Leveraging LOC

March 20, 2008

Save $$$ – Using LOC

Line of credit (LOC) can be used to help home owners pay off their home mortgage sooner and save them thousands dollars on mortgage interest payment. A $200,000 mortgage loan amortized over 25 years can be shortened to just over 13 years 2 months, and the interest savings can be as much as $60,000!

Who can benefit?

Not all home owners can make use of the above program to pay off their home mortgage sooner. For home owners who have substantial equity built up or those who can make use of their LOC may consider using the program. A home owner who wishes to take advantage of the savings should have a good understanding on the risks involved as interest rates do fluctuate over the duration of the program.

The program can best be illustrated using the following assumptions:

1) That a home owner’s mortgage is around $200,000 and he or she is eligible to be approved an additional $100,000 “Line of Credit”

2) That the interest rate on the $200,000 mortgage is at 5.5% and the $100,000 LOC is at Prime Rate assumed to be at 5.5% paying interest only each month.

3) The $100,000 is invested in a 12% a year interest paying investment (Mortgage Investment Corporation or private 2nd mortgages) with monthly interest income of $1,000. This money generated from the investment less monthly interest cost of $541.67 is used to pay down the principal.

4) The $200,000 mortgage is paid off in 13 years and 2 months. The total interest paid on the $200,000 mortgage works out to around $76,542 for a total interest savings of $60,050.

If you like to have more information whether the above program is for you, you can contact kindly contact me (Elsie Tse) at 604-716-3369 or Email Me 

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