School me on HELOC's

[03ozwhip]

just went into my bank I have my mortgage with and the best I could get out of them was 3.7% and they will ask their manager if they can do half on the $300 appraisal fee.

help me out guys, who should I be talking to?

[imranm]

Originally posted by 03ozwhip
just went into my bank I have my mortgage with and the best I could get out of them was 3.7% and they will ask their manager if they can do half on the $300 appraisal fee.

help me out guys, who should I be talking to?

Talk to Tim, he's a sponsor on beyond. Went for coffee with him a couple of weeks ago... Aside from knowing his stuff, he really has an appreciation for his clients interests

[RealJimmyJames]

If they already have your mortgage, they shouldn't need a new appraisal.

[Xtrema]

Originally posted by RealJimmyJames
If they already have your mortgage, they shouldn't need a new appraisal.

http://jamiesarner.com/toronto-real-...rules-changes/

I wonder if the upcoming Nov 30th change has spook lenders a bit.

[ExtraSlow]

I could see them wanting a new appraisal if a) they didn't do a proper one when you got the original mortgage or 2) they aren't confident that they understand the current state of the market or can't value your home in the current market.

Either one of those situations makes an appraisal worthwhile from thier perspective, but I really don't think that YOU should pay for it. Ask them if they really want you to have the HELOC with them? Shop around, loans are quite competitive.

[ExtraSlow]

Hey, I know beyond is really enjoying my finance questions this year, so I'll keep it going.

Anyway, if I'm close to my mortgage renewal date, is there is a difference between taking equity right out of the mortgage vs just making a withdrawal from the HELOC on day 1?

Sure, the interest rates may be slightly different, but is there is a difference in payments, tax, repayment etc? I guess a guy can do interest only payments on a HELOC, vs the required principal plus interest payments on the mortgage.

It kind of feels like it would be cool to have the bank scratch me a fat cheque on the day I start my new mortgage. But aside from that . . . .?


ExtraSlow, Posting every thought that enters his head since 2016 (tm)

[Xtrema]

Lol.

I think you got it. Also heloc is not amortized so it's also a cheaper loan. Especially the higher the amount of amortization period is.

Heloc will only access 65% of your equity while you can remortgage equity down to 5%, so you can potentially get more $ out of the house.

Say you have $600K house with 25% equity. With HELOC you can access $30K loan.

But if you refinance down to 5%, you have access to $120K. Depends how you restructure your mortgage (extend to 30 year amort?), you may have a bigger loan = bigger monthly payment but extending amortization may limit the increase.

[ExtraSlow]

It's weird, I've had a HELOC for a decade, but never used it for anything I wasn't paying off within a month or two. So never really looked too deep into it. Also, kind of coincidental that my mortgage comes up for renewal in a couple of months.

Always options.

[ercchry]

Who the hell is offering 95% refi's?!

Your options might be limited if you are not showing any income... and being self employed though

[max_boost]

Heloc is all flexible. It's great.

Use your heloc to pay off your mortgage if it works. Just shifting it from one pile to another. Although I got say, psychologically it feels weird like you are in debt unsecured style.

Also in my experience, creditors view heloc like the devil vs a conventional mortgage.

I guess in the end it just depends how much equity you have and wether you care about paying a higher interest rate. Some people want to pay the least possible interest.

Anyway good luck extra slow.

[jwslam]

Originally posted by max_boost
I guess in the end it just depends how much equity you have and wether you care about paying a higher interest rate. Some people want to pay the least possible interest.

Lowest interest rate does not equal least interest paid

Example with $300k:
25 years of monthly @ 2.8% = $116,514 of interest
20 years of monthly @ 3.0% = $ 98313 of interest

(does anyone else keep a Ti-83 on hand? )

[Xtrema]

Originally posted by jwslam

Lowest interest rate does not equal least interest paid

Example with $300k:
25 years of monthly @ 2.8% = $116,514 of interest
20 years of monthly @ 3.0% = $ 98313 of interest

(does anyone else keep a Ti-83 on hand? )

Longer amortization period will always mean more interest but lower monthly payment if mortgage is the same. Extending amortization is about lowering payment now to big time to get back on your feet.

Originally posted by ercchry
Who the hell is offering 95% refi's?!

Your options might be limited if you are not showing any income... and being self employed though

http://www.themortgagestoreonline.co...loantype6.html

Some would do it, not sure about the caveat tho (probably at high rate). I'm sure brokers should have some products lined up.

[flipstah]

What's a decent amount of equity to qualify? 50%? 20%? Or is it dependent on the loan you ask?

[ercchry]

Originally posted by Xtrema



http://www.themortgagestoreonline.co...loantype6.html

Some would do it, not sure about the caveat tho (probably at high rate). I'm sure brokers should have some products lined up.

C lender product... basically private lending, close to credit card level rates

[blownz]

Originally posted by JoniBoy
My understanding is your HELOC portion can only be up to 65% of the home value however HELOC + mortage can still be up to 80% of the home value.

I currently have this through RBC's Homeline plan - I refinanced a rental with a mortgage at 80% of the appraised value and every month as the principal is paid down, my line of credit increases by that same amount, so that the total (available HELOC + remaining mortgage) remains constant at 80% of the home value. This continues until the HELOC portion reaches 65% of the home's value at which point it maxes out.

I did this refinance in July of 2015 well after the new rules had come into effect so I'm quite certain this is how it works but perhaps Todd or Tim or anyone else in the know can confirm?

Coincidentally I have the same RBC homeline plan. My HELOC kept increasing until it was 80% of the value of the house. It has been a few years now and nothing has changed. And I paid off my mortgage in Feb of 2015 and people here mentioned it changed in 2014. Maybe the bank is just to lazy too change?

Originally posted by jwslam

Lowest interest rate does not equal least interest paid

Example with $300k:
25 years of monthly @ 2.8% = $116,514 of interest
20 years of monthly @ 3.0% = $ 98313 of interest

(does anyone else keep a Ti-83 on hand? )

So the salesguy at the RV dealer I bought my last trailer from told me to "be careful when paying off loans because the one with the highest interest isn't always the best to pay off". I told him I wasn't sure what he meant and he explained: "8% interest on a $20K RV loan is only $1600 a year. But 4% on your $400K mortgage is $16K a year, so you are better off paying your house off first!!"

I took a second to decide it wasn't even worth continuing the discussion. Told him "good point" and moved on. lol

[jwslam]

Originally posted by blownz
So the salesguy at the RV dealer I bought my last trailer from told me to "be careful when paying off loans because the one with the highest interest isn't always the best to pay off". I told him I wasn't sure what he meant and he explained: "8% interest on a $20K RV loan is only $1600 a year. But 4% on your $400K mortgage is $16K a year, so you are better off paying your house off first!!"

Depends which year you're in.

[blownz]

Sure the exact amount of interest varies based on the outstanding balance, but are you agreeing with him that it is better to pay off a loan at 4% when you have another at 8%?

[max_boost]

i think current mortgage rates are 2.3 to 2.9%

a heloc is prime +.5 so 3.2

but again heloc is all about flexibility and you are really just accessing your own money

whatever works for you

[Redlyne_mr2]

Lower rates on Helocs but a huge percentage of Heloc users are in the never never plan, no one has any discipline to pay them down and many use them as an unlimited chequing account. Ive never had one, never will. My Home equity is my retirement plan. If I need to borrow money for something its short term, high payment so that the interest costs are next to nothing.

[Inzane]

I've been an advocate of HELOCs for years.

However I'm a geek about it. About 5 years ago per my account manager's suggestion I transferred all my remaining mortgage debt into my HELOC. At that time I built a spreadsheet to simulate a conventional fixed term mortgage going forward with things like interest rate and payment as inputs. I used that as my plan to track my current status vs. the benchmark. This was a great way to insure you're not falling behind. It also allowed me to easily see how much I was reducing my overall interest owed and how how many months I was knocking off by paying down faster.

My HELOC is split into 3 parts. The main one is for mortgage and household stuff (renos etc), the second one is for car payments (I use a spreadsheet tracker for this purpose too), and the third one is for investment use (I like to keep this separate for tax return purposes where applicable).

A properly setup HELOC combined with discipline is a great financial tool. It gives you ultimate flexibility and IMO maximizes your ability to keep your money working for you. For example it seems pointless to keep a large chunk of cash sitting around in a bank account as an "emergency fund" where it's doing nothing and making nothing, when you could put that amount against your HELOC to offset the interest you'd otherwise pay, and then only pull that money out WHEN you need it.