Mortgage payoff or downpayment?

[styxworld]

Hello everyone,
I have just read real estate investing in Canada and was very impressed and challenged into getting out there.
We currently have a small mortgage on our appartment ($50,000 left paid bi-weekly) but i just got a hold on the same amount.
What should I do? Use the money for a down payment on another property or pay off my mortgage quicker (over 5 years if i do not want to pay extra fees) ? According to online mortgage calculators, i could save approximately $15,000 over those 5 years in interests if i pay off the mortgage. What would you recommend ?
To help you answer, my wife is currently working on a stable job but I am in the middle of a career move (I may not have a decent income for a up to a year). We live in downtown Toronto and have no children for the moment although getting ready for some...

Thank you for your time in answering my question and happy new year!!!

 

[ToddStokowski]

My thoughts would be to pay the maximum amount down on your personal mortgage with the $50,000.00 and then arrange a home equity line of credit that you could use for the down payment on your investment property (should you decide to invest).

From a tax perspective, you are maximizing your interest deductions.

From an investment perspective, you are paying down bad debt (personal debt) and minimizing non-tax deductible interest while at the same time arranging access to capital for investments.

Consider contacting your mortgage company and ask them if they would waive the early payment penalty if you subsequently replace the mortgage with a higher mortgage (that would be the rental property mortgage).

It would be a win-win. You get out of personal debt, the mortgage company gets a higher mortgage and you are in the real estate game smartly.

Give it some thought.

Todd

 

[TodorYordanov]

I agree with Todd 100%. Good luck.

Todor

 

[navaz]

Todd is exactly right as long as you qualify for a new loan/mortage -just confirm with your mortgage broker before paying it down

 

[RobMacdonald]

Absolutely, Todd is exactly right. No questions. And as Navaz stated, get the mortgage appliction done beforehand.

 

[styxworld]

Thank you all for your time and answers, i will start working with the banker right away

 

[Thomas Beyer]

get the mortage to 0.

Then get a line-of-credit for the MAXIMUM amount .. usually 75% of value .. you don`t have to use it or pay any interest if it is 0 .. but you can use it when you want and have it ready ..

Always apply when you don`t need it .. once you need it the bank may not give it to you (because you lost your job or you`re dead or you`re disabled or you need it quickly for an awesome deal ..)

 

[gwasser]

I agree with the previous comments. However, I would like to point out that `being in the process of doing a career move`, probably means that you have currently no income, other than your wife`s. This may not be enough to qualify for a line of credit. In fact it may result that you application is declined which in turn may affect future credit applications.

Ask first a mortgage or credit expert whether you would actually qualify prior to applying. Rob MacDonald (see earlier post) comes to mind.