Hello,morden wrote: ↑ Ok since posting the above I've been poring over the thread, learning about collateral vs non-collateral mortgages, mortgage portability, IRDs, etc. I've got 60 days until renewal date and I still have some questions. I've had some dealings with a local broker and been underwhelmed with him, so thought I would ask the pros here (who've been super helpful already).
CIBC Mortgage (current 2.99 5yr fixed)
Renewal in Montreal, QC
Maturity date May 30 2019
Maturity amount $148k
House value est. $498k (Purview)
CIBC HELOC 30k (separate charge confirmed)
We have a young family but kids will reach high school in the next 3 years and our house is small. We would either like to move to a larger home or add an extension to this one (but not anywhere near ready to make this decision before renewal date).
CIBC offered us a Home Power Plan (collateral mortgage with HELOC 3.47%) and the broker got us in touch with TD for a Flexline (3.24%). These are both collateral mortgages, no? Having read about collateral mortgages it seems its harder to transfer/break when renewing or buying a new home. We would need to pay to discharge or (or have the new lender cover it).
Question: If we do end up deciding to add extension (100k+), is having the HELOC the best option? Would a second mortgage be cheaper/make more sense? Is it worth it to avoid the collateral mortgage?
Lastly, maybe we should look at a shorter term fixed or variable?
Thanks in advance for any insights.
Anything with a built-in home equity line of credit will be a collateral charge mortgage. The Home Power Plan and the TD Flexline are both registered collaterally. Collateral charge mortgages get a bad rap around here, but they can be useful products in many, many cases. They are somewhat more costly to transfer at the end of your term but most lenders already offer collateral charge transfer programs at their best rates, and in many cases the fees can be covered by the new lender. The fee is typically between $580 - $800 for a collateral charge transfer, depending on the province. If you get $800 in perceived utility from having a combination mortgage and LOC product, then not much is lost. I have to assume that in 5 years time, all lenders will entertain collateral charge transfers as it's already very common.
As for the addition/renovation. In most cases the line of credit is the optimal route when the outlay is going to be in stages. This is because you will only pay interest on the funds you've used, whereas by taking the funds in cash you pay interest on those funds immediately. Further, once your renovation is complete, you can lock that heloc component into a fixed or variable amortized mortgage component to reduce the interest cost.
Concierge Mortgage Group