# Worth doing lump sum payment on mortgage to increase HELOC limit before signing??



## mcu (Dec 6, 2009)

Hi Guys,

I will be signing a HELOC on a rental property this week and I am debating on weather I should do a lump sum (I am allowed to do 40k/year) in order to increase my HELOC by 40k before actual signing. My current mortgage rate is 3.79% and HELOC will be at prime which is now 3% but for how long?

My thinking is that my 40k lump sum will add 40k to my HELOC which will be available to me for many many years. Is it worth the headache or better keeping cash on hand for rainy day or down payment on a future deal?


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## DavidJD (Sep 27, 2009)

I think cash is less of a headache...

Could you not put cash down later, for whatever benefit?


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## HaroldCrump (Jun 10, 2009)

^ Off topic, but why do you have a picture of Amy Calistri on your profile?
Are you affiliated in any way?


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## mcu (Dec 6, 2009)

Yes I prefer cash in hand but if i do it later then my HELOC is still 40k less. Hope you guys understand what I mean. If I go sign this week I get a HELOC of 100k for example. If I make a lump sum of 40k I get a HELOC of 140k since they are giving me 75% of the appraised amount minus mortgage balance.

My reason for HELOC is to get my equity out in order to invest in new properties.

Thanks


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## Jungle (Feb 17, 2010)

If that is your reason, then yes, put the lump sum. But be very careful in buying real estate right now. Not much out there is cash flor positive and all fingers are pointing towards a correction. Stocks are CHEAP right now, in comparason.. 

Does your bank have the option where you can have an auto limit increase on your HELOC, everytime a principal is paid? We had that on our STEP and you could look at that option as well. 

Also for your information, if you put the 40K down on your rental property and do nothing with the HELOC, you will have less interest to deduct and will be paying more income taxes.


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## mcu (Dec 6, 2009)

i plan on buying only deals when they come...not pushing it for now as I also think market will drop. It can be 6 months or maybe 24 months before i find something, so yes I was also worried i will have to pay more taxes as less would be deductible.

I asked TD if they offered something that would increase my limit as my mortgage got paid down but they looked at me funny and told me that you would have to re-apply everytime and re-notarize again. Not sure if all banks are the same


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## Jungle (Feb 17, 2010)

I think that's because TDs new rules now where every mortgage now has a collateral charge, with equity available to use up to 125%. After this, you must go and refinance. 

For people without helocs, this makes it very expensive to move the mortgage for a more competitive rate at another bank, as you must pay legal fees to transfer. Mortgage is no longer assumable at end of term by other lenders.


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## mcu (Dec 6, 2009)

so you thinking if i don't plan on buying right away, I should not make the lump sum payment to increase the HELOC?


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## Jungle (Feb 17, 2010)

If you are 100% sure of buying another property and your only means is using the HELOC for the down payment, then do the lump sum. 

Talk to TD again to confirm that once you start making pre-payments, you can not reborrow the equity.


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