Velocity banking is a way of paying down a mortgage with a home equity line of credit (HELOC); the terms are defined here. Whether it beats plain extra payments depends on your numbers. This page has no verdict; it routes you to the test that matches your question.
Illustrative model, not financial, tax or legal advice. A HELOC is secured by your home. Results depend on your rate, fees, balance, term and cash flow and do not transfer to your loan.
What are the three tests?
- SPREAD (before)
- On your own loan and cash flow, at what HELOC rate do the HELOC path and plain extra payments end level on net position at the same horizon, with your fees included, and where does your line’s rate sit against that?
- FREEZE (before)
- If the lender stopped new draws or lowered your limit in month 12 or month 36, or your draw period ended, could you cover the mortgage payment, the HELOC payments and your expenses from income and cash on hand, with no new draws?
- COUNTERFACTUAL (while you use it)
- After each month, what would your total debt be if the same cash had gone to extra mortgage payments instead? If the gap keeps growing against the HELOC path, the plan is not doing what you assumed.
Which page answers which question?
| You are asking | Read |
|---|---|
| What is it, and how does it work month by month? | What Is Velocity Banking? Chunking, Month by Month |
| Does it beat extra payments? SPREAD test. | Does Velocity Banking Work? Two Examples vs Extra Payments |
| What if the line freezes, the rate rises or income stops? FREEZE test. | Velocity Banking Risks: Rate Rises, Frozen Lines, Job Loss |
| I want to run my own numbers. | Velocity Banking Spreadsheet: Formulas and Limits |
How was this built?
Every model number on these pages comes from one reference model, RM-1.1, which is also the model behind the spreadsheet, and each page lists its checks and limits. Regulation and tax citations are read from the primary sources and dated on each page. The pages are written by Michael Schmidt. Our own tool, the Velocity Mortgage App, has a calculator and a chunk tracker for subscribers; it projects against minimum payments, not against extra payments. Already have an account? Sign in.