Mortgage expert finally learns the ingenious trick rich people use to buy houses and 'it's baffling'

Buying your own home in this economy has become a distant dream for many people. However, those who still wish to buy their own home instead of paying rent, have to deal with paying off the mortgage. Surprisingly enough, that is not how affluent sections of society buy homes and other properties. One TikTok user has claimed that the wealthy people do not really pay the mortgage. Paul Leara, (@homeloanhero_ on TikTok), who has a wide knowledge of mortgages and real estate, created a video to shed some light on how the rich folks buy their properties. 

"I thought I knew money until I learned this," Leara said in his video. "The wealthy people don't get a traditional mortgage like you and I do. Being a mortgage broker for years, I never learned this until just recently. It's baffling to me why it took me so long to figure this out." He continued about how people with assets and money don't get a mortgage like regular folks. Instead, they take out a "lien" against their assets. "They don't liquidate. They don't take out their money from their portfolio, from their bank account and buy a house with cash. They take a 'lien,' like a loan, against their money, which is interest only and it keeps building. It keeps compounding while they pay off their house," Leara explained.

As a result, the rich folks are making money while they pay off their house. "So they’re basically making money to own their house. And not everyone can do this. You don’t have $1 million or $2 million sitting in a portfolio? You can’t do this.” However, Leara suggested something for average homeowners as well. Instead of following the path of the rich people or wishing to have millions of dollars sitting in their bank accounts, people can take out a home equity line of credit, otherwise known as HELOC.

"Here, instead of the mortgage, you pay the interest. And I can show you how. I would love to, if you're interested," he offered. "Or if you think I'm lying, please prove me wrong." The comments section started debating on Leara's statement where some claimed he was making it all up and others backed him up. @indiansky324 questioned, "But doesn’t the HELOC require you to already have a home to take the equity out of?" @layway0412 explained, "People really don’t understand that interest on a HELOC and a loan is calculated differently. Even if HELOC is 18%, it will still be a lot less than a mortgage. Amortization vs average daily balance." 

@financequeenmadonna mentioned, "Actually, this can be done with life insurance and you don't have to be wealthy. When you have cash value, you borrow against it. The money’s still in the account." @lindagelenaghan shared, "A friend of mine got HELOC and now lives in a $7.5 million house in Pacific Palisades and the first few years she only pays interests." @sideboatbecky added, "Family trust or irrevocable trust so that everything collective is in and then borrow from the trust but pay back into trust so it’s a never-ending bank." 

You can follow Paul Leara (@homeloanhero_) on TikTok for more videos on housing and mortgages.