Personal Finance

Refinancing home

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  • Aug 20th, 2021 10:43 am
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[OP]
Newbie
Jul 10, 2019
36 posts
8 upvotes

Refinancing home

Hello.

I am refinancing my home in order to fund the down payment on an investment property.

I am adding 125K to my existing mortgage. My existing mortgage is 5-years fixed with 2 years remaining.

My question:

The rep from the bank (CIBC in my case) said that the extra 125K also needs to be fixed (albeit 2 years) and that choosing a variable interest rate for the 125K component is not possible.

Can someone confirm that this is indeed true?
5 replies
Banned
User avatar
Mar 9, 2012
815 posts
422 upvotes
Drummondville, QC
That's because at the end you will have only one mortgage segment with a blended rate and a very odd remaining term.
Current credit card set up:
CIBC Dividend Visa Infinite: 4% groceries, 4% gas, 2% transit, 2% restaurants, 2% recurring bills
Tangerine MC World: 2% drugstore, 2% home improvement, 2% hotel-motel
Sr. Member
Dec 13, 2010
851 posts
1311 upvotes
Vancouver
Imperatvs wrote: Hello.

I am refinancing my home in order to fund the down payment on an investment property.

I am adding 125K to my existing mortgage. My existing mortgage is 5-years fixed with 2 years remaining.

My question:

The rep from the bank (CIBC in my case) said that the extra 125K also needs to be fixed (albeit 2 years) and that choosing a variable interest rate for the 125K component is not possible.

Can someone confirm that this is indeed true?

Sounds correct, since you're doing a refinance into a single mortgage. You probably want to post this question in the giant mortgage rates thread, to get an answer from the mortgage brokers on the site: official-mortgage-rates-thread-351105/3800/

A few options to consider:

1. Can you simply take a second mortgage out? So you would keep your existing mortgage, and add an additional 125K second mortgage.

2. Can you get a HELOC, and use that for the down payment? Once you've withdrawn the $125K from the HELOC, you can then convert the balance into a mortgage term. You may not get the absolute best rate when you convert, since your bank knows you need to stay with them - but you can still choose variable.

3. Have you asked what the penalty is to break your existing mortgage? It might be worth it, and then move lenders for the refinance. You can often get great rates, plus cash incentives to move. It depends on what your break penalty is though - definitely post in the mortgage rates thread, the brokers there respond quickly and they're pretty helpful.
Member
Jan 31, 2007
310 posts
34 upvotes
Montréal, QC
mastaj wrote: Sounds correct, since you're doing a refinance into a single mortgage. You probably want to post this question in the giant mortgage rates thread, to get an answer from the mortgage brokers on the site: official-mortgage-rates-thread-351105/3800/

A few options to consider:

1. Can you simply take a second mortgage out? So you would keep your existing mortgage, and add an additional 125K second mortgage.

2. Can you get a HELOC, and use that for the down payment? Once you've withdrawn the $125K from the HELOC, you can then convert the balance into a mortgage term. You may not get the absolute best rate when you convert, since your bank knows you need to stay with them - but you can still choose variable.

3. Have you asked what the penalty is to break your existing mortgage? It might be worth it, and then move lenders for the refinance. You can often get great rates, plus cash incentives to move. It depends on what your break penalty is though - definitely post in the mortgage rates thread, the brokers there respond quickly and they're pretty helpful.
One advantage of options 1 & 2 is that it will be easier to calculate the interest paid that you can deduct from your income taxes since you are using the funds for an investment property.
Deal Fanatic
Dec 16, 2005
6384 posts
4576 upvotes
might be better to do the heloc as you can write off the interest since it is for an investment property.

if you refinance your primary the interst is not tax deductible.
Newbie
May 19, 2006
58 posts
65 upvotes
mech9t5 wrote: if you refinance your primary the interst is not tax deductible.
This is not correct. Any interest paid on funds used to generate income is tax deductible. You just need to calculate how much of that interest paid was for personal use and how much of that was for business.

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