SO WHAT DO I DO WITH MY CREDIT LINE AND CREDIT CARDS?
So now you should have your line of credit and your credit card. If you’re still confused about your line of credit, don’t fret. In the next couple of pages we’ll spend a minute talking about what to consider with your line of credit. First, however, we want to give you a good sense of the process.
The power of Mortgage Cycling comes from the ability to place large “lump” payments against the principal balance of your mortgage. This in turn reduces the principal which in turn reduces the calculated interest on your loan. When you can reduce the calculated interest in this manner…equity is easily built into your home mortgage.
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If you ever wished you could get a loan that you could use to invest or start a business, here’s a great way to do it using cycling. Using the following example you’ll be cycling the banks money with two credit card balances. By doing this you will be able to deposit a lump sum of cash in your personal account without incurring any interest or having a payoff deadline.
I recommend using this money only for purposes that will bring in additional money. Like property investment or starting you own business. I don’t recommend using this money for impulse purchases like a new car, a boat or anything else that’s going to end up losing its value.
This cycling technique is a very powerful cash system. Use it to your advantage by investing the money wisely. You may also use this money to pay off existing high interest debt. When you do this you’ll want to open a money market account where you deposit any extra cash. Over time while you’re cycling the money back and forth…you’ll have saved up enough money to pay the original balance off. All without paying a cent in interest!
The chart below uses the following examples: Note: The credit card names are strictly used as examples. You may use whichever credit card you’re comfortable with.
• $10,000 line of credit from your bank
• $10,000 credit limit Amex credit card
• $2,500 credit limit Master card
• $2,500 credit limit Visa card
January
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February: Use your Amex to pay off bank credit line balance of $10,000
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March: Use Master Card and Visa to pay Amex balance in full
April: Now you will pay Master Card and Visa off using your Amex.
See how simple and powerful this is? Continue to cycle back and forth for as long as you wish. Make sure to pay each balance full every month and you will never incur any interest charges on this loan.
This entire time you have $10,000 sitting in your personal account gaining interest just waiting to be invested.
You have just given yourself a $10,000 loan with 0% interest that doesn’t have a pay back off date. Allowing you to take as much time as needed to repay the loan.
Be sure and use this technique wisely. If you have any reservations about your ability to manage money responsibly…I recommend holding off on using this cycling plan until you have better will power and stronger money management skills.
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Mortgage Cycling can be a very powerful vehicle to build wealth. Once you get the hang of this cycling technique and you feel comfortable using credit to pay down your mortgage, you can focus on using mortgage cycling to create an income.
Since Mortgage Cycling is so effective at rapidly building tens of thousands of dollars in home equity, you can use this to your advantage by taking this equity and placing a down payment on an investment property. A good example of an investment property would be one that is purchased at or below market value then turned into a rental.
You would then use the renters’ monthly payment to make the mortgage payment on this rental property and possibly the payment on the equity loan you took out to purchase the property. This way you have acquired this property with no out-of-pocket expense.
Now you obtain a line of credit to begin Mortgage Cycling this property. Before you know it, you will own your first investment property – free and clear. You can either sell it for a profit or keep it and collect a regular monthly payment from the tenant.
From there, you can always move on to additional properties using this exact technique. Many real estate investors own dozens of properties outright from utilizing this technique.
Important Instruction: Each time you send your big extra payment (in the above example it was $6,000) to your lender, be sure to call them ahead of time and let them know you’ll be sending a large pre-payment. Be sure and clearly state the payment is to be applied to the loan’s principal. This is very important. If you don’t do this, the lender may apply the payment to the loan interest or even put the money in escrow. This would be very bad, as it would totally negate all your efforts of paying off your mortgage and building equity. |Remember to check your mortgage contract to make sure that any prepayments made will be applied to principal. Some lenders will state in their mortgage contract that prepayments go to escrow. This is BAD as you cannot reclaim those funds for any useful purpose. Your signed contract is the ultimate source of truth for all transactions. Read it carefully!|
Also, be sure to get the name of the person you spoke to. You’ll want to keep track of this transaction to make sure that your efforts pay off. Also request to receive a receipt or statement that shows when your extra payment was applied to the loan principal. If you notice that it wasn’t, you’ll have the name of the person who handled your transaction to clear it up.
You’ll want to send your extra payment by check so that there’s a receipt of your payment. Send the check with the following letter:
Example:
Important payment information enclosed
August 28, 2004
Re: Additional principal payment
Loan #0000-00-99999
This payment is to be made on behalf of:
Your name
Your property address
Extra monthly payment to be applied
to principal is $6000.00
If there are any questions or problems with
this payment, please contact Your name
at 777-777-7777.
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