Personal Finance

Is refinancing a good choice?

  • Last Updated:
  • Feb 28th, 2010 10:25 am
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[OP]
Jr. Member
Jan 24, 2007
136 posts
31 upvotes
Toronto

Is refinancing a good choice?

I own a condo in King West (1 bedroom, owe about $180K on it - worth about $300) and want to start my own business soon.

For that, I need $ and all of my equity is locked up in my condo. I'm 3 years into a 5 year fixed mortgage (4.99%) so my payments are quite high (realllly regretting not going variable 3 years ago!!!).

My mortgage broker suggested either refinancing my current property OR discharging the mortgage and getting a Manulife One line of Credit (but fee to do so is $6800) OR Buying another property (selling mine) and netting some equity. Problem is the market is sooo hot. I can sell my place easily but if I want to put 20% down, I'll basically be buying a similar size/type of condo...which is kind of a lot of work for netting maybe $20K after fees!

What is the best route?

I've heard if I refinance I can write off the interest to my business (but I have no sales currently).

Any f/b is appreciated!
3 replies
Deal Addict
User avatar
Apr 6, 2008
1605 posts
122 upvotes
Toronto
ilovetrouble wrote:
Feb 27th, 2010 10:37 pm
I own a condo in King West (1 bedroom, owe about $180K on it - worth about $300) and want to start my own business soon.

For that, I need $ and all of my equity is locked up in my condo. I'm 3 years into a 5 year fixed mortgage (4.99%) so my payments are quite high (realllly regretting not going variable 3 years ago!!!).

My mortgage broker suggested either refinancing my current property OR discharging the mortgage and getting a Manulife One line of Credit (but fee to do so is $6800) OR Buying another property (selling mine) and netting some equity. Problem is the market is sooo hot. I can sell my place easily but if I want to put 20% down, I'll basically be buying a similar size/type of condo...which is kind of a lot of work for netting maybe $20K after fees!

What is the best route?

I've heard if I refinance I can write off the interest to my business (but I have no sales currently).

Any f/b is appreciated!
If your mortgage is through one of the big 5 banks, then you should go to your bank and ask for a secured line of credit in addition to your mortgage and if you qualify, they may finance you up to 80% of the appraised value of your condo and would register a second charge on your house for the LOC. This way you would not be paying any penalties for breaking your fixed mortgage and the cost of doing this would be comparatively low and you might get the LOC for prime +1%.

If you get this, then the expenses can be written off against your other income even if you do not have any sales currently in your business but it is in existence or can be carried over and written off against your business in future years. Moreover, with the LOC you would be able to keep better track of interest expenses for business use of equity from your condo then by refinancing in one mortgage only.

After 2 years, when your mortgage comes up for renewal, then you should look in to the All in One product of National Bank as suggested by a senior member in earlier post.

.
Pramod Chopra
Mortgage Alliance Co. of Canada
www.pramodchopra.com
Broker License # 10530

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