Buying appartment after one year as PR

[NetMecca]

That's not how a home equity line of credit(HELOC) works in Canada. You cannot get a HELOC to buy a house from scratch. HELOC is essentially a loan you get against the equity you already have in a house.
Let's say you bought a home for 500K, where 450K was your mortgage and 50K was your down payment.
Few years down the line, let's say the valuation went up and the house is now worth 700K. And you were also able to repay further 50K of your mortgage. So now you owe the bank 400K.
Now HELOC allows you to draw your equity upto 80% of the home's worth. So 80% of 700K is 560K. Out of this, you still owe the bank 400K. So with this formula, you could get a loan for upto 160K at very low interest rates. People usually take out HELOCs for things like renovation, or buying another house, or simply to invest, as HELOCs have very low interests compared to personal loan. For example, right now you could get a HELOC at as little as 3-4% per annum, and if invested wisely, you could earn 7-10% easily. So you are net in profit.

I am sorry I disagree. Did it twice on purchasing homes straight up. Had to put down a deposit, same as any other mortgage, but I had no need to wait until the home value increased before I could get access to that. I purchased the homes and applied for that type of mortgage straight away. Had no issues.

I did the home value increase thing as well btw. Not that difficult either. The only challenge I found with getting this, is using a mortgage broker to assist. They generally do not offer this product. You have to go to a bank to get it. Good luck

 

[NetMecca]

For this kind of product (typically called an All-in-One account in Canada) where the mortgage is treated as a bank account, you must have minimum 20% downpayment to start. Also the interest rates tend to be higher than conventional mortgages, and only end up saving money to those that would be dumping extra money into it. For the majority of people, they are not good products due to the higher interest rate and they end up taking forever to pay off.

The higher interest could be a pain if you are living from hand to mouth, I agree. And not entirely sure how easy it would be to get a decent fixed rate. But even with the higher mortgage rate, I would rather own the property and get the benefit of equity value changes than just pay rent. Property values in Canada have proven fairly stable and mostly growing (despite the crash in US), so no major risk there. With rent you get nothing except a place to live. If the amount of interest is the same as rent (likely less) you still come out ahead since if the value of the property increases you get the benefit when you sell, even if you have not paid your mortgage down one penny.

And if you have some extra cash lying around. You could easily pay off your mortgage much quicker with less challenges and complications (penalties etc) and keep your mortgage open (giving you access to those funds any time) pretty much indefinitely.

Like I said, I am a firm believer in this type of mortgage and the flexibility and overall benefit of this far outweighs the down sides for me. Good luck

 

[scylla]

I think there's some confusion in the HELOC discussion. I work for a bank and generally agree with the above statement (with some points of clarification). You can absolutely get a HELOC immediately when you first purchase a house. In these cases the HELOC is actually your mortgage - in others words, you don't have a traditional mortgage and also a HELOC, you just have the HELOC. I can confirm this is 100% feasible because that's what I did when I purchased the house I have now. My HELOC is a fixed rate HELOC.

I think some people here are confusing the more old/traditional use of the HELOC where you would have a conventional mortgage and then add a HELOC later because you want a line of credit. However HELOCs can absolutely be used as your primary mortgage. Again - that's my set up and that's been my set up since I first purchased the house I own now several years ago. 100% doable. Again, as explained by the poster above, in many ways it's just like a conventional mortgage, you still need a downpayment, etc. Using a HELOC this way is extremely common now.

 

[Rob_TO]

The higher interest could be a pain if you are living from hand to mouth, I agree. And not entirely sure how easy it would be to get a decent fixed rate. But even with the higher mortgage rate, I would rather own the property and get the benefit of equity value changes than just pay rent. Property values in Canada have proven fairly stable and mostly growing (despite the crash in US), so no major risk there. With rent you get nothing except a place to live. If the amount of interest is the same as rent (likely less) you still come out ahead since if the value of the property increases you get the benefit when you sell, even if you have not paid your mortgage down one penny.

And if you have some extra cash lying around. You could easily pay off your mortgage much quicker with less challenges and complications (penalties etc) and keep your mortgage open (giving you access to those funds any time) pretty much indefinitely.

Like I said, I am a firm believer in this type of mortgage and the flexibility and overall benefit of this far outweighs the down sides for me. Good luck

Again, this type of product doesn't help you own a home any quicker. In fact it's much harder to qualify for this All-in-One product, because you need a minimum 20% downpayment to start with. If one has less than a 20% downpayment, they will need to go with a conventional mortgage.

 

[NetMecca]

Again, this type of product doesn't help you own a home any quicker. In fact it's much harder to qualify for this All-in-One product, because you need a minimum 20% downpayment to start with. If one has less than a 20% downpayment, they will need to go with a conventional mortgage.

Agreed, you still have to meet all the credit and deposit requirements. But when you do, mostly as easy as a regular mortgage. Though be aware there are certain homes (eg. trailer homes - mobile homes and possibly some others) that generally do not qualify for this type of mortgage arrangement no matter whether you qualify or not. If you are planning to purchase a home, would be a good idea to chat to your bank, find out what their requirements are before you start house hunting. I like to get pre approval for a mortgage / HELOC (subject to property valuation) from my bank before I start hunting. Lets me know what I can afford plus useful for negotiation since you can establish that your mortgage is already approved. Almost like a cash buyer. Depending where you live and buy, makes some sellers more negotiable.

Good luck

 

[Rob_TO]

Agreed, you still have to meet all the credit and deposit requirements. But when you do, mostly as easy as a regular mortgage. Though be aware there are certain homes (eg. trailer homes - mobile homes and possibly some others) that generally do not qualify for this type of mortgage arrangement no matter whether you qualify or not. If you are planning to purchase a home, would be a good idea to chat to your bank, find out what their requirements are before you start house hunting. I like to get pre approval for a mortgage / HELOC (subject to property valuation) from my bank before I start hunting. Lets me know what I can afford plus useful for negotiation since you can establish that your mortgage is already approved. Almost like a cash buyer. Depending where you live and buy, makes some sellers more negotiable.

Good luck

A pre-approval does NOT mean you're actually pre-approved for the mortgage. A pre-approval is done in mere minutes, simply as a guide to show you what you can most likely afford in a mortgage. The actual due diligence of the lender to confirm your income, assets, credit history, other debts, that you aren't overpaying for the home, etc etc is only done once you have a firm offer on a home and you actually applying for the mortgage. A "pre-approval" does not mean the lender is obligated to give you the mortgage, there are many reasons that they could back out and end up declining it.

In negotiations, you either include a condition of first securing a mortgage, or you don't include this condition. Whether you got some pre-approval in advance, is not really relevant to a seller. If you're confident in getting the mortgage than you simply would not include the financing condition in your offer to make it more attractive to the seller.