Should I renew my mortgage - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

I-Hate-Hulse · 03-01-2005, 09:02 AM

Once again it depends on your risk tolerance. I know when I signed my first mortgage I was all worried about a variable rate. Didn't want to be running for my Excel worksheets everytime the Bank of Canada raised the rates. Next time however, I'm going variable rate for sure, as long as it has lockable provisions. I'd of saved another $2500 over 5 years had I done so.

Not sure if other banks will pay your penalty for you. That was never suggested to me back when I looked into refinancing my mortage a year or so back. Check with the mortgage brokers - gives you an excuse to call that sexy mortgage broker!

CaptainCrunch · 03-01-2005, 09:03 AM

A lot of banks will buy your mortgate business, I know that BMO has done it in the past, its worth checking it out and seeing what the terms and conditions are.

You will always save more in a variable if the market is there to influence it properly

jonesy · 03-01-2005, 11:00 AM

Quote:

Originally posted by fotze@Mar 1 2005, 03:55 PM
Any of you guys know about cancelling and going with someone else. I am currently locked in for 2.5 more years at 5.64%. I know I can get at least 4.6%.

The penalty is about $3000, but I would save that with the rate difference.

I've heard of other banks paying the penalty in some cases, is this true.

Also if I went to variable I would save that much more.

Any opinions?

Sell you house. Move to the U.S.A
The land of opportunity.

Or else go work in some tropical country as a bartender.

Bill Bumface · 03-01-2005, 11:11 AM

I've heard of brokers going as low as %3.25 right now.. snap that up!

photon · 03-01-2005, 12:56 PM

Yeah I haven't seen anything that low on a fixed rate.

I just finalized financing on a house, and I went with a home line of credit rather than a mortgage. Rate is prime but the advantage is I pay interest only and can use the rest of what would be a payment to invest, so my equity not only grows in the house it also grows in conventional investments.

Bend it like Bourgeois · 03-01-2005, 01:09 PM

I tried to get a few banks to pay the penalty a few years back, and none would. That may have changed - or I may not have asked the right banks.

If you're looking to save money overall, not lower your payments, take the same payment you have now and plug it into a variable mortgage or even a fixed mortgage at a lower rate and see what the amortization changes to. I found that the easiest way to do the math.

The interest savings can be huge - easily worth the penalty - and even if you go variable your payments are already set up to cover rate hikes.

Bill Bumface · 03-01-2005, 01:26 PM

Quote:

Originally posted by fotze+Mar 1 2005, 12:13 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (fotze @ Mar 1 2005, 12:13 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-hulkrogan@Mar 1 2005, 11:11 AM
I've heard of brokers going as low as %3.25 right now.. snap that up!

Variable rate though, right? [/b][/quote]
yup, but you had the option to lock it in right away for 5 years

Bertuzzied · 03-01-2005, 01:29 PM

Try and get a home secure line of credit! it's the best way to go. Interest rate at prime. My monthly payments went from $1300/month to $600/month. I had to pay a big ass payout penalty! it was over 6 grand!

Bend it like Bourgeois · 03-01-2005, 01:42 PM

Quote:

Originally posted by Bertuzzied@Mar 1 2005, 01:29 PM
Try and get a home secure line of credit! it's the best way to go. Interest rate at prime. My monthly payments went from $1300/month to $600/month. I had to pay a big ass payout penalty! it was over 6 grand!

That's interest only though right?

If you chose a variable rate mortgage you'd be paying similar interest, but with a set amount also going to principle each month.

I'm not saying the HELOC idea is bad, just want to make sure I understand it correctly.

photon · 03-01-2005, 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

Tron_fdc · 03-01-2005, 03:02 PM

Quote:

Originally posted by photon@Mar 1 2005, 09:58 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

Do you have a link to the website you mentioned? It sounds interesting.

photon · 03-01-2005, 03:53 PM

http://www.gemortgage.ca/content/HomeBuyer...vices/HELOC.asp

Bend it like Bourgeois · 03-02-2005, 10:53 PM

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

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.

photon · 03-02-2005, 11:15 PM

It's flexible but it's dangerous.. the temptation to just pay the interest and have the money you'd normally go towards the principle get eaten up in living expenses would be too great for a lot of people to resist.

It's also a variable rate on the LoC and that rate is a bit higher than what you can usually find for shorter term variable rate mortgages, so the investments and tax advantages have to make up for that. In the simulations I did there was actually a disadvantage in the first few years assuming reasonable returns on the investment, but after 6-7 years it really starts to kick in.

I never do want to pay off my mortgage, I just want to be able to borrow against the equity so I can invest. This lets me do that while still benefiting from the growth of the property value.

Debt is good as long as it's for assets that provide a greater return than the cost of borrowing