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Originally Posted by Tron_fdc
Hey Dom, quick question:
Did you turn your existing mortgage into a HELOC, and used the cash you gained as a down payment for ANOTHER mortgage? I wasn't aware you could do that....
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I believe you can definitely do this (but someone correct me if I'm wrong).
You re-finance your existing property into a HE-LOC, take out the extra equity so that you've still left 25% of the (HE-LOC) property value in the HE-LOC. Take the rest and do whatever you like, if it happens to be $50k, put a downpayment and buy another house to rent. There are small issues that would have to be dealt with, but essentially you could easily do this.
The thing I like about the HE-LOC is this;
I won't be living in my current property in 3-4 years. Had I got a mortgage, I'd be paying $850/month mortgage, $220 condo fees/$60 property taxes, for a total of $1130/month. The issue with this is, because I know I'm selling in 3-4 years, I don't think it make sense to pay interest-heavy mortgage payments (like 90%) for 3-4 years and then sell. The equity I'll have built up that way will only be several thousand.
INSTEAD I'll get the HE-LOC, and only pay interest payments ($350), as well as condo/property taxes ($630/month grand total). This leaves me w/ around $500 a month to invest that I would have originally been committing to interest-heavy mortgage payments. So while I'm not actually building equity in the property, I AM taking the $500/month I'm saving w/ the HE-LOC and investing it into RRSP's, so I'll get a fat tax-return at the end of the year to... re-invest into RRSP's (or whatever investment vehicle you choose).
If you're selling within the next few years, I figure it makes great sense. If you're in your house long-term, mortgage is probably the way to go.