Personal Finance

Refinance or HELOC?

  • Last Updated:
  • Oct 7th, 2014 10:01 am
Tags:
None
Jr. Member
User avatar
Jul 14, 2012
167 posts
94 upvotes
Calgary

Refinance or HELOC?

I'm sure this may have been discussed before but I am in need of about $25000 and have qualified for a HELOC. With today's lower mortgage rates, would it be better to take a hit and refinance early (2 1/2 years left on 5 yr term) or just take the HELOC @ prime + 0.50? Currently my mortgage rate is 3.04% fixed.
8 replies
Sr. Member
Dec 3, 2013
615 posts
256 upvotes
Brampton/waterloo
I would say depends on your mortgage amount and your cashflow to handle mortgage/interest amount, at prime pretty low atm, securing a low rate now for 5yrs, might be better than the rate you will get 2.5yrs from now, as it seems like prime will be going up a little or so slowly
Deal Addict
Jan 19, 2011
3208 posts
1526 upvotes
Do the math.

Having said that, it is probably better to take out the seperate HELOC, and continue paying down the mortgage. Either way, the bank comes out protected, you just pay up front to break the mortgage now and refinance, or pay it over time at the 'hihgher' interest rate. Look also at one time fixed costs, especially for an appraisal, which might have to be done.
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
Sr. Member
Sep 25, 2006
598 posts
58 upvotes
Ottawa
Typically when you set up a heloc, wouldn't you need to pay 500-600$ for the set up fee which covers legal cost, etc?
Jr. Member
User avatar
Jul 14, 2012
167 posts
94 upvotes
Calgary
Its $150 setup fee through my bank. I was offered a lower mortgage rate at the time of setting up the HELOC, but my wife was taking the call. I assume the product advisor is looking at a commission for this and is tempting us to refinance at the new rate. Mind you, a lower rate is nice but I don't think it will offset the costs of breaking the mortgage. When they call next I will see what costs they want to absorb, if any, and likely just take the HELOC.

Quanger wrote: Typically when you set up a heloc, wouldn't you need to pay 500-600$ for the set up fee which covers legal cost, etc?
Sr. Member
Sep 25, 2006
598 posts
58 upvotes
Ottawa
$150 is very reasonable. So your bank would register the mortgage as a collateral of you get a heloc from them?
Jr. Member
User avatar
Jul 14, 2012
167 posts
94 upvotes
Calgary
Actually I have yet to confirm their offer. Makes me think of looking into a better mortgage rate if I were to go to the trouble of refinancing midstream. The play-it-safe method works well if I pay the HELOC off in reasonable time in case Prime takes a jump.

Are there any good brokers in the Calgary area that can advise me on this?
Deal Guru
User avatar
Feb 2, 2014
11231 posts
3350 upvotes
Toronto
Do you know what the penalty is for breaking the mortgage? The good news is that you can get 2.68% on a 5-year fixed, so you will be saving interest too by refinancing. The bad news is that you will have to pay penalties, discharge fee, possibly an appraisal and legal fees to refinance.
chickenballs wrote: Actually I have yet to confirm their offer. Makes me think of looking into a better mortgage rate if I were to go to the trouble of refinancing midstream. The play-it-safe method works well if I pay the HELOC off in reasonable time in case Prime takes a jump.

Are there any good brokers in the Calgary area that can advise me on this?
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Jr. Member
User avatar
Jul 14, 2012
167 posts
94 upvotes
Calgary
Hi. Will find out the penalty on Wed. since the office was closed when I received the call. The best offer I got from them was 2.82% 4-year fixed, doesn't seem worth the hassle really. I understand that closing a HELOC would result in charges as well so it would make sense to refinance at the end of the term and pull equity then. Wish I thought of that last time but I didn't need the money then.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)