Quote:
Originally Posted by lorenavedon
I'm really interested in the %35 down then get a HELOC route. I already PMed WinnipegFan about it and got good info but was wondering if anyone else has done this to purchase a place or if they had any other insights. Seems like an easy way to save in volatile markets. If you feel the stock market is currently too risky and being in cash earns almost nothing, I'd rather put everything I have into a home, even if it's %50 with a HELOC. Zero savings... then if you hit a few months of tough times you can take money out IF needed to survive, but if times are good you can continue to dump in as much as possible and basically earn %2 to %2.5 (which is what you'd be losing holding it in a savings account and keeping a mortgage) (Please no "put your emergency funds into stocks or bonds" advice) Thanks
eg. 200k savings (%1.5)
buy 400k place
260k HELOC. (%3.5)
after purchase balance - 0 savings and 200k on HELOC %3.5
vs (%20 down = 80k) 320k mortgage @ %3
plus 120k savings @ %1.5
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I have an NBC All In One account, which basically acts as a HELOC. I took possession in November 2008, so I was able to only put down 25% (now most require 35%) and my interest rate is prime. These are great if you are fiscally responsible and can understand that for a long time you won't have any "money" in the bank. I'd rather ever cent I put into the bank drops my interest payment, rather than having an amount in chequing, savings and a mortgage payment. It worked really well for me in the first five years I had it, as my job paid a low salary, but high bonuses. My compensation was about 60% salary and 40% bonuses, so it was nice that every few months when I got my bonuses, they immediately went against my principal.
That said, I'm looking at selling my townhome and buying a house worth about 3 times the value of my current place. I will likely go with a mortgage as the rates are much cheaper than the HELOCs, and maybe after the first 3-5 year term, I'll go back to the current type of account. It will depend on rates, as the HELOCs are all at prime + 0.5% right now.