These are good problems, and friends, to have @crankcall.
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Mortgage Rates
- Thread starter ToSlow
- Start date
Mad Mike
Well-known member
Mortgage brokers have a fiduciary duty to work on behalf of the buyer, this includes providing you guidance on the impact of moving a mortgage, securing a HELOC etc. Based on the amount of credit you indicate ($600K) my guess is they didn't set up with a LOC, more than likely it's a Scotia STEP which is their name for a mortgage with revolving credit, generically known as a HELOC.
A LOC is unsecured, meaning if you go bust the banks takes a hit. Scotia's STEP mortgage is a secured mortgage with a mix of installment and revolving credit where LTV of the installment portion maxes at 80%, and 65% for the revolving portion. There are often different interest rates for revolving and installment. Once you hit 35% equity, you can be all revolving, or negotiate all or some into installment credit for lower interest.
Your broker would have been paid a commission of around 1.2% on the installment portion and trailing commissions that are paid over time on the revolving portion based on how much you use. It would certainly be in her best interest to get you to pull and finance cash and to move and close any other revolving credit to Scotia. That ways your borrowing is all commissioned to her. But this move may have not been in your best interest.
A LOC is unsecured, meaning if you go bust the banks takes a hit. Scotia's STEP mortgage is a secured mortgage with a mix of installment and revolving credit where LTV of the installment portion maxes at 80%, and 65% for the revolving portion. There are often different interest rates for revolving and installment. Once you hit 35% equity, you can be all revolving, or negotiate all or some into installment credit for lower interest.
Your broker would have been paid a commission of around 1.2% on the installment portion and trailing commissions that are paid over time on the revolving portion based on how much you use. It would certainly be in her best interest to get you to pull and finance cash and to move and close any other revolving credit to Scotia. That ways your borrowing is all commissioned to her. But this move may have not been in your best interest.
I’m pretty sure it was all in her best interest at the time , and a salesman getting sold should be embarrassing LOL . It all worked out . I’m extremely blessed that when I have challenges like , I need 50k in about an hour I have friends with liquidity. Hopefully not that often …
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I know two friends who I could call who could and most likely would lend me $50K within the hour.
However, the flipside to this is that if you are good to trust for $50K, then chances are, you probably don't need it.
I'd also lend $50K to those two friends, but outside of them, I wouldn't lend that amount to anyone else, for fear of never seeing that money again...
ifiddles
Well-known member
Anyone here ever look into or know someone who's had a reverser mortgage? I know the interest rates on them are horrendous, however, I've been thinking lately about retiring early (well, leaving work and just travelling) but need a way to fund this 
My house is basically paid off (less than $8,000 owing) and as much as I love teaching, I don't know how much longer I can do this (I have 6 years until retirement).
Any thoughts on these versus a HELOC?
My house is basically paid off (less than $8,000 owing) and as much as I love teaching, I don't know how much longer I can do this (I have 6 years until retirement).Any thoughts on these versus a HELOC?
They are a great deal for the bank terrible deal for that person taking it you would be far further ahead to sell the house invest the money and rent a placeAnyone here ever look into or know someone who's had a reverser mortgage? I know the interest rates on them are horrendous, however, I've been thinking lately about retiring early (well, leaving work and just travelling) but need a way to fund this
Any thoughts on these versus a HELOC?
Sent from the future
need a way to fund this
Have you considered renting your house out and traveling on the rental income? You can pay someone to take care of the maintenance in your absence, but don't use a property management company, the fees are stupid high and they tend to do the absolute minimum in return. I think this is a smarter move than disposing of a (potentially) appreciating asset. You come back after a few years and your house is worth xx% more. And you travel for free. Plus, if you decide full-time long-term travel is no longer for you, you always have a place to come back to as a safety net.
Not sure where you're traveling, but without the GTA expenses, you can live amazingly cheap compared to what you're paying right now. I did the calculations and 1 year's worth of expenses living in Toronto was equal to 4-5 years living expenses on the road. But we did live in a tent for most of that time...
@ifiddles , do not do a reverse mortgage at your age unless you plan on dieing in the next ten yrs. It is not in your favour financially. I do approve of getting out early, but do your homework. 6 yrs is not a long time , you'll be off half that and on strike the rest ( I'm teasing)
If you rent the place and leave Canada you are supposed to have a canadian agent named to ensure taxes are paid, I did this for my idiot brother, My guess is dozens do this with no agent .
If anybody here is to be trusted it would be Lightcycle, my wife is pulling the chute next June, taking Feb off to plan, 7 years early. shes having no fun. Apparently i'm financing her earle bail, since apparently all I do is have fun.
If you rent the place and leave Canada you are supposed to have a canadian agent named to ensure taxes are paid, I did this for my idiot brother, My guess is dozens do this with no agent .
If anybody here is to be trusted it would be Lightcycle, my wife is pulling the chute next June, taking Feb off to plan, 7 years early. shes having no fun. Apparently i'm financing her earle bail, since apparently all I do is have fun.
ifiddles
Well-known member
I don't want to sell and rent an apartment and I'm not keen on renting my home out (heard too many horror stories about nightmare renters lately) which was why I was looking at a reverse mortgage...from what I understand, they don't have to be paid back until the home is sold (ie: upon death or just selling to move into a nursing home/retirement home)...monthly payments are not required unlike a HELOC...
We actually would love to travel around in an RV (not the camping types)...so much to think about...hmmmmm
We actually would love to travel around in an RV (not the camping types)...so much to think about...hmmmmm
If you don't want to rent it out or sell is there anything keeping you in the area can you buy something less expensive a bit out of the area? Is hubby still working can he afford you after you retire if the house is paid off
Sent from the future
You are probably not old enough to get a reverse mortgage either. It is basically selling your house for pennies on the dollar and still being required to maintain it and insure it.
Sent from the future
Sent from the future
A word to wise re LOCs. Watch the bank when you go to make a LOC payment. More than TWICE I went in to put something down on the money I had borrowed from the LOC and instead of paying down what I owed they treated it as a credit and added it to the amount I had available to borrow. WTF.
This was with TD.
This was with TD.
As always, bad news always gets more press than good news. What percent of nightmare renters do you think are out there right now vs people who are good tenants, who take care of the place and pay their rent on time? I know plenty of people who rent (I'm one of them), and almost all of them are upstanding folks who I would have no compunctions about renting to. I think the numbers are in your favour, especially if you do your due diligence.
It's a game of risk vs reward. If you want to play it safe and slowly drain the equity in your home, the danger then becomes trying to take care of yourself in old age with no assets or little net worth.
But if you separate your emotions from the math, using the considerable equity built up in your home to your advantage makes sense and can be quite profitable in the long run.
You are taking a break from one of the highest cost-of-living areas in the world (not many people have that flexibility and mobility), with equity built in one of the most expensive housing markets in the world. You're holding a handful of Aces and a few more up your sleeve to boot.
I wouldn't fold now if I were you.
Nice. Keep us apprised. Always great to hear stories about people taking unconventional paths in life.
Holy shirt I just looked up reverse mortgage rates I will give you one if you want not making 10% anywhere else easy. You will have zero equity in 8 years and get 55% or the value of your house.
Sent from the future
Sent from the future
ifiddles
Well-known member
@Scuba Steve LOL...my investments make *&^%%$ returns, mostly because I have my TFSA, and RRSP in savings accounts...I had them in mutual funds, but lost a bunch back at the start of the pandemic and pulled them out...I'm risk adverse
I am 55 in April which is when my mortgage will be paid off...my house is probably worth about $700-800,000...I could get a HELOC, but then I'd have to make payments on the outstanding balance
We could move to hubby's house in Cambridge (he has it rented out currently) but then I'd be further from my siblings in Oakville and Toronto
I've also thought about quitting and going to work at Walmart as a greeter (just to get something with less stress) LOL
I am 55 in April which is when my mortgage will be paid off...my house is probably worth about $700-800,000...I could get a HELOC, but then I'd have to make payments on the outstanding balance
We could move to hubby's house in Cambridge (he has it rented out currently) but then I'd be further from my siblings in Oakville and Toronto
I've also thought about quitting and going to work at Walmart as a greeter (just to get something with less stress) LOL
At 55 they will probably offer 30% or less at 10 percent a year. You will owe them the house after 15 years and the money will be long gone. Buying bank stock will always outperform savings accounts and are reasonably safe in Canada. Probably the worst possible option. Cambridge is only a few minutes further than Milton from TO.@Scuba Steve LOL...my investments make *&^%%$ returns, mostly because I have my TFSA, and RRSP in savings accounts...I had them in mutual funds, but lost a bunch back at the start of the pandemic and pulled them out...I'm risk adverse
I am 55 in April which is when my mortgage will be paid off...my house is probably worth about $700-800,000...I could get a HELOC, but then I'd have to make payments on the outstanding balance
We could move to hubby's house in Cambridge (he has it rented out currently) but then I'd be further from my siblings in Oakville and Toronto
I've also thought about quitting and going to work at Walmart as a greeter (just to get something with less stress) LOL
Sent from the future
If you do go this route, make sure you quit your job *after* you get your HELOC. Part of the HELOC application is demonstrating you have enough income to service the debt.
Before we left on our trip, I made the rounds to all the banks I did business with and got three different $50K unsecured LOCs as a safety net (also bumped up the limit on all our CCs). It was astoundingly easier than the process of getting a single $200K HELOC because I had my last pay stub from work before I gave notice.
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