david ingram replies:QUESTION: 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. ------------------------------------------------------------------
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