, the feds, even if they raise them a little bit, that's okay. At some point, these mortgage rates are going to come down. And there's a lot of people on the waiting on the sidelines that's going to get back in the game once those rates start hitting the fives and the fours again. And we've had some trickles of fives over the past six to eight months too. So there's been opportunities to get rates in the fives. You just have to be in position to capitalize on that. Now, when it comes to this all in one loan, I've been getting a lot of DMs about this lately.

5:56A lot of people been on the internet kind of talking about this. So the all in one loan, I'm going to try to make this as simple as I possibly can. It's basically a first lien position HELOC. HELOC is a home equity line of credit. And what this does is there's some banks out there that's offering, you open up a checking account with them and it combines like your HELOC and your checking account. So you make all your deposits temporarily into your home equity line of credit to reduce that line of credit balance. And then as you're getting paid, you deposit into your HELOC and you're using a HELOC to pay your bills.

6:37See, a HELOC is not like a 30-year mortgage where it's amperized over 30 years. A HELOC is more simple interest. So as you pay down your balance, your payment goes lower. So instead of having cash sitting in your check-ins and your savings account, you have that cash sitting in your HELOC and you just use that HELOC to go about your daily spending, paying your bills, et cetera, et cetera. Now, this can reduce total interest that's paid and can definitely shorten the life of the loan. And it's definitely going to give you an increase in your cash flow and your flexibility. But this is best fit for folks who have money.

7:19So explain, is it a HELOC or it's not a HELOC? It's a HELOC. It's a HELOC. So when people say all in one, this is just marketing. So it's a HELOC. It's a HELOC. Thank you, Ron. Yeah, it's another name for HELOC. It's another name for HELOC. It's something that people are using as more marketing because they're saying, hey, you get a checking account that comes with it and you can use a checking account with the HELOC. It's a HELOC, right? Plain and simple. It's a first lane position HELOC. That's all it is. And the HELOC, for those of you who don't know, it's home equity line of credit, like I said.

7:55You have, in most cases, you'll have a 10-year draw period. So in that 10-year draw period, you can use it like a credit card, right? You can use it, pay it off, use it, pay it off, use it, pay it off, and you have that flexibility. And then after 10 years, it converts into like a 20-year principal interest mortgage. These rates are generally higher than what a 30-year mortgage is going to be. These rates can range anywhere from 8 % to 10%, 11%, just depending on who's the lender, who's giving the HELOC, and ultimately, you're a profile, right? But this is, again, this strategy has been around for decades, right?

8:33First lien position HELOC, use that, put all your money into the HELOC and use that HELOC to pay your bills. And then you'll have surplus. So instead of it sitting in your checking account, you are paying less interest. And essentially, you can technically pay off your mortgage much faster this way. But again, you have to have surplus of income to do this. If you are someone who's kind of living check to check, this is probably not going to work for you, right? This is going to work for people who have good income, high income earners, people who got strong monthly cash flow who don't need to continue to dip into that HELOC every single month to live their life, right?

9:14Borrowers who keep larger cash balances, this is perfect for them. Now, when you go out here and you purchase a home. This is not like an FHA loan, guys, or conventional where you can do 3%, 3.5%, 5%. At a very minimum, you have to put down 10%. And some banks that offer this, you're going to have to probably put down more, 15 % to 20%. So first things first, you have to have that down payment to even do this. Second thing is you need to have a low debt to income ratio because again, that is extremely important. And I think that's the part that people are not speaking about. You can't really go out here and get a HELOC if you got a 55 % debt to income ratio.

9:56Tell them what debt to income ratio is for those if they're new or don't know. Debt to income ratio is exactly what it says, your debt towards your income and what that ratio is. So for example, if you have$10 ,000 gross of monthly income and your mortgage payment plus all your bills that are on your credit report, like your car loan, your student loans, your credit card bills, if everything comes up to$5 ,500 a month, you're at a 55 % DTI or debt to income ratio, right? So that could probably be good for FHA borrower. But if you're talking about a HELOC, you need to be at a 42 % or lower debt to income ratio.

10:38And again, remember, one important key that folks, when I hear people speak about this and they speak about HELOCs in general and first position, you have to understand the HELOC can be cut off at any given time by the lender. It's just like - With how much notice? Can be cut off. Like if I have a HELOC, they could just cancel it even though I already have it? Absolutely. They can cut your balance. It's the same thing like a credit card, right? If they feel like your spending is not up there, they'll cut your balances. They'll say, okay, you used to spend a hundred thousand dollars a month but you now spending 20 so why am i going to keep giving you a hundred thousand dollars when you're not showing that you're spending this money so i'm gonna cut that balance it's the same thing with the helot if if you live in the declining market if we start seeing these foreclosures continue to rise and that impacts remember real estate is local guys so and the banks are monitoring this is so much technology and the banks are using all of this and it's all based off of algorithms too so if you live in a zip code that has the it's a declining market and you have a HELOC that's out, guess what's going to happen?

11:48You're going to wake up one morning and you're going to think you have, you know, 50 ,000 available and then you're going to wake up to see that your line was frozen. And there's nothing you can do about that because they've reserved the right to freeze your line to protect their interests. Ernest, what's up? Look, when you think about discovering small brands, what star pops in your mind? Well, it should be Walmart. Seriously, Walmart has thousands of small brands and they're all in one place. Just go online or in-store, discover and shop. It could not be easier. Every one of these brands has a real story and real people behind it.

12:22They're true American success stories, and you can find them all at Walmart. Discover thousands of small brands at walmart.com today. Ernest, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partnered with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower Personal Dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money.

12:57Now make sure it's working hard for you. Download the Empower Personal Dashboard or visit Empower.com. Not an Empower client paid or sponsored. When traveling for events or festivals throughout the country, every dollar matters. We compare flights, prices, hotel rates, and restaurant options. So why wouldn't we compare rides? Personally, I always check lift before booking a ride. Prices can change throughout the day depending on traffic, weather, and what's happening in the city. If you're headed to a concert, out to dinner, or catching up with your friends on a Friday night, taking a few seconds to check lift could leave you with more money to enjoy the experience.

13:35Save money. Check live.

14:05worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more. This is an iHeart podcast. Guaranteed human.