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Combing/Moving HELOC/LoC from Bank A to a new Mortgage at Bank B - Advice appreciated

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  • Oct 22nd, 2020 3:05 pm
[OP]
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Dec 11, 2005
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TO

Combing/Moving HELOC/LoC from Bank A to a new Mortgage at Bank B - Advice appreciated

Hi all,

I'm trying to figure out if anyone have done this before the below scenario as I'm being offered b/c the mortgage is being refinanced/redone from current 2.25 to 1.75% Variable.

Mortgage amount is $230K

Now I was told they can move my outstanding heloc of 50K from Bank A (my original bank ) to Bank B (1.75%) which is refinancing the mortgage of my principal residence.

So instead of paying just monthly interest at 2.45% for HELOC, lump that into the new mortgage and include it and pay less interest.

Thinking out loud, it'd take 180 months to pay monthly principal of $277.77 to pay off the HELOC at Bank A - not counting interest.

Is it safe to say even though my payments will be lower of this combined amount at Bank B, I will obviously be paying higher interest in 25 years amortization?

The only plus I can see if pre-payments option to pay off the entire mortgage sooner.

Thoughts if you'd choose this rather than just leaving the HELOC alone at Bank A and continue to pay monthly P+I ?
Achieva Financial /KOHO / STACK (0% FX Fee) /Tangerine / EQ Bank member / I use Plastiq for paying bills with my CC

"You can't soar with the eagles if you're hanging with the turkeys - Gary Kent
5 replies
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Feb 2, 2014
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Toronto
TorontoEh wrote: Hi all,

I'm trying to figure out if anyone have done this before the below scenario as I'm being offered b/c the mortgage is being refinanced/redone from current 2.25 to 1.75% Variable.

Mortgage amount is $230K

Now I was told they can move my outstanding heloc of 50K from Bank A (my original bank ) to Bank B (1.75%) which is refinancing the mortgage of my principal residence.

So instead of paying just monthly interest at 2.45% for HELOC, lump that into the new mortgage and include it and pay less interest.

Thinking out loud, it'd take 180 months to pay monthly principal of $277.77 to pay off the HELOC at Bank A - not counting interest.

Is it safe to say even though my payments will be lower of this combined amount at Bank B, I will obviously be paying higher interest in 25 years amortization?

The only plus I can see if pre-payments option to pay off the entire mortgage sooner.

Thoughts if you'd choose this rather than just leaving the HELOC alone at Bank A and continue to pay monthly P+I ?
That's a high rate. You can get 1.50% 5-year variable for the same transaction.

You don't really have a choice. You have to move the HELOC and mortgage over. They are likely combined under one lien.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
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Jan 15, 2017
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What are you trying to achieve by refinancing your current mortgage? Are you looking for a lower payment or are you looking to save money overall? It seems as though you are primarily looking for a lower overall payment as your plan is to refinance into another 25 year amortization. You rarely save money overall when you refinance into a longer amortization than your current mortgage. What is the remaining amortization on your current mortgage?
[OP]
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Dec 11, 2005
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TO
skeet50 wrote: What are you trying to achieve by refinancing your current mortgage? Are you looking for a lower payment or are you looking to save money overall? It seems as though you are primarily looking for a lower overall payment as your plan is to refinance into another 25 year amortization. You rarely save money overall when you refinance into a longer amortization than your current mortgage. What is the remaining amortization on your current mortgage?
Hi skeet, I wanted to save money, so at the moment my rate is 2.25 and with the new I was offered 1.75%, I have 23 years 2 months on current amortization remaining (on a 25 yr i signed up with).

thanks
Achieva Financial /KOHO / STACK (0% FX Fee) /Tangerine / EQ Bank member / I use Plastiq for paying bills with my CC

"You can't soar with the eagles if you're hanging with the turkeys - Gary Kent
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User avatar
Feb 2, 2014
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TorontoEh wrote: Hi skeet, I wanted to save money, so at the moment my rate is 2.25 and with the new I was offered 1.75%, I have 23 years 2 months on current amortization remaining (on a 25 yr i signed up with).

thanks
You will have to pay a penalty then, as it sounds like you're breaking mid term.

What is the penalty to break the existing mortgage?

1.50% 5-year variable is the best rate for your transfer of the LOC and mortgage.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Jan 15, 2017
3515 posts
2866 upvotes
TorontoEh wrote: Hi skeet, I wanted to save money, so at the moment my rate is 2.25 and with the new I was offered 1.75%, I have 23 years 2 months on current amortization remaining (on a 25 yr i signed up with).

thanks
You will most likely have to pay a penalty to refinance now. Make sure you factor that into the equation.

At the minimum, anytime you refinance you should keep your amortization the same. Extending it tends to increase your overall costs. To really save money, you could look at keeping your current payments the same to take advantage of the lower interest rate. By doing this you usually end up shortening your amortization period and saving overall. Another way of looking at it is that by keeping the same payment as you have now with a lower interest rate you are actually locking in prepayments and all the savings that come with them.

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