What is the Most Efficient Method of Borrowing?
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Thread: What is the Most Efficient Method of Borrowing?

  1. #1
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    What is the Most Efficient Method of Borrowing?

    I don't have any debt but am considering opening a line of credit, maybe for 150K. The idea is that I would use it to fund minor investment projects which have a high probability of return, like installing solar panels.

    Right now we are looking at a line of credit from the Investment Group. Unlike mortgage, there is complete flexibility in terms of repayments which is nice but the rate is a bit higher than with closed mortgages (2.95%). I don't have the T&Cs yet but the agent mentioned something about "all in one".

    Is anyone familiar with the product? What are the problems with it?

    Suggestions, comments welcome - thank you.


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    I know nothing about the one you mention. But, FWIW, I will say I have a HELOC with TD at their prime +0.3%, so that means 3% at the moment. The thing I like about it is the convenience of it being tied within my bank accounts and web broker all together.

    When I took it out about six years ago, I asked for $150K and they practically begged my wife and I to take $400K. Ultimately, we were glad we did as we were able to help our kids when they were building a home with a short term loan.

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    Right... My bank (HSBC) offered Prime +0.5%, which means 3.2%. Like you say, it's convenient, but they charge you extra $250 a year on a $100K borrowing. Also, HSBC charges $350 for someone to check out your house + lawyers fees up front. I would have gone with HSBC had it not been for these 2 really stupid charges up front. IG claim that they don't have any up front fees.

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  5. #4
    Senior Member none's Avatar
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    say that again -- $250 a year on 100,000.

    That's trivial

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    It is, but better off in my pocket. Still, I would be OK with that had it been the only delta.

    The ~$500 up front fee I am not at all fond of; that gets charged whether I use the loan or not. Also, HSBC will charge something similar at the end - to "discharge" you. Not sure if IG has any discharge costs; something to find out.

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    You may first wish to think if you want a floating rate or a fixed rate due to interest rate risk. Floating rate is normally cheaper but if rates go up your costs go up. For fixed rate your term and rate are fixed. I'm not here to discuss which way rates will go but I am at the age when I recall the prime rate peaking at 22.75%. How would you like to pay that on $150,000. Of course this seems unlikely but an increase in rates could always occur.

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    Don't recall why, but TD waived the legal and the cost of the home valuation....it didn't cost anything!

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    @frase - I consider the delta between a floating and fixed rate to be the cost of insurance. If rates were to jump up, I would simply repay the loan; in other words I will be "self-insured".

    Also, I am not aware of any HELOCs which have a fixed rate. The whole point is that they are "open" lines of credit and have variable rates - unless I am missing something.

  10. #9
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    Quote Originally Posted by Dilbert View Post
    Don't recall why, but TD waived the legal and the cost of the home valuation....it didn't cost anything!
    That would make a lot of sense when it's bloody obvious that the price of the house is many times that of the loan. This is exactly what's pissing me off about HSBC's offer.

  11. #10
    Senior Member GreatLaker's Avatar
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    TD has a deal to waive set-up costs on a HELOC, at prime +0.5. I have a HELOC with Scotia at prime +0.5. Originally it was called Total Equity Plan, as I paid down my mortgage I could borrow up to the original balance of the variable mortgage at prime -.85 (way back). Never even used it.

    Mordko you said Investment Group... you mean Investors Group? Sounds like an interesting product, but with that firm I would read the T&Cs several times, upside down, sideways and backwards.

    Eschew obfuscation. Espouse elucidation

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