- Joined
- May 11, 2009
- Messages
- 172
Hi everyone,My HELOC education continues! I am currently renegotiating my HELOC with TD and am facing a number of options with regards to how I can set it up. As with much in life, there is no clear cut winning strategy, and each option has its pros and cons. I need some advice as to the best way to proceed.My current situation:
- My wife and I have a combined income of roughly $120K/year
- Our primary (and only) residence is worth roughly $240,000
- We have $84,000 remaining on our mortgage with TD
- TD could therefore give us up to $108,000 total credit, either in one or split between two HELOCs
- The mortgage is floating at prime - 0.5 (currently 1.75%)
- We have a second position HELOC with TD with a limit of $57,500
- The HELOC is floating at prime even (2.25%)
- We have roughly $15,000 of miscellaneous personal debt on the HELOC
My aim is to maximize the limit of a HELOC so that I can use it exclusively for investing. Ideally, I would like to be able to finance three properties with this money before requiring outside sources. The personal debt should be separated in some way so as to not confuse things when calculating the tax deductible interest that would accrue on investments.
Here are my choices (as far as I`m aware):
1. Keep the current second position HELOC as is and set up a third position HELOC floating at prime +1
Pros:
- Keep current HELOC at low rate of prime even
- Keep current mortgage at low rate of prime - 0.5
Cons:
- New HELOC only has limit of $50,000
- Whichever HELOC would be used for personal debt has limit that is set way too high (wasted equity)
2. Reapply for two new HELOCs, a second position $88,000 limit at prime + 0.5 and a third position $20,000 limit at prime +1
Pros:
- Healthy upper limit on `investment` HELOC with decent interest rate
- Minimized `personal debt` HELOC with acceptable interest rate
- Keep current mortgage at low rate of prime - 0.5
Cons:
- Two new applications at $500 each = $1000 expense for set up
- Lose the current great HELOC interest rate of prime even
3. Reapply for single new HELOC, a second position $108,000 limit at prime + 0.5 and `lock-in` investment purchases using TD`s Fixed Rate Advantage Options
Pros:
- Locking in the investments will separate them from personal debt, making it easy to calculate tax-deductible interest
- The more personal debt I pay down, the more room I have for investing
- Keep current mortgage at low rate of prime - 0.5
Cons:
- Each locked-in investment purchase is a fixed rate mini-mortgage requiring pay-down of the principal!!! Bye-bye cash flow...
4. Apply for new re-advancing mortgage and attached HELOCs with another bank (TD does not offer re-advancing option)
Pros:
- Always increasing upper limit of HELOC as mortgage is paid down
- Won`t have to constantly reapply to increase limit (good if my income is unstable over next few years)
Cons:
- Lose my current great mortgage interest rate of prime - 0.5
- Fees, fees, fees
As it stands, I think number 3 is out of the question completely, and numbers 2 or 4 might be good considerations, but of course I may be missing something...
Any thoughts?
Ben
- My wife and I have a combined income of roughly $120K/year
- Our primary (and only) residence is worth roughly $240,000
- We have $84,000 remaining on our mortgage with TD
- TD could therefore give us up to $108,000 total credit, either in one or split between two HELOCs
- The mortgage is floating at prime - 0.5 (currently 1.75%)
- We have a second position HELOC with TD with a limit of $57,500
- The HELOC is floating at prime even (2.25%)
- We have roughly $15,000 of miscellaneous personal debt on the HELOC
My aim is to maximize the limit of a HELOC so that I can use it exclusively for investing. Ideally, I would like to be able to finance three properties with this money before requiring outside sources. The personal debt should be separated in some way so as to not confuse things when calculating the tax deductible interest that would accrue on investments.
Here are my choices (as far as I`m aware):
1. Keep the current second position HELOC as is and set up a third position HELOC floating at prime +1
Pros:
- Keep current HELOC at low rate of prime even
- Keep current mortgage at low rate of prime - 0.5
Cons:
- New HELOC only has limit of $50,000
- Whichever HELOC would be used for personal debt has limit that is set way too high (wasted equity)
2. Reapply for two new HELOCs, a second position $88,000 limit at prime + 0.5 and a third position $20,000 limit at prime +1
Pros:
- Healthy upper limit on `investment` HELOC with decent interest rate
- Minimized `personal debt` HELOC with acceptable interest rate
- Keep current mortgage at low rate of prime - 0.5
Cons:
- Two new applications at $500 each = $1000 expense for set up
- Lose the current great HELOC interest rate of prime even
3. Reapply for single new HELOC, a second position $108,000 limit at prime + 0.5 and `lock-in` investment purchases using TD`s Fixed Rate Advantage Options
Pros:
- Locking in the investments will separate them from personal debt, making it easy to calculate tax-deductible interest
- The more personal debt I pay down, the more room I have for investing
- Keep current mortgage at low rate of prime - 0.5
Cons:
- Each locked-in investment purchase is a fixed rate mini-mortgage requiring pay-down of the principal!!! Bye-bye cash flow...
4. Apply for new re-advancing mortgage and attached HELOCs with another bank (TD does not offer re-advancing option)
Pros:
- Always increasing upper limit of HELOC as mortgage is paid down
- Won`t have to constantly reapply to increase limit (good if my income is unstable over next few years)
Cons:
- Lose my current great mortgage interest rate of prime - 0.5
- Fees, fees, fees
As it stands, I think number 3 is out of the question completely, and numbers 2 or 4 might be good considerations, but of course I may be missing something...
Any thoughts?
Ben