We purchased our first home in 2014 for $260 000, with around $65000 down payment and a $195 000 mortgage.
Later, we upgraded for around $8000, such as removed carpets, installed hardwood floors and window shutters.
Besides, we spent a little money on minor repairs and maintenances works. These are just regular expenses for homeowners, nothing major, as the home was brand new.
It was a newly developed area, so it was not a convenient place to live: no malls or shopping centres surrounding the sites. There were no public transportations or schools near our home.
A couple of years later, all came close by, and it became one of the well-developed areas. It is now one of the convenient places to live.
First Mortgage Renewal
Five years later, in 2019, my first mortgage renewal came. At the time, the mortgage rate was slightly lower than I had before.
Thus, I took some money out of the mortgage and reduced my student loans.
I didn’t have any ideas about home re-evaluation or refinancing.
Home re-evaluation
Almost six years later from our home purchased, I planned to re-evaluate my home value and take more money out of my house because the mortgage rate is at a record low and home values are skyrocketing in our areas.
I decided to take advantage of this low rate environment and secure a low rate for a long-term fixed rate.
There is not a single home available for less than $500K. New townhomes are starting prices from low $700K.
Thus, I thought, why not take advantage of this unique environment.
First, I called one of a friend – a real estate agent to estimate our home value.
He said we could sell our house for around $550K to $580K range based on recent average sales prices with similar size homes.
The estimated price was more than double our purchase price. Amazing!
But, we have no plans to sell our home. We just wanted to unlock some money from our house.
Process began in late December
In late December, I called my mortgage lender (RBC), requested them to re-value our home price to increase the HELOC value, and submitted all the necessary documents.
A week later, with additional documents provided, they contacted us and came up with a similar price range as my friend suggested.
However, our income is not enough to increase the HELOC limit to the range because we are a single income family and making around $70 000 annually.
But, RBC agreed to increase home value to $395 000 (conservative estimate). As a result, my HELOC available limit increased by $136 000.
HELOC Available limit = (Home value) * 80% – (current mortgage balance)
= $395 000 *80% – $180 000 = $136 000
Actually, I was expecting go for little more, but the amount was good enough right now.
This process took around four weeks to complete, and it cost me around $1000.
Paid down other debts
Once my HELOC limit increased, I withdrew $135 500 and paid down most of my loans.
There are a few more left to, but I am not in a rush to pay them now.
Setup new mortgage segment
Next step, I called my RBC branch and requested them to roll back my HELOC into a four-year closed mortgage segment for a fixed rate of 1.74%.
This process took just 15 minutes to complete (RBC Home-line Plan). It is straightforward process at RBC. I am not sure about other banks process, and whether they have a similar plan or not.
That’s it. Now I have one house and two mortgage segments for a longer-term fixed rate.
It took a little bit of my time and cost around $1000, but it is worth the process for the time and cost.
I can save thousands of dollars over the next four years from debts service fees, and now my cash flow increased significantly high.
Potential high inflation or higher interest rate increases won’t affect my cash-flow for the next four years. I hope I can make better than a 1.74% return over the same period using the available funds/cash-flow.
My debts are much better now as I have a lower rate and fixed-loner term.
All these changes will be reflected in my next net-worth update report.
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