Line of Credit or Mortgage, what to apply first ?

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m2611
Member since: May 04

Posts: 314
Location:
Post ID: #PID

Posted on: 10-09-10 13:35:47

I recently bought a new under construction home

This will be ready within next 2-3 months
I already paid 10% downpayment & planning to pay another 10% to save CMHC insurance
I have a pre-approval of Mortgage from one of the bank

I already checked with my own bank & they told me I am qualified for certain amount of Unsecured line of Credit

So my question is -
Should I first take Unsecured LOC & then actually apply for final Mortgage approval OR the other way

Are they interlink ?
If I take one, will other have any effect ?

If yes, then what should I do ?

Please note - Mortgage pre-approval is from BMO while Unsecured LOC I am getting from TD

Thanks..

Happy
Member since: Aug 03

Posts: 309
Location: INDIA (sometimes Canada)
Post ID: #PID

Posted on: 10-09-10 15:36:04

They are somewhat interlinked (depends upon the amount in each one), if the amount of LOC is very small as compare to mortgage, then it is ok. but if both amouts are comparable - then it raise red-flag for bank.

best for you is to take both.... First get the mortgage money. then same day or next day get some LOC on top of it. Remember that LOC amount should be only about 2 to 10 percent of the mortgage money.

As LOC is unsecured I think TD will be ready to assume that risk for higher interest rate as compared to low interest rate of mortgage. If u donot need the money then deposit it back into your LOC after few days - Your LOC will still be available to you, in case you need it.

If there is any Bank employee / or mortgage broker on the forum, they will also provide you usefull information in this regard.

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m2611
Member since: May 04

Posts: 314
Location:
Post ID: #PID

Posted on: 10-09-10 16:51:59

Quote:
Originally posted by Happy

They are somewhat interlinked (depends upon the amount in each one), if the amount of LOC is very small as compare to mortgage, then it is ok. but if both amouts are comparable - then it raise red-flag for bank.

best for you is to take both.... First get the mortgage money. then same day or next day get some LOC on top of it. Remember that LOC amount should be only about 2 to 10 percent of the mortgage money.

As LOC is unsecured I think TD will be ready to assume that risk for higher interest rate as compared to low interest rate of mortgage. If u donot need the money then deposit it back into your LOC after few days - Your LOC will still be available to you, in case you need it.

If there is any Bank employee / or mortgage broker on the forum, they will also provide you usefull information in this regard.

Thanks Happy..

Yes Mortgage amount is roughly $350,000 while unsecured LOC is roughly $15000-20000

Also TD is offering Unsecured LOC at Prime plus 3.65 while I am getting Mortgage at prime minus 0.7 from BMO or TD

rajcanada
Member since: Jul 03

Posts: 2713
Location: Kitchener, ON
Post ID: #PID

Posted on: 11-09-10 08:47:29

Banks require proof of down payment before they approve final mortgage. If you are first time home buyer, you can explore Home Buyer's Plan through RRSP if closing is after 90 days. http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

Get your monthly payments for line of credit from the bank. Also cost of borrowing vs CMHC and see how much you save. Say if LOC is for 5 years, also factor in the fact that prime would be up and you have adequate margin to cover both loan and increased mortgage payments. Also allow adequate closing costs, land transfer fees, property taxes, moving expenses, house warming party expenses , etc.

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m2611
Member since: May 04

Posts: 314
Location:
Post ID: #PID

Posted on: 14-09-10 15:25:56

Quote:
Originally posted by m2611

Yes Mortgage amount is roughly $350,000 while unsecured LOC is roughly $15000-20000

Also TD is offering Unsecured LOC at Prime plus 3.65 while I am getting Mortgage at prime minus 0.7 from BMO or TD

Can one some one write if this rate is good or bad ?
Prime plus 3.65 for unsecured LOC

Do all bank shows unsecured LOC rates on website

Thanks

m2611
Member since: May 04

Posts: 314
Location:
Post ID: #PID

Posted on: 17-09-10 12:51:28

Quote:
Originally posted by ashedfc

Line of credit: if you don't use you don't pay any interest, so rate shouldn't matter.

Sorry I am not clear...

I need above mention Unsecured LOC & if bank is asking Prime plus 3.65
Is that mean rates are good or okay ?

Please confim...

Pramod Chopra
Member since: Sep 03

Posts: 1284
Location: Pickering, ON
Post ID: #PID

Posted on: 17-09-10 13:44:48

If you are going to put 20% down payment and want a LOC as well then look for the most flexible product which offers combination of mortgage and line of credit. It is called ALL IN ONE from National Bank. Here is the http://nbc.ca/bnc/cda/feeds5/0,2726,divId-2_langId-1_navCode-16578_navCodeExTh-4050,00.html

Read all the benefits of this product which include free checking account, availability of the funds in HELOC at a much lower interest rates the mortgage is paid down and above all security and peace of mind.

N.B. You might see a rate of prime +1.00% for the HELOC on the website but the rate is prime + 0.5% through mortgage brokers and at prime (directly) if you are an engineer.

p.s. I have tried number of times but the link is not being displayed properly so please visit National Bank's website at http://www.nbc.ca" rel="nofollow">LINK and look for their mortgage products and learn about ALL IN ONE mortgage line of credit.

Good luck.

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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada

Contributors: m2611(7) rajcanada(4) Happy(2) Pramod Chopra(2)

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