Hi Guys,
I am reader of this wonderful newsgroup since long time but its my first posting here.
I am not clear about Line of Credit and don't have credit line yet but having couple of credit cards. One time I went to a bank to inquire about balance of my mortgage. The person gave me required info but asking me why I don't have line of credit yet. I have no answer of it because I don't have enough knowledge abount line of credit.
Could anybody explain me advantages/disadvantages of having LOC. I have credit card but don't have any balance on it because I pay full each month. Do I still need LOC?
The guy at bank give me some info about LOC what is secured and unsecured LOC. I have my own house since last 3 years and having some equity on it. The guy suggest me to apply for secured LOC with interest only paymnet option and invest this money on other investment.
I am confused,
- should I go for it or not.
- Apply for secure LOC and save the money for any rainy days
- Or it just SCAM don't involve in it
I have couple of more question and will ask as our discussion go further. Your suggestion/advise are most welcome.
Thank you
1.Line of credit You Can Use Again and Again.
As soon as you repay any of the credit you've used, it immediately becomes available to you to use again. You're in complete control, able to borrow when you need to, without having to reapply every time.
2.Line of credit offers range of payment options to suit your needs. You can set up a fixed payment schedule to include principal and interest (blended payment), pay interest only on a monthly basis with principal payments at your discretion, or have the principal payments scheduled for your budgeting ease. Choose a payment schedule that best suits your needs. The blended or principal payment schedule, they can be set to monthly, bi-monthly, bi-weekly or weekly.
3.The only requirement is that you repay the interest owing each month, but you can pay more at any time without penalty.
4.No Administration or Service Fees on Your Unused Credit.All you pay is interest on the credit you use.
5.Interest rate as low as our Prime Rate.
These were the advanyages of line of credit....people borrow for many reasons, but if used judiciously for investment and get good rate of returns then you can make your money out of your home equity which is lying idle.
Many people do use home equity to make money work for them ..so it is not a scam but it is your independent decision what to do with your money
Hi Arun,
Welcome to Canadian Desi where you feel at home and get practical answers to most of your questions as generally the members answering have been through similar situations in past and this saves you from re-inventing the wheel.
Regar has answered most of your questions perfectly. I would only wish to add a couple of points.
The Guy at your bank has given you info about the LOC as it is in the bank's interest to increase their business by offering you a variety of products so that you should not be looking for these products elsewhere. Whether you take unsecured LOC or a secured LOC, you would be paying some interest to the bank whenever you use it. That's what the bank wants. Of course, it can come in handy for you at the time of your need as well but ultimately the bank guy is looking for bank's interest.
The secured LOC is against your house and the bank secures a 'collateral charge' against your property in addition to the 'regular mortgage'. This makes 'switching of mortgage' difficult and you have to pay lawyers fees and other expenses all over again if you want to switch your mortgage to other institution for better product or rate. On the other hand if you have only a regualr mortgage on your house, you can switch to another institution for a better product or rate and you do not have to pay any fees or expenses.
You can certainly borrow from the LOC and invest and can write off the interest expenses but it is a complex process and if not done properly can be a risky thing to do.
We advise and do this only for our most eligible clients and that too onloy after knowing about their needs, objectives, time frame and future plans and for this a lot of information is required to find out if it is suitable for them or not. This is called Smith Manoeuvre and a lot has been written about this on our board.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thank your Regar & Pramod on clarifying me.
Pramod, Thanks for the detail message. Could you please PM me your office address and timings. I want't to discuss some issue with you.
Thanks
Quote:
Originally posted by Aurn
Thank your Regar & Pramod on clarifying me.
Pramod, Thanks for the detail message. Could you please PM me your office address and timings. I want't to discuss some issue with you.
Thanks
Hi Arun,
You are welcome to discuss financial matters any time. I have sent you a PM with my office address.
Regards,
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Location: carl sagan's universe
Posted on: 04-01-07 23:50:29
Quote:
Originally posted by Pramod Chopra
Hi Arun,
You can certainly borrow from the LOC and invest and can write off the interest expenses but it is a complex process and if not done properly can be a risky thing to do.
There is an add-on also whereby instead of using the equity in your home you get an investment loan, available as low as prime + 0.5%.
In my practice I have noticed that people prefer to take this route as the majority don't like to use the equity in their home to invest, but prefer it (their home) to be debt free.
It's basically a psych thing.
In my case I have put both to use- sort of a double-barrelled shotgun. Accelerates both paying down the mortgage and fast-tracking my investments.
It's deadly- in all senses of the word including 'cool' and 'awesome'.
Hello all!
Thank you for sharing so much information.
Now I have a question.
I have been living in Canada for an year. I have a stable job in an IT company. I am single here.
Am I eligible for a Line of Credit?
How soon can I apply and how soon can I have the fund available with me?
Thanks in advance!
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Carpe Diem
