The 3 Things You Need to Qualify for A HELOC And Why Most Homeowners Fail the First One

Added: 2026-05-07

[00:00:00]Hey gang, Michael Lush, founder and CEO of Replace Your University, also known as Replace Your Mortgage. It's probably why you're tuning in because of what we do underneath Replace Your Mortgage. Um, a lot I get this question a lot. What has to be true in order for this strategy to work? And there are several components to this. Uh, and I always start with number one because, you know, we had an event this week and you know, we turn away a lot of people. Um, it's it's weird because I was actually talking to another financing company yesterday on the on the way home from the office and yeah, we're just looking for different ways to take our paper and finance it and make money as a company.

[00:00:37]And I was explaining to him, you know, how we operate as a company, you know, because they underwrite companies like ours, thousands of companies like ours, whether you're Tony Robbins or Grant Cardone or Little Opplace University.

[00:00:50]And so when I was explaining to him, you know, that we actually turn away a lot of people, he's like, "Well, hold up.

[00:00:54]You have people that want to pay you and you don't allow them?" I said, "Yes, actually more of those than than we actually allow." He's like, "Explain further." And I told him, I said, "Listen, we have a system and a process that not only do we educate them and show them how to do this forever, for the rest of their life, uh, not only on just their home, but their cars or education or anything they want to finance uh throughout their their life's journey. uh we also walk them through to the point of success and I said and we have a refund policy that if they don't get that then we have a 100% refund policy. He was blown away. He's like that is very rare. That is very abnormal uh not only in your industry but in all industries especially when it comes to the ecom space or the digital uh world that that it's not normal to do business though the way that we do. He said, "Not only the refund is rare, but on top of that, you're not willing to take money if you see red flags on the front end."

[00:01:52]I said, "Yeah, 100%." So, uh, realistically, I would say 60% of the people that want to pay us and want to come on board to our community, we don't allow. Um, does it hurt our personal bank account? Absolutely. But instead of trying to build our personal bank accounts higher, we're actually maintaining character. And hopefully we grow the bank account to get into heaven. I know it doesn't work that way, but nonetheless, at least that's our thought process. We want to maintain integrity. We care more about our reputation and that we've helped everyone that actually exchanged that value of money, they should get a reward for it. And if you don't get a reward for it, then we shouldn't have been doing business together to begin with.

[00:02:33]So, let me explain why this wouldn't work for you. Number one, cash flow positivity. And it's not as easy as just cash flow positivity, meaning I make more money than I spend. It has to be I make more money than I spend [music] in relation to my debt load. Right? One could argue a half a percent of your income and cash flow positivity would be enough. But I don't like just a general I like to look at all facets of it. And I'll give you an example.

[00:03:02]>> [snorts] >> uh one of our clients uh actually put their numbers into the calculator and they were not qualified and so we took a deeper dive and what they had was $200,000 of equity available to them. So if we structure it the right way, get access to the equity, we can pay off $35,000 of credit cards and two car loans. And if I remember correctly, that's about $2,000 of minimum payments on a monthly basis. So, if I take a portion of that $200,000 of equity and consolidate the consumer debt, guess what happens? Cash flow positivity goes up because the payments on the car loans and the credit cards go away. Not to mention the credit scores go up, too.

[00:03:41]And one would argue like, well, I don't want to do that because I have a 1.9% on my car loan. Doesn't matter. It's an installment loan, front-loaded advertised loan. It almost always loses to a simple interest debt tool that is combined with your cash flow. Let me explain. Let's say you've got a car loan, $30,000 car loan at 1.9%. Your payment on that car loan is going to be $552 a month. And if you were to take that and roll it into the home equity line of credit, your home equity line of credit payment, the minimum payment on that is going to increase by about a hundred bucks a month. So instead of having a 552 going out the door, you now have an additional $100 going out the door. So that's a difference of $452.

[00:04:24]Well, where does that $452 go? It goes towards the principal reduction of the home equity line of credit. And when we show them the math in black and white, look, if you don't include the car loan, it's going to take you 2 years longer.

[00:04:37]If you do include the car loan, it's going to be 2 years less to not just have your home paid off, but also the car. So, you're like, why would I get it? You're like, and I was this way for 17 years. So, if you think this way, I don't blame you. I was actually in the industry and I thought the same way you did. It doesn't make sense to take a 1.9% rate and throw it into let's say a six or 7% home equity line of credit.

[00:05:03]That's higher. That sounds stupid, but you're comparing apples and oranges.

[00:05:07]They don't compute interest the same way because one is a payment strategy and the other one is a cash flow strategy.

[00:05:14]So now that we relooked at her numbers, paying off the credit cards, paying off the car loans, credit scores will eventually skyrocket, but you will now qualify because you've just freed up additional cash flow that goes where?

[00:05:26]Towards the principal reduction of your line of credit. Now, in a mortgage, if you did principal reduction, that money is gone for a long period of time.

[00:05:34]There's only two ways to access it.

[00:05:36]refinance, which costs thousands, sometimes tens of thousands to refinance to get access to your equity in your home, or sell, which can also cost tens of thousands of dollars because you got realtor commissions and title uh insurance fees and all this stuff. So, yeah, I mean, both options to get access to your equity is very expensive.

[00:05:54]However, it's 100% free to gain access via your home equity line of credit, and you can do so every single day, multiple times a day if you wanted to. So that's why principal reduction is so confident uh for people to to use their cash flow to put it in there because they know they have 100% liquidity that if they needed that money, they don't have to ask for permission. They don't have to go through underwriting. They don't have to have good credit scores. Um they can literally just log in on their phone and move money around. They got instant access to it just like they would in a checking account. Right? So again, that's number one. You have to be cash flow positive in relation to your debt load. Number two is we personally, this isn't for this to actually work for you, but we as a company require you to have at least 680, ideally 700 credit score and above.

[00:06:48]Why? Because for all the faults that are the credit score model um you know there is some validity to hey if I have a 730 or 740 credit score it shows us that in the past in the most recent past you have been responsible with money. So, it already kind of gives us somewhat of your behavioral decisions that hey, I you know, if you recently late or defaulted on something or foreclosed or had a car repossessed, you're not going to have a 700 plus credit score, which means you in the recent years have not overextended yourself. You at least show some behavioral patterns with money that is somewhat responsible. Albeit, you know, a lot of people could have a mortgage and I would argue that's not responsible borrowing. But nonetheless, I digress. So, we like to see that because we're not pulling your credit.

[00:07:38]We're taking your word for it. So, our clients are pulling their own credit and reporting back to us, here's what my credit score is, and we allow them to come on board. Before I get into the last one, if you like this video and you find it valuable, please hit the subscribe button. Definitely helps us out at the channel. Thank you for that.

[00:07:54]And on to the last topic, discipline.

[00:07:57]But it's a different type of discipline that most people would think because when you hear about this as an outsider, you're like, "Oh my goodness, this takes more discipline to what I'm doing."

[00:08:05]That's the wrong type of discipline.

[00:08:07]Actually, it's easier to execute on our strategy than it is to execute with your current strategy. Cuz think about what a mortgage does. A mortgage is segregation of income. It is a segregation of income tool. It's designed to be that way. It's designed to separate you from your cash.

[00:08:22]Wasn't always the case. You can see my other videos of what a mortgage looked like prior to 1913 versus today, [snorts] but it is designed to separate you from your cash. So, let's think of a visual here. The top you've got income coming in, but below income it goes to one of two buckets in checking account, savings account, checking account, we now segregate it further. Some of it is going towards the mortgage, some of it's going towards the car, some of it's going towards other bills and expenses, etc. Then you got the savings account over here. Some of that money is going towards retirement.

[00:08:54]Some of it's going towards an emergency fund than in a vacation fund, etc. We are constantly separating our dollars from one another. That is much harder path to follow than actually what we teach because what we teach is what's called a streamlined income approach.

[00:09:09][music] And it's income comes in, goes to the HELOC, you pay your bills out of it. Income comes in, goes to your HELOC, you pay your bills out of it. You see how that's so much easier? Especially with the digital world, everything's automated. So all you have to focus on with our income approach is to focus on making more income and everything else takes care of itself. But the discipline we do talk about is with our strategy, you're now going to have access to more capital. Uh this is the report that we most consistently get back from our clients. I now have access to more capital than I've ever had access to before in my life because their principal reduction is going down much faster than if they had a mortgage. but they always have liquidity and access to that equity. So very quickly in a couple years they got access to a couple hundred,000 of capital. The discipline we preach is to use that for good, not for bad. What is good? You can use that.

[00:10:08]You can use that equity if you want to buy a cash flow asset. Maybe it's real estate, maybe it's insurance, maybe it's other investments, but buy assets that produce a monthly dividend or cash flow.

[00:10:18]Because if you do, what happens to your income? It goes up. What happens to the debt reduction? It goes down faster.

[00:10:24]What you need to resist is, I've always wanted this truck. I've always wanted this car. I've always, you know, one could argue this. I've always wanted to take a vacation to Fiji or Tahiti or wherever. Right? You know, to me that's kind of a fine line because, you know, I think you should create memories, but nonetheless, you have to resist the temptation to use that capital for things that aren't going to increase your net worth. So, that's the type of discipline that is required in our. So, again, it's cash flow, positivity, decent credit, and discipline to resist temptation because you're going to have access to more money than you typically have ever had in your life. Y'all take care. God bless.