![What should you do next? Contact a H.E.A.P. certified advisor who can help you correctly budget and setup your plan. Some of you may be listening to this on the web-site of a H.E.A.P. certified advisor. If that is the case, I strongly recommend you contact that advisor for help. If you are listening to this on the main H.E.A.P. web-site, please register for more information on the site and you will be referred to a local H.E.A.P. certified advisor or e-mail [email_address] .](https://image.slidesharecdn.com/heap-client-101206220022-phpapp02/85/Heap-client-15-320.jpg)
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- 1. The H ome E quity A cceleration P lan (H.E.A.P.) By: Roccy DeFrancesco, JD, CWPP, CAPP, MMB Founder: The Wealth Preservation Institute Co-Founder: The Asset Protection Society
- 2. What Is H.E.A.P.? H.E.A.P. is a dynamic new financial plan that enables you to pay off your home several years early WITHOUT changing your normal spending habits . It is NOT a bi-weekly payment plan or some other extra payment scheme. YOU are completely in control of the whole plan. H.E.A.P. is a simple plan that can setup literally in a matter of days once properly budgeted . H.E.A.P. is also a plan that has NO downside and NO risk .
- 3. Things you need to know to understand why H.E.A.P.works 1) Interest on home mortgages is paid in arrears (we are paying for last months interest expense). 2) Interest is charged daily on our home mortgage (not monthly like we pay). 3) Almost everyone earns zero or close to zero with the money sitting in their checking account (and whatever is earned is taxable each year).
- 4. Who does H.E.A.P. work for? Those who spend less then they make on an annual basis. If you carry a checking account balance and spends less then you make, H.E.A.P. will reduce the length of your mortgage. The higher the average checking account balance and the more surplus you have, the better H.E.A.P. works. Also, you MUST have equity in your house in order to implement H.E.A.P..
- 5. How does H.E.A.P work 1) Work with a H.E.A.P. certified advisor who will gather information and make sure the plan once setup is properly budgeted. 2) Based on proper budgeting, you will obtain a home equity line of credit (HELOC). 3) Then you access the HELOC and use the borrowed funds to pay down the balance on your primary mortgage . 3) Then you use the HELOC as your primary checking account . (you deposit paychecks and pay bills from the HELOC). 4) When your checking account surplus pays down the HELOC to zero, you access it again and the borrowed funds are again applied towards the primary mortgage.
- 6. Why H.E.A.P. works H.E.A.P. uses EVERY available dollar EVERY day to pay down home mortgage debt. Remember, money in your checking account earns a client zero (or close to it). H.E.A.P. also works in good part because you choose to use your checking account surplus to pay the HELOC down to zero every 3-6-9-12 months. Those who implement H.E.A.P. can choose to aggressively pay down the HELOC or not. You are in complete control and since there is no downside to H.E.A.P. you have no risk .
- 7. Normal Principal Reduction Normal monthly payments gradually reduce the balance of the loan over the entire term. In this case, assuming $200,000 borrowed at 6.25% we have a monthly payment of $1,231.43. The first payment pays $189.77 towards principal and $1,041.67 towards interest. As the principal decreases slowly, the interest charges decrease as well. The 60 th payment of $1,231.43 applies only $257.83 towards principal and $973.61 towards interest. These payments continue until the loan is paid in full.
- 8. Example Client Profile Monthly Income After Taxes = $5,000.00 First Mortgage Balance = $200,000 Mortgage Payment = $1231.43 Monthly Bills = $1,650.00 Misc Monthly Expenses (spending $) $800.00 Total Monthly Outlay = $3,681.43
- 9. The Set Up -A line of credit is established of $25,000.00. -A reserve amount is established of $15,000. -This reserve will be available credit at all times for emergency. ( In other words, this money will not be drawn out of the account). -Equity Line is 7.5% with an interest only payment requirement (by the way the HELOC interest rate has very little effect on how quickly total debt is paid off).
- 10. The Plan Commences -$10,000 is immediately drawn and applied to the current first mortgage as a principal reduction. -$2,500 (paycheck) is direct deposited into the account twice a month from the employer. -$3,681.43 is withdrawn for bills and expenses on the first of the month.
- 11. Date Activity Amount Balance Avail Credit 2/1/2007 1st Mtg Reduction ($10,000) $10,000 $15,000 2/15/2007 Payroll Deposit $2,500 $7,562.50 $7,437.50 2/28/2007 Payroll Deposit $2,500 $5,109.77 $9,890.23 3/1/2007 Bills ($3,681.43) $8,791.20 $6,208.80 3/15/2007 Payroll Deposit $2,500 $6,346.14 $8,653.86 3/30/2007 Payroll Deposit $2,500 $3,885.80 $11,114.20 4/1/2007 Bills ($3,681.43) $7,567.23 $7,432.77 4/15/2007 Payroll Deposit $2,500 $5,114.53 $9,885.47 4/30/2007 Payroll Deposit $2,500 $2,646.49 $12,353.51 5/1/2007 Bills ($3,681.43) $6,327.92 $8,672.08 5/15/2007 Payroll Deposit $2,500 $3,867.47 $11,132.53 5/30/2007 Payroll Deposit $2,500 $1,391.65 $13,608.35 6/1/2007 Bills ($3,681.43) $5,073.08 $9,926.92 6/15/2007 Payroll Deposit $2,500 $2,604.78 $12,395.22 6/30/2007 Payroll Deposit $2,500 $121.06 $11,197.51 7/1/2007 Bills ($3,681.43) $3,802.49 $13,673.74 7/15/2007 Payroll Deposit $2,500 $1,326.26 $11,318.57 7/30/2007 Payroll Deposit $2,500 HELCO PAYOFF Access another $10k
- 12. What Just Happened? The first mortgage was reduced by $10,000. $10,000 borrowed from line of credit was paid off within 5 months. Then you access the HELOC for anther $10,000 which will be applied to pay down the primary mortgage. No spending habits were altered. $15,000 emergency fund was always maintained. While you may normally figure out a way to spend your surplus, H.E.A.P. gives you focus on the goal of paying off your mortgage debt and gives you discipline to get it accomplished.
- 13. How much did H.E.A.P. save the example client? If the person in the example just paid the mortgage over 30-years, the total payments would have been: $443,316.38 . With H.E.A.P. the example person would have paid off the mortgage in 8.5 years . Total interest paid over the 8.5 years = $65,797.69 . This would save the person $177,518.69 in mortgage interest over the life of the loan.
- 14. What if you dont stay on Budget? If you spend more then budgeted, its not the end of the world as H.E.A.P. has no risk to it. The end result will be that you take a little longer to pay off your mortgage. Whats the alternative? Do what most people are doing now and thats nothing (thereby paying the debt down over 30-years and giving maximum money to the lender).
- 15. What should you do next? Contact a H.E.A.P. certified advisor who can help you correctly budget and setup your plan. Some of you may be listening to this on the web-site of a H.E.A.P. certified advisor. If that is the case, I strongly recommend you contact that advisor for help. If you are listening to this on the main H.E.A.P. web-site, please register for more information on the site and you will be referred to a local H.E.A.P. certified advisor or e-mail [email_address] .