Refinancing dilemma .. Payoff HELOC or Use it to buy another one?

[Edison Reis]

Dear folks

We have 3 Properties that we acquired using our HELOC As the down payment few years ago.

One of the mortgages is coming up for renewal and considering the property value went up about 70% in 3years I am planning to refinance it and pull some money out. (Instead enjoying the LTV status)

So the question becomes ..... should I use the money to invest in another property or pay the HELOC?

I am currently inclined to buy another one as the HELOC interest is 100% tax deductible hence I may keep it as a "never ending" nor growing debt.

Thoughts ?

Thanks in advance

Edison

[Roy N.]

Originally posted by @Edison Reis:

Banks in Canada have always been careful as far as lending (which has sheltered us from the 2008 real estate crash) and there’s no signs of seeing that change in the near future. What is relatively new is the “mortgage stress test” where banks shall add an additional 2% on the top of the landing rate to make sure people can truly afford it. (Government qualifications requirement)

The so-called "stress test" determines the borrowers ability to qualify as follows.

If  the mortgage loan is to be insured, the borrower must qualify at the higher interest rate of either:

• the Bank of Canada’s conventional five-year mortgage rate (presently 5.34%)
• the interest rate you negotiate with your lender

If the mortgage loan is uninsured, the borrower must qualify at the higher interest rate of either:

• the Bank of Canada’s conventional five-year mortgage rate
• the interest rate you negotiate with your lender plus 2%

Regardless, interest rates are still considerably below their historic range of 7-9%.