Leveraging the velocity bank strategy is among the best decisions you can ever make when you want to get out of debt fast. Actually, many people believe this strategy will help them by allowing them to pay off their mortgage early. Even though there is some truth in this, you need to be disciplined enough for things to work in your favor.
Despite playing a crucial role of helping individuals get out of debt, there are a few underlying assumptions the strategy makes that can fall apart in reality leaving you with more financial burdens than thought in the first place. Below are some of the most notable ones.
Assumption: Paying off Your Mortgage Early is the Best Financial Decision
Before leveraging what velocity bank offers, you ought to keep in mind that it relies on the assumption you should pay off your mortgage as soon as possible using all of your available funds. Even though it sounds kind of counterintuitive, you may not want to pay off your mortgage as quickly as possible. Keep in mind your house is often your most effective liability, and it isn’t necessarily bad to have a mortgage on it.
Assumption: Equity in Your House Counts as Savings
It is without a doubt that velocity bank has the potential to help you increase your home equity. But that’s not savings, and you might not always be able to access it. For money to count as savings, it should have maximum liquidity and safety. You must also be in a position to access the cash reliably and quickly if it is to serve you well when you need it the most.
For you to get the most from velocity banking strategy, it needs to hold true the above and other assumptions. The good news is it can help and be in line with their financial goals. But for those who are saving for retirement or want the security of a life insurance death benefit, then it might not be the best strategy to leverage. So understand what it entails before you finally get going.