Talking Readvanceables Mortgages

Fixed-vs-Variable-CBC Mortgage Centre’s Jas Grewal and Mortgage Architect’s Peter Majthenyi (both mortgage planners) were on CBC talking about readvanceable mortgages this week.

"There are ways to make the debt on your principal residence tax deductible,” Jas told Kevin O’Leary.  “The average Canadian hasn’t been educated on that."

O’Leary quickly challenged the idea of leaving debt on your home, to which Peter replied: "You have to differentiate between good debt and bad…Most good mortgages, for those that qualify, are a combination of a line of credit and a mortgage."

"There are a lot of advantages to leveraging your property,” Peter added. Why?  "Not to go buy depreciating assets,” he says, “but to start buying appreciating assets."

Sitting on a free and clear house is "the worst thing you can do," Majthenyi stated. He advises: Go back and "Borrow on your house…Invest it prudently, be it in your business, be it in real estate, be it in some kind of dividend fund…whatever your tolerance is…and you can write off the interest every year."

The two brokers also debated fixed and variable strategy.

“Rates are at historic lows for the last 60 years," Jas said. “You’re paying 1/2 of the 25 year average (for a 5-year fixed mortgage today)."

Peter’s position:  "Don’t run out and pay more interest to the lender, sooner than you have to. That’s what variable is predicated on."  He feels the effective average rate of a variable will be lower over the next five years than a 5-year fixed.

Kevin O’Leary wasn’t so convinced, saying: "There’s no debate. You lock in now."

(Source: CBC)

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