# New home, HELOC



## RedDirt77 (Oct 18, 2011)

My husband and I just sold our condo (for 135k more than we bought it for). We've made a good profit... however, we are planning to buy a new house (and would have to increase our mortgage by 35-80k).

My husband is suggesting we get a HELOC in order to tap into the money we've made on the sale of our condo to afford this... get a 2nd mortgage and have money for new furniture.

For some reason I don't like the idea of this... more debt scares me.

Opinions?


----------



## andrewf (Mar 1, 2010)

You don't need to use a HELOC. Unless you are porting your mortgage, you could just put the minimum 20% down and use the residual from the sale of the condo for whatever you would have used the HELOC for.

On the other hand, do you really need to buy all-new furniture all at once?


----------



## RedDirt77 (Oct 18, 2011)

We are locked into our mortgage.. thus we have to port...


----------



## jamesbe (May 8, 2010)

As andrew said, for sure not need for a HELOC.

I don't know how much you sold your house for or your current mortgage but here are some numbers for example (lots of assumptions are made here LOL).

You pay $300k for your current condo, and just sold it for $435k You had $200k remaining on your mortgage.

When the sale is over you will get a cheque from your lawyer for $235k (minus lawyer and realtor fees) so let's say $200k and your mortgage will be paid off. You now want to buy another house. That house is $500k.

If you want you can take $100k as downpayment, increase your new Mortgage to $400k and spend $100k on furniture!!!

No HELOC nothing, now I'm not saying you should do this, but I hope you understand it more clearly with my crazy numbers.


----------



## RedDirt77 (Oct 18, 2011)

We have to port our mortgage... can't repay with profit on sale of condo.


----------



## the-royal-mail (Dec 11, 2009)

No one is truly locked in to anything unless they're in prison.

So you might have to pay a fee of a few thousand $. Is that the only reason you say it is locked in?

Paying that fee would still be better than going into debt.

I share your disdain with this shell game. Better to deal with cash rather than crazy schemes.


----------



## RedDirt77 (Oct 18, 2011)

Thanks to everyone for their responses.

I'm beginning to understand this more and I'm still so confused. It seems like we have four options but we'll have debt no matter what, it's just figuring out the smartest way to handle it (option 4 is the cheapest and has the most flexibility but I still feel uncomfortable with it).

1) Increase our current mortgage (not a very good fixed rate) for more than we need, take out some of the "profit" (cash in our bank account that could have lowered our mortgage).
2) Break our current mortgage, pay a penalty, get a new variable rate mortgage, take out some of the "profit" (cash in our bank account that could have lowered our mortgage).
3) Keep our current mortgage, get a 2nd mortgage (variable) for the increased amount, take out some of the "profit" (cash in our bank account that could have lowered our mortgage).
4) Keep our current mortgage, get a HELOC for the increased amount of the new house and also HELOC for other things we might need (as they come up)


----------

