Investor · Sask, Sk · Member since 2017 · 85 posts · 25 votes
Is there a formula to calculate the risk between cash out refinancing vs selling? We have a fair bit of equity in one of our houses and it should be possible to refinance or HELOC. This option would be ok and work as long as it and all the other places continue to be rented. The other (way safer) option is to sell, however once you factor in no 1031 in Canada, capital gains ( taxed at 19.38% ) and fee's there may not be a significant difference between the two. So yes it seems like it all comes down to risk and what I want going forward however. I think to keep the momentum up and take bigger steps forward the refi is a better option but if there is a major down turn or correction I don't want to be over leveraged either. I appreciate any input, thanks.
I presume you are going to draw down on your equity between mortgage terms and not break/prepay an existing mortgage (plus penalty: 3-mth interest or IRD).
There is also nothing that says you must leverage your property to 75 - 80% LTV, if you sleep better with only a 50 - 60% LTV, then you know your limit.
As for the choice between a note, secured line of credit or a hybrid arrangement it comes down to math and whether you needs some/all funds now or later.
An old saying from RE guru, when they look back, they said:"Never Sell." I totally understand your situation. I look back at my RE journey. I will still keep some and sell some. Those ones that give you too much headache, sell them. Have HELOC is great way of leverage. For me, that's how I get started, it was from an existing equity - as long as it is in your comfort level. Leverage is how we grow.
Thanks, we have a meeting with the bank Monday. Going to try HELOC, it's a bit riskier but definitely more in line with our goals to keep it. Hopefully we are able to do it and take a big step forward.