HELOC vs Cash Out Refinance - Ontario, Canada

[Olga Netchaeva]

Hi, I'm looking for help with making sense of these numbers from my bank. I originally started application for a HELOC but then changed my mind and asked for quote on cash out blended rate refinance (I'm 2 years into a 5 year fixed term). I have about $65K in equity in my property that I'd like to pull out and use as down payment on a second property.

The numbers look like this:

• Current mortgage balance: $397,500. Current interest rate: 2.89%. Term: 5 yr fixed (I'm at end of 2nd year).
• New loan limit approved at $464,000 (80% of newly appraised property value).
• HELOC agreement drafted with: fixed portion $397.5K at 2.89%, revolving portion $67K at 3% (prime + 0.3)
• Cash out blended rate: 2.83% (blended between 2.89% and 2.64%)
• The term in either scenario remains the same - 3 years remaining

When I tried to get my advisor to switch gears to a cash out refinance, he argued that HELOC is still a better product. He then claimed that the end result of the above-described HELOC agreement is that I would have a fixed rate of 2.44%. This last part is what I'm struggling with most - I can't make sense of it.

Thanks!

Olga