How you can get amazing value from the limited time Marriott Bonvoy American Express card offers + MORE Aug 8th

For this summer American Express have brought back increased welcome bonuses on their Marriott Bonvoy co-brand cards. These are being touted as the best offers for this year and in this post we look at how those bonus offers can provide some amazing value on hotel stays. Whether you get yourself the Marriott Bonvoy™ American […]
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Ask MoneySense
I am considering taking out a HELOC loan to buy another property. Is this a wise decision, or would a loan be better? My bank advises me that I can qualify for a $400,000 HELOC.

–Caren

When buying a second property, Canadians can choose from a number of financing options, including a home equity line of credit (HELOC), a mortgage, or a personal loan. Before you decide, it’s a good idea to consider practical matters including interest rates, cash flow, income tax, and more. Let’s dive in.

Interest rates for a second home

When you borrow money using a HELOC secured by the value of your home, the interest rate is typically prime plus a small premium of 0.5% to 1%. Today, that would mean an interest rate between 5.45% and 5.95%. 

By comparison, variable-rate mortgages are usually offered at a discount to prime of maybe 0.5% to 1%. The interest rates for fixed-rate mortgages are currently in that range, too. 

As a result, Caren, there is the potential to save 1% to 2% interest with a mortgage on the new property instead of a HELOC on your existing property…