Breaking a term mortgage to move to another institution - Garth Turner on Fred Snyder's Show on Sunday June 1 and David and Gart


Hi David and Fred,
Over the years, I have listened to your advice on the radio and even attended a seminar you gave on real estate about 9yrs ago.  
In that time we have aquired two properties one in Vancouver, a condo in xxxxxxx xxxx  (approx value of $700K- we currently owe 410k) that has become a rental property) and one in xxxxxxxxx which is our principle property (approx value is $900K -we owe 408k). My husband also runs his business (which is incorporated) out of our principle residence.
What we want to know is if it makes sense to move our mortgages with HSBC (they are both locked in until Dec 2010) to another institution (RBC) where we have our personal and business accounts.
 We would like to borrow against our rental property to complete our basement and consolidate some outstandinging debt.
It would cost us approx $8500 to move the mortgages. The current interest rates are;  3.9% (interest only) on the rental property and 4.45% on the principle residence. HSBC suggested we take out a two tier mortgage on the rental property (at a rate of 3.9% for 408K 4.0% 152k) the balance of what we want to borrow would be on a non secured line of credit at 5.95%.
RBC offered us a 4.0% (variable rate) on a Homeline Mortgage for each mortgage. We would take the same amount of money out of the rental property and the remaining amount would come off our principle mortgage.
The Mortgage broker @RBC feels strongly that even though we will pay a penalty,  the long term benifit to us out weigh the costs. She did a comparison of both mortgages over 5yrs. 
We do not see an overwhelming reason to move our mortgages given the $8500 cost and given we only have 21/2 yrs left on our existing mortgages. We will likely move our mortgage over to RBC when we renew the terms. 
The only real advance we see to our moving our mortgages at this time is that RBC would look at the total sum of both mortgages and give us direct access to the existing equity (to be used to invest etc).Where as each time we want to use equity from our current property we have to go through the various legal and real estate assessment steps/fees. While we would like to own more property it isn't an immediate goal.
Another goal is to pay down our principle mortgage in approx 12 -17 yrs.
If we move to RBC they are suggesting we switch to a 40yr term and do accelerated payments to pay off the principle residence in approx the same time period.
Do think the benefit outweighs the cost of moving our mortgages?
I hope I have given you enough information to answer the question.
Your comments would be greatly appreciated.
david ingram replies:

You would be better off paying 7% for a deductible mortgage then 4% for a non-deductible mortgage.

See Fred and get a written financial plan.  Your mortgage should be arranged to be deductible which means that you might have to operate as a proprietorship for a while.

Put it down in black and white to make your decision.  If neither the HSBC or your RBC person suggested methods of making the personal mortgage deductible, you need someone who does understand it.  As described you have the ability to do so. Scrap both people you are talking to and find someone who does.  Glen Kelleway, and independent Mortgage broker at (604) 476-0053 ([email protected]).

You should also consider a Manulife One Bank HELOC or an ENVISION Credit Union RED FROG account is the opinion I have off the top of my head.  Glen Kelleway set up my mortgage at the Greater Vancouver Community Credit Union.  Unfortunately, the big six banks just do not get it.

READ MY NOVEMBER 2001 NEWSLETTER in the top left hand box at  Get hold of Fraser Smith's Book, the Smith Manoeuvre which describes how to make your mortgage deductible as well.

See Fred before you do anything.

This Next Sunday, June 1, Garth Turner, Former Revenue Canada Minister will be Fred's Guest.   Garth and I will also be speaking at Tom Allen's Money  EXPO in Victoria at the Convention Centre on Sept 20 and in Nanaimo on sept 21st.

Garth has just written an amazing book on Real Estate called the GREATER FOOL.  There is a question and answer spot on the book at  Do yourself a favour and take a look.

Every Thursday at 12 noon and 7 PM, Fred Snyder of Dundee Wealth Management
presents free Financial Seminars for his clients, potential clients and anyone who phones and asks to attend.

THERE is NO CHARGE!  (I used to charge up to $999.00 for essentially the same thing)

They are presented at the Dundee Boardroom (holds about 30 people max)

1764 West 7th
Vancouver, BC

phone (604) 731-8900 - ask for Freda to register.  There is no charge and no obligation.

These are genuine educational seminars dealing with everything from how to buy a house to making your mortgage tax deductible to buying an RRSP to alternatives to RRSP accounts to estate planning.  So what started as 13 separate seminars has now evolved into 23 separate topics.

ONE LADY CAME TO 53 separate seminars and her husband came to about 20 with her.

If you have a financial consultant, bring them.  People have brought their bankers and life insurance agents with them.

Take your spouse, your best friend, your son, your daughter, your mother or your worst enemy But do phone 604-731-8900

Fred Snyder  also is the host of ITS YOUR MONEY every Sunday morning on CHBD (600 on AM dial)  from 9:00 to 10:30.  This is a phone in financial show which I appear as a guest on on the last Sunday of every month.  (Originally I was the co-host but the program is really devoted to BC finances because of BC Securities Legislation and my practice is world wide.)  You can listen to 4 weeks back at and listen to the program live around the world every Sunday morning at the same spot.  We have taken calls from around the world.  In one case, a lady phoned from Florida, got her answer and then asked if I was the David ingram she knew in Regina back in 1959.  Small world as they say.

Call (604) 280-0600 with your question on Sunday Morning.

When it comes to real estate you should also be checking out Ozzie Jurock's site at



david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.


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