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MONEY

JOHN LOZINSKI

A -of-a

MORTGAGE….

Is there such a thing as a perfect mortgage? Finally there is a mortgage that offers a

nearly perfect solution to low-ratio financing. This product comes with different names from different lenders, but essentially it is a mortgage combined with a line of credit. The basic premise of these mortgages is that you must have at least 20% unused equity in your residence. If you do, the possibilities are endless. As an example, if your home is worth

$300,000.00 you can register a mortgage/ credit line on your property for any amount up to $240,000.00. That is 80% of the home’s current value. You can have the entire $240,000 as a fully open line of credit or break it up. If you need, say $150,000.00 to pay out your present first mortgage, you can designate the first $150,000.00 of your mortgage/credit line to be a regular mortgage at a fixed interest rate, term and amortization and it will repay just like any other regular mortgage. The remaining balance ($240,000 less $150,000) can be designated as one, or several different lines of credit totaling $90,000.00. The line of credit can be used for anything you wish or can be simply left there unused. If you have no balance used on the line of credit, no payments are required on that portion of your mortgage. In some cases, you can fracture the line

of credit into several smaller credit lines. You can keep a smaller line of credit for investment, another for personal use, another for an income property you want to buy in the future, or another portion for any other reason you can think of, all in the same mortgage. The lender will do all your accounting for

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you, reporting each portion of your credit line separately monthly. Reporting to CRA at the end of the year on your investment-designated credit line is simplified as your lender does most of your accounting. The other neat feature is that if you

have, say, $10,000 in a savings account for unforeseen expenses, you can use it to make a prepayment on your fixed mortgage down to, say, $140,000 and your credit line portion increases by the same amount that you have paid down on the fixed portion of the loan. So instead of a $90,000 credit line it increases to $100,000 available credit. Why? The original limit on your mortgage/credit line was $240,000.00. That means that you ALWAYS have $240,000 available to you in a combination of mortgage and credit line so as the fixed mortgage goes down the available credit on the credit line increases by the same amount. You never again need to keep a savings account for rainy day expenses, trips, tuition or incidentals. Any extra cash you have can be used to pay down your fixed mortgage or the designated personal portion of your line of credit and that money it is always available to you and can be re-advanced to you as needed. The fixed portion of your mortgage/

credit line is at the lender’s best broker rate (lowest rate) and will have all the privileges and penalties associated with the particular type of fixed mortgage you choose. The credit line portion of your mortgage may be at prime plus 1% or less and will fluctuate when the bank’s prime rate changes up or down. The line of credit portion of the entire mortgage is completely open in that it can be paid in full each month without notice or penalty, then re- advanced as needed. This might very well be the last mortgage you will ever need on your home.

John Lozinski is the owner of Verico Lozinski Mortgage Corp, Suite 238, 39 Robertson Road, Bell mews Plaza in Bells Corners. He can be reached at 613-721-6843, ext. 223.

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