First Lien HELOC Calculator

A First Lien HELOC can be an excellent choice for financially disciplined homeowners with positive monthly cash flow. It works best if you have significant home equity, consistent income, and can commit to using the velocity banking strategy. The key advantage is that your money works harder - every dollar deposited reduces your principal immediately, lowering daily interest calculations. However, it requires discipline to avoid overspending and comes with variable interest rate risk.

First Lien HELOC interest is calculated daily based on your average daily balance, unlike traditional mortgages that use monthly amortization. This means when you deposit your paycheck, your balance drops immediately, reducing interest charges from that day forward. For example, if your balance is $200,000 at 8% APR, daily interest is about $43.84. But if you deposit $5,000, your new daily interest drops to $42.74. This daily calculation is why velocity banking works - every dollar saved reduces interest immediately.

For a $100,000 HELOC at 8.5% APR, the interest-only payment during the draw period would be approximately $708/month. During the repayment period (typically 20 years), the principal and interest payment would be around $868/month. However, with a First Lien HELOC using velocity banking, you're encouraged to pay more than the minimum, applying your entire cash flow surplus to accelerate payoff and reduce total interest costs significantly.

First Lien HELOC rates are variable and typically tied to the Prime Rate plus a margin. As of 2024-2025, rates generally range from 7.5% to 10.5% depending on your credit score, loan-to-value ratio, and lender. While these rates appear higher than traditional mortgage rates (which might be 6-7%), the daily interest calculation method and velocity banking strategy often result in paying significantly less total interest over the life of the loan.

Velocity banking uses a First Lien HELOC as an 'all-in-one' account where your income is deposited directly into the HELOC, immediately reducing your principal balance. You then use the HELOC for daily expenses. The key is maintaining positive cash flow - the difference between income and expenses continuously pays down principal. Because interest is calculated on daily balance, keeping your balance low throughout the month dramatically reduces total interest paid, often cutting a 30-year mortgage payoff to 5-10 years.

Yes, this is one of the primary uses of a First Lien HELOC. By refinancing your existing mortgage into a First Lien HELOC and implementing velocity banking, many homeowners pay off their homes in 7-12 years instead of 30. The strategy works because: 1) Daily interest calculation rewards any principal reduction immediately, 2) Your entire income temporarily reduces the balance each month, 3) You only pay interest on what you actually owe each day, not on a fixed amortization schedule that front-loads interest.