What is a re-advanceable mortgage?
A re-advanceable mortgage is an innovative home financing product that combines the benefits of a fixed or variable rate mortgage with a home equity line of credit. By combining the two products, every time you pay down the principal of your mortgage, that equity is instantly available through your line of credit—without having to apply for a higher borrowing limit.
There are several benefits for setting up a re-advanceable mortgage:
- If you’re planning to invest in a revenue property, it lets you have instant access to your home equity for a down payment without having to apply for an additional loan. Some re-advanceable mortgages allow you to finance the down payment for more than one property, so your existing mortgage becomes a strategic tool in helping you gain revenue-generating assets.
- Canadians have never been able to deduct their home mortgage interest (like you can in the US). However, a re-advanceable mortgage allows you to adopt an investment strategy that gives youexactly the same thing: tax deductible mortgage interest. In this strategy, every time you make a mortgage payment, you automatically withdraw that additional equity from your home and invest it in stocks, bonds, mutual funds or revenue properties. The wonderful part about this is when you borrow money for investments like these, the interest is tax deductible.
- You can pay less interest over time. Some re-advanceable mortgages include a bank account component, so every time your paycheque is deposited, the increased balance of your bank account automatically pays down your mortgage. Even if it’s just for a few days before you need the money for other purposes, these mini lump sum payments can save thousands of dollars in mortgage interest over time!