Common Assumptions About The Velocity Banking Strategy

by Radhika Pawar creative content writer

The velocity banking strategy sounds very appealing on the surface. Most people believe that velocity banking will benefit them by allowing them to pay off their mortgage earlier. But there are some few assumptions that people make about velocity banking and leave you with more financial burdens than you expected.In this article, we have compiled some of the major assumptions people make about velocity banking strategy. Read on below!

 

Saving on Interest Payments Is The Most Important Factor In Paying Off Your Mortgage

Velocity bankingstrategy relies on the assumption that you need to save interest to truly benefit from paying off your mortgage early. Wile interest payments can add up and become a hassle at some point, they aren’t the most essential factor.

 

Once you get caught up saving interest, you can forget that you’re using all of your free cash towards that particular purpose. Its right, paying off liabilities will result in lower interest rates. But it also can result in using all of your free cash and experiencing lost opportunities costs in the end.

 

Equity In Your House Counts As Savings

Well, the velocity banking strategy can help you increase your home equity. However, that’s not savings, and you might not aways be able to access it. The problem here is that for money to truly become savings, it must have maximum liquidity and safety. You must be in a position to access the cash reliably abd quickly for it to serve you well when you need it.

 

So, as you increase your home equity, remember that you aren’t actually increasing the money you can access and use. In order velocity banking to become successful, it needs you to have some cash counting as savings. At least you’ll be moving on the right direction.

 

Wrapping Up

Velocity banking strategy needs some of these assumptions for it to become successful. for some people, it may help and be in line with their financial goals. But for those who want to save for retirement and others, velocity might not be the best option.

Sponsor Ads

• Ad Space Available - Rent it Now!

Created on Dec 7th 2022 01:29. Viewed 81 times.

Comments