Mortgage Add On Advice

[spike9294]

Hello,

My current mortgage on my home is with RBC. They offer a mortgage add on up to 95% of the appraised value. If I took this option, I would generate enough money for down payments on 3-4 properties, and it would add about $100.00 more a month to my mortgage payment.

I have two cash flow properties with a lender that does not offer this option. Is it a wise decision to max. out my mortgage on my own home to buy more cash flow properties.

Any advice would be greatly appreciated.

Mike

 

[MonteDobson]

Hi Mike,

Is the "add-on" in the form of a Line of Credit? If yes, I would say go for it as I love the flexibility of LOC`s.

 

[jcab256]

QUOTE (spike9294 @ Feb 19 2009, 11:54 AM) Is it a wise decision to max. out my mortgage on my own home to buy more cash flow properties.

Personally I would say yes. Assuming you are referring to your primary residence, you will be taking bad debt (non deductable interest) and making (at least part of it) good debt. (deductable interest)

My concern with your approach would be how are you going to track the amount of money that is used for investment purposes. perhaps there is a simple solution to this, but I don`t know what it is.

I don`t know how much equity you have in your home, but alternatively, the option which I`ve done is to get a HELOC which is used soley for investment purposes. This gives a clean record of what is used for investing, and the associated interest. Also, since it is a LOC, there is no limitations on payments and such. (in my case anyway)

My 2 cents.

Jay

 

[spike9294]

The amount would be added directly to my mortgage, and is not a LOC. The HELOC would only give me 25% of what I could get with the add on to the mortgage with a small fee of about $400.00 for legal and appraisal.

Mike

 

[Noel]

QUOTE (spike9294 @ Feb 19 2009, 12:09 PM) The amount would be added directly to my mortgage, and is not a LOC. The HELOC would only give me 25% of what I could get with the add on to the mortgage with a small fee of about $400.00 for legal and appraisal.

Mike

Hi Mike,

The direction you`re considering could definately work to your favour.

Pros:
You have access to more funds allowing you to do more
No Legal or Appraisal Fee
More investment properties

Cons:
Lack of ability to track the portion used for investment (from an accounting/tax stand point)
Less Funds
Less Investment Properties

Noel

 

[Karma]

We just purchased a rental property in Dec. through the Nat. Bank by getting a 2nd mortgage on our principal residence that we used for the downpayment and to skip CMHC fees. This second mortgage can be tracked separately so that we can deduct the interest for income tax purposes.


Hi Mike,

The direction you`re considering could definately work to your favour.

Pros:
You have access to more funds allowing you to do more
No Legal or Appraisal Fee
More investment properties

Cons:
Lack of ability to track the portion used for investment (from an accounting/tax stand point)
Less Funds
Less Investment Properties

Noel