Quote:
Originally posted by photon@Mar 1 2005, 02:58 PM
Yup, that's interest only. You have to take the extra amount that would normally go towards the principle and do something with it yourself. Which is nice because then it has a chance to grow rather than just sitting there.
It's nice because it offers some flexibility, but you have to be disciplined if you ever want to pay off your house 
The added benefit is if you pay off portions of your HELOC and reborrow that money for investing, the interest on that portion of it becomes tax deductable (borrowing for the purposes of investing).
Another interesting thing with HELOCs is now GE (not sure about CMHC) insures them, so you can actually have a high ratio line of credit (up to 90% according to their site). There's also mixed packages where a portion of the mortgage is traditional and a portion is a LOC.
When I first did this years ago, there was only one bank that did it and the rest of the banks looked at me like I was crazy. I couldn't even get a student loan because they saw the HELOC as a liability rather than an asset as they view a mortgage. CMHC wouldn't touch it with a 10' pole.
Now they all have these things
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Interesting.
I know a guy with the manulife HELOC that's a bank account as well - the thoery is he'll pay of his mortgage twice as fast or something.
But if you pay interest only you could concievable never pay off your mortgage. So you could 'rent' the house you live in and flip it, almost like an investment property.
Not a bad idea. You (the generic you) get:
- cheap rent
- all the equity benefits of increasing house prices
- the ability to afford a much higher investment because it's interest only
- no capital gains tax
Really interesting concept.