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Oct. 10, 2021

63. The HELOC Hack You Should Know with Michael Lush

63. The HELOC Hack You Should Know with Michael Lush

Join Mike Cavaggioni and Michael Lush on the 63rd episode of the Average Joe Finances Podcast as they talk about replacing mortgage with HELOC to start saving thousands of dollars in interest. Michael is the founder and CEO of Lush Enterprises, educating consumers on more efficient ways to purchase or refinance their homes. He used to be a mortgage loan officer who always did what he believed was best for his clients. But after learning that he could do more for them from a wealthy mentor, he made it his mission to share a particular HELOC hack with more people.

In this episode, you’ll learn:

  • How to use a Home Equity Line of Credit to pay off your home efficiently.
  • The history of mortgages and the value of velocity banking in allowing more loans.
  • Why going back to basics is essential when financing real estate more effectively.
  • How else can HELOC help make your money work for you instead of you working for it.
  • Why you should master your finances first before looking into any cash-flow options.
  •  And much more!

 About Michael Lush:

Michael Lush is a proud father and husband where his priorities are his faith, family, freedom, and finances. His goal is to enrich the lives of all those he comes in contact with, helping them achieve their lofty goals. After all, Michael believes that life is meant to be lived abundantly in all areas, strongly emphasizing efficiency and prioritization.

Michael believes the mortgage industry can be one of the most excellent tools to achieve financial success when done correctly and ethically. Hence, he makes it a mission to educate consumers, bankers, and loan officers on the pitfalls of traditional mortgage lending versus the proper use of a Home Equity Line of Credit.

Find Michael Lush on: 

  1. Website: https://replaceyourmortgage.com/
  2. LinkedIn: https://www.linkedin.com/in/michael-lush-a1091b9/
  3. YouTube: https://bit.ly/3xupDNz

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Transcript
Average Joe Finances:

This is Average Joe Finances podcast, Episode 63. If you're watching this on YouTube, make sure you smash that like button and click subscribe. For those of you listening on a podcast platform, be sure to subscribe on whatever platform that is, and leave us a rating if you can. The more likes ratings and subscriptions that we get, the more we can spread the message and grow our community. So we also have a free Facebook group. It's called the Average Joe Finances network. Check us out, join the group, join the community, ask questions, and become a part of the team. All of our other social media accounts are listed in our flow page. And we have them in the video or podcast description below.

Michael Lush:

So when somebody is worth hundreds of millions of dollars, and tells me that I'm selling financial cracker, middle America doesn't feel good at all. So what I did from that moment on was really trying to figure out a way to prove him wrong. Because if I can prove him wrong, that not only do I earn his business, but also prove to myself that what I've been doing all these years was the right thing.

Average Joe Finances:

Welcome to the Average Joe Finances podcast, are you trying to get out of debt, invest or just not sure where to start, then this is the place for you. We discussed different ways to get out of the rat race and build your wealth. Join us on this wild ride to financial freedom. Hey, how's it going, everybody. So today's guest is Michael Lush. And I'm really excited to talk to him. I've actually seen him on the news before with some of the things that he's doing. So Michael, for three nights a week was teaching his friends, neighbors past clients in live classes on how to replace their mortgage with a HELOC and start saving 10s of 1000s of dollars in interest. Now, it didn't all just start for him like that there there was there was a lot of work to get there. He used to be a mortgage mortgage loan officer. And he always did what he believed was best for his clients. So he ran into a wealthy mentor that showed him what was wrong with what he had been doing the last 15 years as a mortgage officer. So instead of landing his wealthy clients, their mortgage business, he discovered that the wealthy financier homes using lines of credit. So he had many late nights to research this program and how he's doing it. He's got this this bank secret that he's gonna share with us today that we can learn a little bit. So for those of you that are listening, be prepared for some pretty awesome stuff. Michael, I'm really excited to have you on the show with me today. Thanks for joining me.

Michael Lush:

Yeah, thanks for having me. Pleasure.

Average Joe Finances:

All right, right on. So I just gave a small tidbit like wave top background of who you are and what you do. So if you could, can you share a little bit more with us? Tell us your story.

Michael Lush:

Yeah. So this started. If I go way back, really right out of college, my first gig was in the mortgage industry. And a buddy of mine, who was a year ahead of me had already started a year before I did. And once I graduate, he's like, you know what, you know, you've got to check this out. So what do you do? And he's like, I work for this company. And I thought they do investments, because their name was very similar to an investment firm, was like, Yeah, I've always had an interest in that. That's what my mom's done for 42 years. And he's like, no, that what we do, we we do mortgages, I was like, Okay, I don't know anything about that. He's like, come on, man. He's like, just come in for an interview. And I kind of brushed it off for a little bit. And he finally came to my apartment at the time and said, Hey, take a look at what some of the top guys are doing in the office 20 3040 $50,000 month, how much? Alright, sign me up. I don't even know what a mortgage is. I've never had one. I don't own a home. But I'll figure this out. So I go in, have an interview. And it was funny, because I'm kind of the guy that will back myself into a corner where I will say something so outlandish that if I don't achieve it, the embarrassment, the fear of embarrassment, is more of a motivating factor than the excitement of success. So I told the guy, the senior vice president who was interviewing me, I said, if you hire me, I will be the best hire this year in the entire company. And that was in January. So I got started in January. And it was in October, we were a large mortgage firm, publicly traded ninth largest in the world, or in the country at the time. And so all of our trainings, he would corral everyone in this huge auditorium for training. And he would randomly call on people into an objection at them, and see how well they overcome it and kind of use that as a training tool. So he called on me to have an objection I went through how we typically overcome the objection when he stopped right there. And he said, If I see flaws in that, maybe some people don't remember perfectly what happened. But he said, That's exactly why Michael is now coming newcomers here for the entire company. I was like, Wow, I didn't even know. And when he told me it was in September. It wasn't December. So my numbers were so far ahead of everyone else that there was no way that they were going to catch up by the end of the year. So they'd already given me the titles Newcomer of the Year. And I was as shocked as anyone else it will, again, and trust me from January to September, there was some ups and downs and rollercoasters, but I definitely had some big, big month. And so I became november of the year, and did well with that company rose through the ranks, System Manager managers and senior manager and running some branches. And then 2000 APS. And my wife was also working for the company. So not only was I one of the top senior managers, I was number three in the company out of 1500. She was number five loan officer in the company out of 1000s. So collectively, we had really good income for folks that were in our early 20s. And what do you think we were doing with that money? We weren't investing not not smart. No, absolutely not. I was the last person you should give big checks to. So not quite paycheck to paycheck, but pretty doggone close. Know that collectively, we're making well over a half a million dollars a year. And I'm buying cars, Escalades denalis four wheelers, because I'm a redneck, motorcycles because I'm a redneck, you know, big house and things of a nice vacation is going to why those fasteners it was coming in, we were spending in 2008 years, it was why they pulled the brake on real estate, right? So that locomotive that we were driving, just suddenly stopped and hit us in the rear end, add lots of debt. Long story short, went broke. But that same company called me probably nine months later, and I took that as an opportunity to move back to Nashville, my hometown. And that same company called and said, Look, we're resurrecting again, we're not going to do subprime stuff like we used to do. We're getting solely into government loans, which really the only thing at the time that was available FHA, VA, USDA, Fannie and Freddie, and we want you to head up Nashville operations, we want to make you director of operations. I've got nothing else to do. Absolutely. Yeah, give me back in my former glory. Yes, I did one more thing. Yeah. And where they got their money was actually from a hedge fund. And so the hedge fund manager, his mom and dad actually lived in Nashville, he was out of Connecticut at the time, or upper hundreds of millions of dollars now doing there. And so he would fly into town to meet with his mom and dad, but when, you know, passing through, he was stopped at my office and mentor me. And it was after a couple of visits, I took the opportunity, so you know what I need to get in this sphere of influence. He's where I want to be, at least financially, you know, I didn't know all the other things that were important in life at the time, you know, family faith, and all that. So I said, Now I gotta get my finances in order, and this guy's got plenty of money. So let me figure out what he's doing. So I took the opportunity said, Look, let's do this. You're a hedge fund manager, you by default, technically own this company, because we got to pay all this money back millions of dollars, we got to pay back to this hedge fund plus rate of return. So why don't you introduce me to your sphere of influence? What I do I do really well. So how about I do mortgages for them. And if their mortgage I'm sure they're big, and big mortgages are big paychecks, big paychecks, big commissions, big profits, you get your money back faster. This is a fail proof plan, right? And that's when he kind of hit me with it. And he only spent 10 minutes explaining it to me, but he said, Look, we don't do mortgages. And I was like, okay, that's what I thought you guys pay cash for everything. So no, we always use other people's money, instead, but what we typically will use is a home equity line of credit. Everything I had been taught in the mortgage industry was a home equity line of credit is a credit card on your home, that's not something you want. So when we're on the phone with customers, and we're doing a cash out refinance, or just some other type of refunds, okay, we're going to roll in that home equity line of credit and rolling the credit card, those are bad for you. And he's like, No, No, they're not. He's like, it just depends on what the audience is. He said in my audience, there's we're not going to do mortgages in mortgages. I don't know if he knew this. mortgage is an old French term. And it's basically the definition of mortgage is death pledge. That's what it is an old French, it's a death contract. So more being mortality, gauged being a certificate or contracts with the Death Watch. He said, Michael, to be honest with you, what you're doing is you're selling financial crap to middle America. And that hurt, that hurt bad, because I've always had been a moral gap. And I've always thought that I was doing the best by my clients. So when somebody is worth hundreds of millions of dollars, and tells me that I'm selling financial crap, and Middle America doesn't feel good at all. So what I did from that moment on was really trying to figure out a way to prove him wrong, because if I could prove him wrong, then not only do I earn his business, but also prove to myself that what I've been doing all these years was the right thing. And it took about a year I hired a CPA and actuary and a couple buddies of mine that actually one of them works with me today is my right hand, man. He's a genius, and we try to poke holes in it, and we couldn't and more than we tried to prove him wrong. We actually proved Tim Ryan. And so in 2012 is when I took the leap of faith until my wife were no longer going to consume mortgages. She said, Okay, well, how are we going to get it paid off? I said, we're gonna refinance the whole thing into a home equity line of credit first lien position, home equity line of credit. Now, secondly, big difference. We'll get into that here in a little bit. But long story short, from 2012 to 2016, early 2016, we paid our house off, we didn't change anything about our budget. Now, obviously, I was in the mortgage industry. So was I making the money that I was making back in the glory days? No, not by a longshot. I was making good money, I was providing a living, I had two kids at the time and a wife. So I wasn't going to go back to the type of situation that we were in. Prior to 2008 we were living paycheck to paycheck. So you know, we were making a good living, but we it was, we weren't killing it so on, you know what I would now consider a modest income, we were able to pay your home off in three and a half years. And from that moment on, I linked up with a buddy of mine, Jimmy, who was a marketing mentor who said, Listen, you've got to turn this into a business, there's a lot of people out there that want to know what you know, and they will pay for it. So that's when I created a business which now called lush enterprises and a form of it is replace your mortgage and we've got other entities that are passed to it now that replace your mortgage is what is most well known. And now I've been teaching 1000s. So we have about 6000 clients now we've probably helped 10,000 people pay their home off and accelerated fashion. Or some folks find out that they can pay their home off in accelerated fashion and choose to actually leverage it to grow wealth. Kind of like you got the two philosophies, right. Robert Kiyosaki, Rich Dad, Poor Dad or Dave Ramsey. We lean more towards Robert Kiyosaki. Now, I say that because the first thing you have to be is you have to understand your budget, you have to be on a budget, you have to be cashflow positive. So this isn't for everybody. And I don't want to exclude it to just those who make good income, because that's not really who it's for. It's not just for those that have a really good income or educated or highly disciplined or mastered their budget. It's also for those that are in the middle class, and sometimes even a lower middle class, as long as they're cashflow positive, and they've mastered their budget. So that the rest is, you know, within 60 days of me abandoning the mortgage industry, you know, God really had my back, and the income from this opportunity skyrocketed. And it was more than I was making in my heyday. So it's like, okay, God, thank you now don't have to worry about finances, all I need to focus on is one glorifying you, but also loving all these people and showing them how to best utilize a home equity line of credit more efficiently utilize debt. And you know, in a little bit, I want to get back into history of where mortgage came to be and how he law came to be. Because in America, financing real estate and mortgages is extremely archaic, compared to a lot of other countries. You know, Australia, over 80% of Australian citizens use what they call a money merge account. And a money merge account is merging your real estate loan into your bank loan. And what it is, is it's their term for home equity line of credit. So in Australia, they've been doing this for decades, most of the country that most of this is what they do. Ironically, the average Australian will pay off two homes in 14 years. What do you think the average American pays off? They're only home? What's the average 26 years over 30? Even if they take a certain that, why is that because every five to seven years, we're refinancing or selling for another house, but we're refinancing to a lower rate on a longer term back to a 30 year term. And we think that that saving us money, and it may on a monthly basis, but it doesn't long term. And that's what we got to get back to is we got to get back to thinking long term and not just short term of what we can cram as Americans into our budget. So Australians don't think that way south africans don't think that way. Both the United Kingdom, they don't think that way. You know, if you look at a house, that's $400,000, and you finance it on a 30 year term, how much is that house gonna cost you? Probably $800,000. Right?

Average Joe Finances:

You know, let's

Michael Lush:

do it Australia. Yeah. So what you're buying one house for you and one for the bank. So what Australians United Kingdom, you know, South Africans think is they look at that house and say, okay, at what point is that house if I finance that that way? Am I able to sell it and actually make money the Americans think we bought for 405 years later, if we sell for 450, we made money we didn't because you didn't take into account all the interest that you pay for the five years. Keep in mind the first five years of 30 year mortgage are basically interest only payments is front loaded with interest. So when you go to pay it off, you will get the balance of what you owe, or like Doggone it is the same as what I owed five years ago. It's designed to be that way, because they know that we refinance or sell every five to seven years. So the banks are rushing in to get their profits first before you refinance. That that is in a nutshell that now I would love to get into the history of mortgages.

Average Joe Finances:

Yeah, sure. I mean, so it's it's, it's fascinating though, because you know, when you think about it, when you look at your amortization, right table, and you're trying to figure out, you know, looking at these 360 payments that you have to make over the next 30 years. And it's not until you hit that 15 year mark, where you really start to see that you're paying more principal than you are paying interest. And everything

Michael Lush:

It is, it is it's archaic. It's very archaic. So as far as the history of mortgages, it didn't, wasn't always that way here in this country. Actually, prior to 1913, a mortgage was designed very similar to a home equity line of credit. So what I'm actually teaching folks isn't something that's new. It's actually extremely old. It's older than the modern day mortgage here in this country. So mortgage used to be something that was open and money can move in and out freely. It was especially popular with farmers. Because if you own the farm, say it's worth 200,000. And you're like, you know what, I need to go buy some equipment. So you run out to the bank that day, I need to borrow $10,000, because I got to buy equipment. Obviously, these are inflated numbers by till 1930, or 1912. But any $10,000 to buy equipment, no problem exchange deed, here's your 10 grand Thank you. And then you go sell your crop, and then you pay back the 10 grand plus some so money can move in and out of your your mortgage very freely. What is it today, the closed end product, meaning the only way to get cash out of your home is to refinance, which is very expensive, closing costs and things of age and time consuming 30 to 45 days on average, for sale. Neither one of those are ideal. So we thought we'd look at that generation prior to 1913 are great grandfathers and grandmothers. And we always hear the same stories, they bought a house and paid off in five to 10 years. There's a couple of reasons for that one, they were a better generation. They didn't have social media and TV and things like that to distract them. They were more educated and more discipline. But they also had better tools, because the mortgage back then was entirely different than a mortgage is today. So why do I keep talking about 1913? What do you think happened in 1913? That kind of changed that game forever. for Americans,

Average Joe Finances:

the government got involved, usually with

Michael Lush:

almost not quite, it's the Federal Reserve. And it's a really cool name. People think that because the Federal Reserve is part of the government's not so neither federal nor is that a reserve. But what the Federal Reserve is, is a central bank. That is the backstop of community banks and national banks. And what it does is it allows banks to execute a really cool magic tricks called fractional reserve lending. Now what that means is for every dollar, you put in a bank account, they have $10, that they can lend out sometimes 15. So if you put 10 grand in, they get 100 grand, put 100 grand in there got a million so after, you know that happened in 1913, which by the way, the you know, the history of the Federal Reserve and the creature of Jekyll Island. That's a great book, by the way. Have you ever heard of that book?

Average Joe Finances:

No. What's What's the name of the book,

Michael Lush:

The creature of Jekyll Island?

Average Joe Finances:

The creature of Jekyll Island?

Michael Lush:

Yes, yeah, really good book it out. It's basically a biography. And it's a true account of how the Federal Reserve came to be. It was actually created by JP Morgan. So JP Morgan, and four or five other individuals had a private meeting off the coast of Georgia on an island called Jekyll Island that he owned, and so private that the servants there didn't know who was coming. So and they were also so powerful that those six individuals in that meeting comprised of one quarter of the world's GDP. That's how wealthy they were. So in that meeting, they came up with a business plan of the Federal Reserve. So after 1913, the banks get together and say, Look, if we get more deposits, because every time somebody deposit the dollar, we have pin, and every time somebody deposit $10, we have 100, we need more deposits. How are we going to go about doing that? So they looked at how Americans were what was called an operating account, how are they executing their operating account, they were operating in and out of their mortgage, there was almost their checking account, they didn't leave it under the mattress, they didn't go put it in a checking and savings account, for the most part, they were operating in and out of their mortgage, which is why they were able to pay it off so quickly. So the banks got together and change the mortgage forever. And they made it a closed end product, meaning money can only go in freely, but not come out freely. So think about that as an individual. If you have an account that's closed in, just like today, you may have a mortgage, how scary would it be to put 100% of your income into your mortgage? month one, you're already freaking out at the end of the month. Why? Because when it's time to pay your bills, your groceries or vacation, it stuck in the bank's treasure chest, you can't get it back out. So what are you going to do as a consumer? You're going to say, Okay, well now I'm going to put some of my money towards my mortgage, and I'm gonna leave the rest of it behind so that I can pay those other bills. Where are we leaving it? We're not leaving it under the mattress. Where do we put it? We put it in a checking and savings account. They pay us on national average 0.25% per year. So horrible rate of return. Actually, it's not even keeping up with inflation, especially this year, not even close your money. Yeah. So now your money is actually going backwards, right? So a checking account, a savings account is a liability. But what does that do for the mortgage? So the mortgage, if you only put some of your money towards a mortgage, instead of all of it, well, you're going to pay on it longer, right? So if you pay on it longer, time and balance are far more important than interest, right? So if time and balance are higher, over a longer period of time, you're going to pay more interest. But that wasn't the number one goal number one goal was to segregate your income. They wanted to separate you from your cash. So since it became enclosed in product, and you had to leave money behind, you left it in their coffers in the checking and savings account, and that's where they grow core deposits. Why do I know this? Because I sit on the board of the bank, I sat on the boards of other banks. I can tell you in those meetings, the number one focus is how do we grow core deposits. That's what they want. They want more depositors so that they can lend more money out and it's called velocity banking. So that's a history lesson on mortgages. And a HELOC is really just going back to basics. It's not teaching us something new. It's going back to the way that we use to finance real estate more efficiently to become financially independent. Because a HELOC is an instrument that is open ended money can move in and out freely. A lot of these he locks you get a debit card, whether you get checks whether you get all our bill pay, you know i right now I can just swipe my HELOC card and pull as much cash out of it as I want to tonight. I don't have to wait until tomorrow. I can do it tonight. Just like I said, if it was a checking savings account, but I don't do that, because what is it doing is going to work for me. So when we get off this podcast, I go to bed. My money is working for me, as opposed to in a checking account where it's working against me

Average Joe Finances:

right on Yeah, so I I've, I've seen you know some of your videos before. So I kind of I kind of have like the gist of it right where, you know, you're pretty much essentially you're taking a HELOC out for the entire value of your home the entire price of your home for the mortgage, right you're paying off your mortgage with your HELOC or while you work it to that point, right you take the HELOC and you just dump the entire thing into it. And then you take your paycheck right and you're taking pretty much all of your pay and just dumping it back into the HELOC. And for any other bills or expenses, you're using your HELOC to pay those right, so you're having like a much larger upfront payment monthly payment into that he locked versus, you know what you're versus like, you know, just making the mortgage payment and then, you know, budgeting your money to the side for the other things, your other bills that you have to pay. Now, I totally get that. But now how would somebody who like you know, they've already got their budget set up, like, you know, they're paying their mortgage, they're paying their car payment. They're investing, you know, 10 to 15% or more, right? Whatever it is that they're investing in separate brokerage accounts, or they're investing You know, this much into real estate every month, or Hey, I'm, I'm putting this much to the side for my next down payment on my next property. How would that work for somebody in a situation like that? Would they would just would they still put their stuff to the side and then put everything else into the HELOC? Like how does this work? Let's take a brief moment to hear from our show sponsors. What's going on everybody? So today I want to talk to you about Buzzsprout the Average Joe Finances podcast recently switched over to buzzsprout. And I gotta say, I am super happy with the progress. Our podcast is now on every single major platform and reaching audiences that we couldn't reach before which is just super awesome. So thank you to buzzsprout for being such a great platform, but also I want to say hey guys, if you sign up for buzzsprout and you sign up for one of their paid plans using our link, you'll get a $20 amazon gift card to go check them out. It's averagejoefinances.com/buzzsprout. And we'll make sure the link is in the show notes below What's going on everybody so today I want to talk to you about the podcast editing service that we use for the Average Joe Finances podcast that is editpods.com and what I really like about them is it's a subscription based service. So the prices are fantastic. And not only do they do the podcast episodes for us, but they also make us videos, audio grams social media caption videos, they do our show notes thumbnails, it's just fantastic products go check them out at editpods.com let's get back to today's episode. You're listening to the Average Joe Finances podcast. Whether it's single or multifamily real estate, the stock market or side hustles we discuss it all strap in and enjoy the ride.

Michael Lush:

Think about how we typically operate as Americans so the scenario that you just mentioned, where does Where's their money when they earn money? Where's it going first, it's going into the checking account right get in from the checking account it may go to an investment account They go to a savings account. Some may go towards bills that are right. So really what we're doing is we're not just replacing the mortgage with a home equity line of credit, we're also replacing the checking account with a home equity line of credit. Right. So again, these he walks have the same capabilities as a checking account does online bill pay you log on, you can see your balance, you can move money around all you want. So first and foremost, the money goes into the HELOC. Because again, time and balance are far more important than interest right. Then from the HELOC, you deploy your funds as you need to. So if you're on a budget and you you keep that budget, so whatever you would typically save and put in a savings account. You're not putting in a savings account anymore. It's a crappy rate of return, right? Yeah, I'd rather have it my HELOC. So that becomes my savings account. Then if I don't invest out of my HELOC, which is what I do, then you invest out of your he lock. So you're you're not just replacing the mortgage, you're also replacing the check cancel their their activities don't change.

Average Joe Finances:

Okay, so like so let's hypothetical someone's making 10,000 a month, they'll take that entire 10,000 a month and put it into the HELOC. And then any other bills or you know, let's say they were putting, you know, $1,000 a month into a brokerage account, they would just pull it out of the HELOC and put it into the brokerage account that way. Exactly, yep. Okay. Very interesting. So, how come more people aren't doing this? Or, or why don't they know about this? Ah,

Michael Lush:

good question. I get that a lot. So one, think about us the consumer, right? So if you practice this, you pay a lot, you pay a fraction of the interest that you would on a mortgage. Is that good or bad for the bank? That's bad, right? Yeah, yeah, less profit, less profits to the bank. So it's bad for the bank. So now, is it less interest to the bank that they are? But also what else? Are you abandoning the checking and savings account? I'm not saying go close them, I'm just saying don't use it. Because it's, it's not benefiting you, it's actually hurting you. So it's not in the bank's best interest to promote this and to educate it right. On top of that, if you look at the compensation plans for bankers versus loan officers, loan officers are folks that do mortgages, right. And bankers are folks that do home equity lines of credit, you're not going to get a home equity line of credit, for the most part from a mortgage company, they don't offer they offer mortgages. Banks are the ones that offer home equity lines of credit. And if you look at the compensation plan of a banker, they don't get paid to do he walks. In fact, we've gone through, you know, over the last seven years, we've got relationships with 1000s of banks, and we've had some bankers call us up and say, Hey, please don't refer anybody over to us anymore. like wow, like, Look, we get paid the same if we get two phone calls a week versus 20. So we'd rather get two oh my goodness, as an entrepreneur, it's like, it's like nails on a chalkboard, right? Like how in the world if your boss or the owner of this only knew your attitude, that's deplorable. But that's the mentality, right? They don't get paid to do it, he locks in sometimes they do that when I say that there might be 250 bucks. But if you look at the compensation on a $400,000 mortgage, that can pay four or five or $6,000 in compensation to the loan officer, not to mention probably 12,000 in profit to the lender, right? So what would you promote, you got to put food on the table so don't expect the bankers to know this because the banks aren't going to tell the bankers educate the consumers on a loophole is going to have them paying a fraction of the interest back to us that they would own a mortgage Oh, by the way, we're also not going to get their deposit accounts. And you know, that's the other half of our business people think that we only educate consumers which is the bulk of our business, but we also educate banks. So we show banks a consumer friendly way to do this, but also benefit the balance sheet of the bank that way it's a win win win and that helps banks promote it now that's a tall order and you know, we've we've gone through 1000s of relationships and there are some banks that have really taken this on and said yep, this is what we want to do. And we're building programs around this message in this strategy because you just can't dispute the math

Average Joe Finances:

right on so what about what about somebody? People go through many things right? You saw what happened in 2008 with with the mortgage crisis and what happened with real estate what what if somebody is in a situation you know, cuz a lot of people that listen to my show that their focus is to get out of debt and start saving up so they can you know, buy their initial home, or you know, invest in real estate, buy some more real estate, right? So what happens to somebody you because we always recommend having, you know, three to six months of an emergency fund a loss of income. So when somebody is in a situation where they're they're doing this strategy, and they lose their job or you know, whatever, there's some type of emergency and the loser income for a few months, what would happen to someone in that situation?

Michael Lush:

Great question. And in fact that we just went through Not 2008 I didn't have a business in 2008. But we had something that was similar in 2008, we had a crisis, right? So COVID-19. So lots of unemployment, right, a lot of folks lost their job furloughed. Even that, so we had about a dozen clients that we had had for three or four years. And those things happen, right? Life happens. So this isn't just a strategy that can be amazing in times this are thriving, it can also be a great strategy when you need to survive. So think about it this way. And I'll get into the hedge fund balance sheet statistics and default rates on mortgages versus Firstly, he walks here a little bit, but once I explain this, you'll know why the default rates on first lien he locks is 115 times lower than mortgages during the 2008 2009 crash. So let's say you got a HELOC, you've been practicing the strategy for two or three years. And you go from a $300,000 balance to 150. Because our average client pays our home off and are paying pay their home off in five years. So half of your balance is paid off in two or three years. So you still have access to the 300,000. You don't have to get reapproved you don't have to get income qualified to access your equity. If they're 24, seven, so if you have 300,000, you paid half of it all, your balance is 150. But you still have access to 150. No different than a credit card, right? If you have a credit card that has a limit of 10 grand, you paid half of it down, don't you have access to another five grand? Absolutely. So it's the exact same thing with a home equity line of credit. And a lot of these ebooks not all but a lot of these e logs, you don't even have to make a payment to. So if you're struggling, and you've had a loss of income, or complete loss of income, and you've got a minimum payment on that 150. So there are a number one, you know, weigh the pros and cons. If I have a loss of income, do I want a payment on the lock? Which is interest only on the new balance? Or do I want a mortgage is pressable an interest payment on the original balance? Which one would I want, I wouldn't want the lock, that's going to give me more flexibility, right? However, you don't even have to make that payment. Because a lot of these he locks, they will make the payment for you. So if you don't make the payment, what they do is they say okay, you are 150 the interest only portion was 500 bucks. So now you have 150 1500. So your own time until the next month. Now if you have a credit line of up to 300,000, how many months Can you survive doing that? A lot, quite a long time. Now, it's not ideal. No one would want that situation because you want to completely pay off your debt, and invest and things of that nature. So that's not ideal. But that's that's the scenario that is complete income elimination. However, some folks just had income reduction. So they might have been making four $6,000 a month, instead of $6,000 a month now they're making four, right? So they're still earning income with you are whatever income you're earning should still go into the home equity line of credit. And we can run through some mathematical scenarios where even that still pays down the principal on the home equity line of credit allows you to survive. So this is a scenario where you know if you've got enough access, and that's why I tell folks, if you owe 400,000, and you got a million dollar home, they'll get a 90% loan to value home equity line of credit. Because that doesn't mean you're going and getting a 900,000 loan, you're getting access to 900,000, your balance is still 400 you're only going to pay interest on the 400 that you've used, you won't pay interest on the other 500 unless you use it. So in times like this, whether it's surviving or an opportunity have access to your equity. So that's why folks in 2008 2009 those that had a first lien position he locked, it's not like they were completely shielded from the real estate market. You know, they still lost their job, they still had a loss of income. But why is the default rates so low on both a first lien HELOC versus those who had a mortgage because of that they can leverage the equity to pay itself but he lock can cannibalize itself and start paying itself and not only that it can start paying your bills for you too.

Average Joe Finances:

Yeah, so I see what you're saying because like that's, you know, a great way to also put yourself in a situation like you know, if you owed $400,000 on a million dollar home, you know, you take out a 90% loan to value HELOC. I mean you're you're sitting there with about you know, another 400,000 with that you could potentially invest if you needed to, right or if something came up like an opportunity. Another real estate opportunity came up and you needed the cash for it. You've got it right. Yep, so that's definitely interesting. Now, I don't know too much about HELOC. So I was actually looking at getting one here soon myself. But you know what I've been looking at like the is the different terms right? So the one that I was looking at is you can use it for the first 10 years but you have to pay it back in 20 years is how that one was particularly set up. And it was actually offset loan to value, which was really cool.

Michael Lush:

Yeah. So that's ballsy of that lender or that bank? Yeah, I was COVID. That was, I would say to Procore, it was still a bit on the risky side prior to COVID, post COVID. A lot of banks ration to back how much they were willing to lend on the C lock. So if you've got one out there still willing to do 100%? That's, that's pretty good.

Average Joe Finances:

Yeah, yeah, it's a local bank out here in Hawaii. So it was pretty interesting. But I was actually looking at that to just pull some equity out of my primary residence. But I'm really like, kind of digging in right now and into the strategy. And I'm trying to work the equation in my head. So I think I'm going to talk to you a little bit more after this. But

Michael Lush:

it's this way. I mean, very interesting. Having inflation, you talked about borrowing to invest, right? It's not, even if you've got one of the worst investments out there, you're still going to quadruple your money, versus what you're getting as far as equity in your home, right? I mean, with interest rates the way they are right now. And they're not going to stay this way. They are eventually going to go up. But I mean, hey, we're at the bottom. So even if they go up or coming off of the bottom, they're still going to be really low for years to come. And then you tack on the interest deductions for tax deductions on the interest that you're paying. You're almost borrowing free money. Yeah. So if you gave me money, and I invested into something that had a horrible rate of return, but it did have a rate of return, that's actually a great investment. So why not borrow almost free money during an inflationary period to invest in?

Average Joe Finances:

Well, yeah, especially with the way inflation is right now, you know, what the announcement they had the other day with it, you know, this year, they're saying it's 4%. I mean, right now, my current mortgage is two and a quarter percent after my last refinance, and I'm, I'm making pretty much 1.75% a year, just because I have a mortgage this low, so I'm actually making money off the inflation, which is kind of scary when you think about it. Yeah, that's definitely very interesting. Now, we kind of we briefly spoke about this, right? And it was when I, when I mentioned about somebody taking that extra equity in their line of credit and using it to invest in more real estate. Now, what if somebody wanted to, instead of their debt pay down, like, you know, just keep everything normal and keep making their payments? But they want to take a large chunk of that equity? And strictly invest it? I know. You know, your strategy is mostly to help people get their homes paid down in five to seven years, right? But what if somebody says, Hey, I want to pay my, I want to pay my home down in 15 years, but I want to invest, you know, this much per year, is something like that possible,

Michael Lush:

not only possible, it's great. You know, and I would also say why 15 years? It depends on your life cycle, right? Yep. You know, let's say you got somebody 35 years old, why pay off in 15 years, depending on what the cost of debt is, you know, 30 years from now, but the cost is really low, and it's been low. The last time it was skyrocketed, and really high was 1981. Okay, so that was 40 years ago, is when it comes to walk rates and also mortgage rates. That's the last time rates were really, really high. Since 1981, it's been plummeting ever since we've hit zero twice now. Other countries went into negative interest rate territory. So I don't see that changing. Yeah. Is it going to fluctuate based on inflation here, and they're absolutely but REITs are going to be low. So there's an argument to why even pay it off. So think about it this way. Let's say you've got access to equity in your home. And you leverage that equity to go buy real estate, right? At the cash flow asset? Well, you're buying real estate that is a cash flow asset. What does that do? That increases your monthly income, your monthly income is going where it's going into your house. So you actually just accelerated the process of paying down the equity because your cash flows higher. Now you can also get he locks on investment properties. It's rare, but you can there are banks out there that do 80% financing on a purchase. If you want to buy a home starting out with a HELOC not a mortgage. You use there he lock on and say I'm buying this home, you start out with 20% down you've got a rental property that's on an interest only simple interest interest only home equity line of credit and first lien position that now improves your cash flow for that rental property which improves your net monthly income, which decreases the balance at a more accelerated fashion. And then what do you do every time it's accelerating? You find more opportunities. So yeah, I didn't know I mean, this is the Robert Kiyosaki method. So when I say you know pay your home off in five to seven years, I'm gonna be honest with a lot of folks that the hook because some most folks they just want to be debt free, because they don't know any better. However, once they get into our strategy and our education, they realize maybe it's not right, the right Time for me to be debt free. Maybe it's time for me to accumulate cash flow assets and then be debt free later. So it's not an either or situation. It can be a both.

Average Joe Finances:

Okay, yeah. No, I like that. Yeah, there's like that the the two different types of mentalities, right you have the Dave Ramsey mentality where it's, you know, all debts, bad debt, get rid of it. And, you know, I want to be at zero and then you have the Kiyosaki method where it's like, Hey, I'm going to leverage my debt to buy more income producing assets. That that's kind of where my head's at, you know, and probably most people listening to my show. You know, it's funny because I talk about it,

Michael Lush:

and neither one of them are wrong. Franklin, I'm in Dave Ramsey's backyard, actually, yeah, he's a member of my church. So yeah, I know Dave Ramsey. I actually taught Financial Peace University in my church. I understand his very last week, but you have to understand that they have two different audiences. Dave Ramsey is talking to hate to say it, but it's true, a lower educated and less disciplined audience, right? And can you gain wealth doing Dave Ramsey's method, absolutely. slow and painful, it hurts rice and beans, right? get after it, like a user was long, painful, but you can, it's going to take longer mathematically, Robert Kiyosaki is the faster method. But his audience isn't to a free radio show his audience is to typically the top three tax brackets, right? They already get it, they already mastered their budget, their high income earners, they're higher educated, and mathematically, it's just a faster method. So neither one of them are wrong. It's just pick which route you want to go.

Average Joe Finances:

Yeah, I mean, so like having a ton of things. It's one of the things I talked about, you know, early on in my podcast, too, when I, when I did a couple solo episodes I was talking about, you know, I followed Dave Ramsey's baby steps, you know, steps one, two, and three. And then after I got to that point where I was debt free, and the only debt I had left was my mortgage. That's when I started looking at, okay, what can I do to invest my money elsewhere and start, you know, leveraging the debt that I have, and, and buying more income producing assets. So that's kind of where my mentality shifted. So it's, you know, I say this, because a lot of people that listen to this show are people that are looking to get out of debt, right? They, or there's people that have already gotten to that point, they're like, Hey, what do I do with my money? So that's why I think this is a very interesting strategy that you can go into with either mindset, right, depending on what it is you want to do you want to pay off your house in five to seven years, awesome, you can do that. You want to pay it off in 30 years still, but leverage that money to buy more real estate? Sure, you can do that. And that's what I think is so interesting about this and why I'm so excited to talk to you about it's pretty cool, man.

Michael Lush:

And I want to answer that one question that you started to ask was the the lot that you're looking at as a 10 year drop period, followed by a 20 year repayment period. So what that means is you have full access to the equity in your home based on the original contract, right? So if you current homes by the three, we're in Hawaii, 3 million. So it's currently valued at 3 million and you got a line of credit, today based on 3 million, well, then that's going to be your line of credit for 10 years, unless you change the contract right? Now, after 10 years, if you have a balance still remaining than what the bank is going to do is allocate that mouse to now on a 20 year mortgage. It's a it's a, it's a closed down fill a simple interest with the close in product that requires you to pay it off in an installment loan fashion for the next 20 years. So how do we keep something like that for 30 years, if there's only a senior draw period, it's real simple. Do what the mortgage people do? refinance. And then 10 years from now, what do you think the value of your property is going to be? Higher?

Average Joe Finances:

Typically higher in Hawaii typically doubles every 10 years. So yeah.

Michael Lush:

So now what do you do in 10 years, you don't get another he locks at the higher valuation, and access to more equity to go get more rental properties. Maybe you get into commercial at that point.

Average Joe Finances:

I like it. Yeah. Oh, absolutely. Get into commercial at that point. I'm looking to get into commercial right now.

Michael Lush:

Yeah, more doors.

Average Joe Finances:

Yeah. Awesome, man. Okay, cool. Hey, this, this has been awesome. I've got a lot of great notes here. And I think you answered all the questions I wanted to ask you. Um, yeah, I think I hit about everything.

Michael Lush:

I know, this is something that you're looking at. Yeah. So let's work one on one. After this. And I want to I want to work with you one on one. I want to, you know, answer any questions or concerns that you have and help you with the bank and mechanize and all that to get you off on the right path? Sure.

Average Joe Finances:

Yeah. And it's really interested in chatting about that. Yeah. So hey, real real quick. This one of the things I like to ask towards the end anyway, and that's, you know, for my listeners that are listening in right now, and this is something that interests them. Is there anything like any last tips or tricks that you would recommend for them to look into? If this is a strategy they'd like to implement,

Michael Lush:

it's real simple. Go to replace your mortgage calm, there's nowhere on our website that we asked you for money. Nowhere. We're always giving free information. So if you go to replace your mortgage calm, there's a couple things that are lots of videos on there, you can go to YouTube, we have even more videos on YouTube at replace your mortgage YouTube channel. But if you go to replace your mortgage calm, the only call to action after you pre educated yourself, I've got a free book on the subject. So you can just download it tonight and read it, no charge, no shipping, nothing, just download it. But after you've kind of convinced yourself like, Okay, this is something that I need to look further into. I have a sales path that almost works around the clock. You book an appointment that the only call to action on our website is to book an appointment with us and it's a free appointment. And what we do for 45 minutes is look at your situation and see if this is a good fit for you because it's not and want to break a lot of hearts here. This isn't the right fit for 70% of Americans. Why? Because most Americans are living paycheck to paycheck. And if you are living paycheck to paycheck and haven't mastered your budget, this is not going to work for you. And in fact, it could be detrimental to you. There is no sidestep to budgeting. You have to master your own personal finances. Now if you have and you got a 660 plus credit score 10% equity in your home and you're cashflow positive, meaning you've mastered your budget. Well then yeah, we'll tell you what your options are and what it looks like and when you're debt free date, or what is your net worth look like if you were to adopt our various strategies to gaining wealth, all of that is free.

Average Joe Finances:

Yeah, you can't beat that. You know, free free is my favorite price. And I'm sure a lot of people listening. It's their favorite price, too. So yeah, let's say you already mentioned your website, but and I know you have a YouTube channel too. Do you have any other social media or anything else like that, that people can check out?

Michael Lush:

I'm terrible on Instagram. If you go to my Instagram, which is Michaellush 13 you're going to find stuff like this where I'm deer hunting, I'm hanging out with family. So yeah, on Facebook, I'm I wouldn't say all business, but I'm mostly business on Facebook, Instagram. I haven't tackled that one yet. Or at least my team hasn't. And I'm the one posting on there. And it shows because it's about family. It's about events. It's about America, and it's about deer hunting.

Average Joe Finances:

Yeah, good stuff, man. All right, so I'm gonna make sure we have all those links in our show notes, including your YouTube channel, your website, all that goodness, just to make it easier for the folks that are listening to copy and paste or just click away. And go check out and see what Michael wash is all about and what his team's doing. And maybe this might be a strategy that might work for them. So pretty excited man and excited to talk to you after this. But seriously, man, it was it was a pleasure having you on the show today. I really appreciate you taking some time. Thanks

Michael Lush:

for having me. Nine o'clock where I'm at and there's nothing better to do other than sleep. So Thanks, Mike.

Average Joe Finances:

It's almost 5pm here so it's all good, actually.

Michael Lush:

Yeah, it's almost 10 Yeah, there we go. I'm a night owl. appreciate my thanks.

Average Joe Finances:

Alright take care. Thanks for listening to the Average Joe Finances podcast. Your source for beating debt, saving money and investing Learn more at Averagejoefinances.com The Average Joe Finances podcast is for informational and entertainment purposes only. Do not use this for any real estate for investment making decisions.