I think I have it figured out...is it this easy?

[CarrieKoch]

So my husband and I have been gathering all our documents up since the ACRE weekend. We`ve done quite a bit of legwork. What it comes down to is that we don`t have enough equity in our home for a HELOC (currently we are a little under 80% LTV) and we only have $5000 cash. We have a 5.09% interest rate on our mortgage and are locked in for another 3 years. Our penalty is $10000.

Our realtor mentioned perhaps paying down an additional 10% into our mortgage to lower the buyout. We could do this by borrowing from one of our unsecured interest only (5.75) line of credits.

Then what I`m thinking is we payout the mortgage and pay the penalty (should be reduced because of the huge lump sum payment). Then we`d get a new mortgage with a much lower variable rate and longer amortization. Then get a HELOC because we`d have more equity in the home (could get $25000 this way).

Use that money to buy the investment property.

Is this legal? Any issues with this? I am so anxious to make that big downpayment.

The big upside is that if we did this we could actually make our home a great future rental property! We could get such a good rate and save so much in our pockets every month...about $400. I was torn what to do with the house because we`d like to move to K-W in the next 3 years and I couldn`t figure out how to make this property a good cash flow property.

Does anyone have any thoughts on this?

Thanks for your help!

 

[Goodstuff]

Using a HELOC for the down payment worked for me in the past.

Secured HELOC`s are now around prime + 1% I believe. A couple years ago you could get them for prime - .90%

Lots of bargains out there now. Just make sure it CASH FLOWS!!! You don`t want to get trapped, especially when you don`t have any spare money to fall back on. And remember, if you use a HELOC, the interest rate can increase whenever rates go up. It`s not locked in.

Rates were near 20% back in the early `80`s. Don`t get caught.


QUOTE (epmrentals @ May 8 2009, 04:54 AM) So my husband and I have been gathering all our documents up since the ACRE weekend. We`ve done quite a bit of legwork. What it comes down to is that we don`t have enough equity in our home for a HELOC (currently we are a little under 80% LTV) and we only have $5000 cash. We have a 5.09% interest rate on our mortgage and are locked in for another 3 years. Our penalty is $10000.

Our realtor mentioned perhaps paying down an additional 10% into our mortgage to lower the buyout. We could do this by borrowing from one of our unsecured interest only (5.75) line of credits.

Then what I`m thinking is we payout the mortgage and pay the penalty (should be reduced because of the huge lump sum payment). Then we`d get a new mortgage with a much lower variable rate and longer amortization. Then get a HELOC because we`d have more equity in the home (could get $25000 this way).

Use that money to buy the investment property.

Is this legal? Any issues with this? I am so anxious to make that big downpayment.

The big upside is that if we did this we could actually make our home a great future rental property! We could get such a good rate and save so much in our pockets every month...about $400. I was torn what to do with the house because we`d like to move to K-W in the next 3 years and I couldn`t figure out how to make this property a good cash flow property.

Does anyone have any thoughts on this?

Thanks for your help!

 

[PeterKinchMortgageTeam]

QUOTE (epmrentals @ May 8 2009, 03:54 AM) So my husband and I have been gathering all our documents up since the ACRE weekend. We`ve done quite a bit of legwork. What it comes down to is that we don`t have enough equity in our home for a HELOC (currently we are a little under 80% LTV) and we only have $5000 cash. We have a 5.09% interest rate on our mortgage and are locked in for another 3 years. Our penalty is $10000.

Our realtor mentioned perhaps paying down an additional 10% into our mortgage to lower the buyout. We could do this by borrowing from one of our unsecured interest only (5.75) line of credits.

Then what I`m thinking is we payout the mortgage and pay the penalty (should be reduced because of the huge lump sum payment). Then we`d get a new mortgage with a much lower variable rate and longer amortization. Then get a HELOC because we`d have more equity in the home (could get $25000 this way).

Use that money to buy the investment property.

Is this legal? Any issues with this? I am so anxious to make that big downpayment.

The big upside is that if we did this we could actually make our home a great future rental property! We could get such a good rate and save so much in our pockets every month...about $400. I was torn what to do with the house because we`d like to move to K-W in the next 3 years and I couldn`t figure out how to make this property a good cash flow property.

Does anyone have any thoughts on this?

Thanks for your help!


That is exactly what many clients are doing. Find out what your prepayment privileges actually allow (often its as much as 20%), and if you can pay it down which will reduce your penatly. Have an experienced banker or broker run some mortgage comparsions for you to show you how much you`ll be saving by taking advantage of the current low rates, and make your decision based on that. At 5.09% with 3 years remaining, there will be pretty signifigant savings for you. You could opt to either enjoy those savings in reduced housing costs, or continue to make the same payments and pay down your mortgage much more quickly.

If however, you are planning on investing in real estate make sure that its not jsut about rate, but that you are getting the best product as well ( it should be readvanceable)

Hope that helps,

 

[CarrieKoch]

QUOTE (CanadianMortgageTeam @ May 8 2009, 11:57 AM) That is exactly what many clients are doing. Find out what your prepayment privileges actually allow (often its as much as 20%), and if you can pay it down which will reduce your penatly. Have an experienced banker or broker run some mortgage comparsions for you to show you how much you`ll be saving by taking advantage of the current low rates, and make your decision based on that. At 5.09% with 3 years remaining, there will be pretty signifigant savings for you. You could opt to either enjoy those savings in reduced housing costs, or continue to make the same payments and pay down your mortgage much more quickly.

If however, you are planning on investing in real estate make sure that its not jsut about rate, but that you are getting the best product as well ( it should be readvanceable)

Hope that helps,

Hi Peter,

I feel like I`m talking to a celebrity!!

I did speak with a PK consultant earlier this week. I didn`t feel like we had great news....But I still feel hopeful. My husband and are are both self-employed as of 2008. Last year we also took a hit in our incomes because I was on maternity leave for half of it. But we have all our personal debts paid off (transferred to a loan under his business) and are doing okay financially.

I`m working on getting our Sophisticated Investor Binder together and we are going out shopping next week with our agent.

Do you think it`s too soon to pay the 10% down on the mortgage with the LOC? Or should we do it so we can get the wheels in motion?

Also is there someone in Barrie that we`d be able to deal with once we get an approved offer? We have had a great relationship with the Royal Bank but we aren`t sure if they will go ahead with this...I guess the main thing is having cash!

Thanks!
Carrie

 

[TodorYordanov]

Hi Carrie,

You need to speak to a good REIM mortgage broker, work with actual numbers to get the real options and costs. Make sure that you work with great mortgage broker and real estate agent, both are very, very important. Look around here for recommendations.
Email me if you need more info.

Todor
[email protected]

 

[manojsingh]

Hi There,
Where you are investing. If you are considering hamilton, I will suggest Hamilton Mastermind meeting is best place to be. You will get all the information there. Thanks