Real Estate

Refinance or Mortgage & HELOC

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  • Aug 10th, 2020 11:37 am
[OP]
Sr. Member
Jan 22, 2012
651 posts
270 upvotes
Bradford

Refinance or Mortgage & HELOC

Our mortgage is coming up for renewal and our broker reached out because rates are low.

We have some renovations we are planning to do. How does one determine whether it’s best to refinance or renew the mortgage and do a HELOC?

What are some pros and cons to both?

If we are planning to move in 2-3 years is it best to do a variable rate?
12 replies
Deal Addict
Apr 13, 2006
1129 posts
250 upvotes
Mississauga
Do you expect to have the renovations paid off in the near future, or will be it a 3-5 year time frame?
If a longer time frame, put it into the mortgage -- it'll come with a lower rate. As well, you can still prepay it.
If you're expecting to need say, $15k, and have an end of year bonus that will pay it off then -- then go with a HELOC.
Fixed rates are very low -- and likely portable on most lenders. You'd move that balance owing to the new property, and add on whatever is required at that time, and then current rates.
If on a variable, it'll be a replacement mortgage, where your whole mortgage will be repriced where rates stand in 2-3 years.
Deal Guru
Feb 22, 2011
12604 posts
16091 upvotes
Toronto
Is your mortgage insured? If so you lose that on a refinance and you would have higher rates for the rest of your mortgage.
Deal Guru
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Feb 2, 2014
10291 posts
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Toronto
Topher86 wrote: Our mortgage is coming up for renewal and our broker reached out because rates are low.

We have some renovations we are planning to do. How does one determine whether it’s best to refinance or renew the mortgage and do a HELOC?

What are some pros and cons to both?

If we are planning to move in 2-3 years is it best to do a variable rate?
Go variable since penalty is only 3 months interest if you break.

The rate is MUCH cheaper on a variable rate than a HELOC.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Sr. Member
Jan 22, 2012
651 posts
270 upvotes
Bradford
CdnRealEstateGuy wrote: Go variable since penalty is only 3 months interest if you break.

The rate is MUCH cheaper on a variable rate than a HELOC.
My mortgage is currently insured so if I do a refinance that effects my rates?
Deal Guru
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Feb 2, 2014
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Toronto
Topher86 wrote: My mortgage is currently insured so if I do a refinance that effects my rates?
You will lose your CMHC insurance unfortunately.

How much extra do you need?
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Sr. Member
Jan 22, 2012
651 posts
270 upvotes
Bradford
CdnRealEstateGuy wrote: You will lose your CMHC insurance unfortunately.

How much extra do you need?
Our mortgage amount owing is 460,000. House is worth $775,000.

We maybe need 50-75K. Depends how much we do.
Deal Guru
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Feb 2, 2014
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Toronto
So you can get a mortgage at 1.70% 5-year variable and get a HELOC in 2nd position. You will keep the CMHC insurance.

If you want to refinance, you're looking at 1.95% 5-year variable, but you lose the CMHC insurance.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Sr. Member
Jan 22, 2012
651 posts
270 upvotes
Bradford
CdnRealEstateGuy wrote: So you can get a mortgage at 1.70% 5-year variable and get a HELOC in 2nd position. You will keep the CMHC insurance.

If you want to refinance, you're looking at 1.95% 5-year variable, but you lose the CMHC insurance.
Thank you. Is there a benefit to doing one or the other?
Deal Guru
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Feb 2, 2014
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Toronto
HELOC rates are higher than variable mortgage rates, but you keep your CMHC insurance.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Fanatic
May 5, 2008
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Winnipeg
CdnRealEstateGuy wrote: HELOC rates are higher than variable mortgage rates, but you keep your CMHC insurance.
What does CMHC insurance give you?
Deal Guru
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Feb 2, 2014
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airmail wrote: What does CMHC insurance give you?
Lower rates usually
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Sr. Member
Jan 22, 2012
651 posts
270 upvotes
Bradford
CdnRealEstateGuy wrote: Lower rates usually
When you refinance does the amount of the cmhc insurance come off the balance owing?
For example, my mortgage was 522,000 but 12,000 of that is CMHC. If my balance owing is 448,000, does that still include the CMHC. Would the balance owing be less then?

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