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Velocity Banking Calculator

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The Velocity Banking Calculator is a powerful tool designed to help individuals optimize their mortgage or loan payments using the Velocity banking strategy. This approach involves using a line of credit to pay down the principal of a mortgage more quickly than traditional methods, potentially saving thousands in interest payments over time. The calculator simplifies complex calculations, making planning and implementing this strategy easier.

What is Velocity Banking?

Velocity banking is a financial strategy that uses a line of credit to reduce the interest paid on a mortgage or loan. By applying larger lump sums towards the principal early on, borrowers can decrease the amount of interest accrued, ultimately reducing the loan’s lifespan and total interest paid.

How Does the Velocity Banking Calculator Work?

The Velocity Banking Calculator utilizes specific variables and formulas to estimate the savings one can achieve by employing the Velocity banking method. Here’s a breakdown of the components and calculations it uses:


  • P: Principal amount of the mortgage or loan
  • i: Annual interest rate of the mortgage or loan (as a decimal)
  • n: Payment period in years
  • L: Line of credit amount used for velocity banking
  • j: Annual interest rate of the line of credit (as a decimal)
  • T: Time in years during which the line of credit amount L is used to pay down the principal


  1. Traditional Loan Interest Payment:I_traditional = P * i * n
    • This calculates the total interest paid on a traditional loan without using velocity banking.
  2. Reduced Principal:P_reduced = P - L
    • Calculates the new principal after applying the line of credit.
  3. Interest Saved:I_saved = (P * i * T) - (P_reduced * i * T)
    • Determines the interest saved over T years by using the line of credit.
  4. Cost of Using the Line of Credit:I_LOC = L * j * T
    • Calculates the cost incurred by using the line of credit.
  5. Net Savings:Net_Savings = I_saved - I_LOC
    • The net savings are achieved by employing the velocity banking strategy, not accounting for compound interest for simplicity.

Step-by-Step Example

Imagine you have a $300,000 mortgage at a 4% annual interest rate, intending to pay it off over 30 years. You decide to use a $20,000 line of credit with a 5% interest rate for velocity banking, applied over 5 years.

  1. Calculate Traditional Interest Payment:
    • I_traditional = $300,000 * 0.04 * 30 = $360,000
  2. Calculate Reduced Principal:
    • P_reduced = $300,000 - $20,000 = $280,000
  3. Calculate Interest Saved:
    • I_saved = ($300,000 * 0.04 * 5) - ($280,000 * 0.04 * 5) = $60,000 - $56,000 = $4,000
  4. Calculate the Cost of Using the Line of Credit:
    • I_LOC = $20,000 * 0.05 * 5 = $5,000
  5. Calculate Net Savings:
    • Net_Savings = $4,000 - $5,000 = -$1,000

Information Table

PPrincipal of the loan$300,000
iLoan’s annual interest rate (decimal)0.04
nLoan term (years)30
LLine of credit amount$20,000
jLine of credit’s interest rate0.05
TTime to apply line of credit (years)5


The Velocity Banking Calculator is an invaluable tool for those looking to manage their mortgages more efficiently. By understanding and applying the principles of velocity banking, individuals can potentially save on interest payments and reduce their loan terms. However, it’s crucial to consider the variables involved, including interest rates and time, to ensure that this strategy is beneficial for your specific situation. With careful planning and the help of the Velocity Banking Calculator, achieving financial freedom sooner is within reach.

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