Real Estate

Refinance vs HELOC buying second property

  • Last Updated:
  • Mar 27th, 2017 12:07 pm
[OP]
Newbie
Sep 16, 2009
64 posts
44 upvotes
Toronto

Refinance vs HELOC buying second property

Trying to figure out what the difference between the two leveraged options off an existing primary resident in purchasing a second investment property. Aside from the more obvious difference in terms of interest rate and payment flexibility differences, are there any strategical differences to get the maximum leverage? Is there any differences in the calculation of TDS ratio between the two?

Example:
Primary Residence Purchase Price : 60k
Mortgaged Amount : 50k
Current Market Price : 150k
HELOC available at 80% : 120k-50k=70k

2nd Investment Property at : 120k
Down payment from HELOC : 60k
Mortgage on 2nd Property at : 60k

Would the approval process criteria of the second property be any different if I were to refinance the primary resident? Does the lender on the 2nd investment property assume full utilisation of the HELOC? ie. HELOC monthly payments are lower, would this help in improving the month debt servicing cash flow?
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