Put too much down on my house

[Monsieur_dee]

Bought my first house a few years ago in Canada. I put too much down as a down payment. 30-40%. Is there any way besides a heloc for me to pull money out of my house without it being a 'loan' 

 

I'm looking at some re finance options.. But can't see anything of taking just cash out? 

 

One option I was thinking down the road would be selling.. And putting a smaller down payment on new house. 

 

Any advice is appreciated. 

[longlake95]

Probably not what you want to hear....but...how can you put too much down on your house? Isn’t the idea to pay it off? Yes I understand where you are coming from, maybe, put just a little down, invest the rest etc.... 

 

if you’re trying to free up cash for an investment....you could borrow....then you’re able to make the interest tax deductible. 

 

I understand the lure of that idea. Sounds like a no brainer in a period where house prices and markets are soaring. It won’t always be the case. I was able to pay down my mortgage and squirrel away $$$ at the same time for investing. I paid my house off in my 30’s. I’m probably more conservative in that regard than many....it’s my little castle and moat for my family. No bank will ever control that asset. Ya, probably old school...lol  fire away....

Edited June 14, 2021 by longlake95

[Gregmal]

I think there's value in both approaches. I bought my house in my mid 20s with 10% down. I dont ever want to have it fully paid off. Chillin around +/-15% of 50 LTV is ideal for me. I was able to do a cash out refi in March 2020 when cash was very handy. But thats the thing, it was timely. Due to appreciation since then, I could probably do another one now....but why? There's nothing major brewing right now so just keep paying it down. You mortgage is almost like a savings account. 

 

There's two things to keep in mind, 1) liquidity and investable cash is much more valuable the younger you are. So having access to as much of it as possible, as young as possible, is a big deal. Let the compounding start as early as possible. 2) Its unique financing that isnt really replicable anywhere else. Use it. A HELOC still generally has a somewhat higher rate. Personal loans are way higher. And credit cards are absurd. 

 

 

[rkbabang]

The best way to pull cash out of your house is a cash out refinance.   With the rates as low as they are, now is the time to do it.   You mentioned selling your house and putting less down on the next one.  A cash out refinance gives you the same result only you don't have to move.

 

That said, I just sold investments to pay off my mortgage.  There is something to be said for owning your home outright.  I don't have to retire, but I could if I wanted to.   It depends on your age, I guess.  If I was in my 20s or 30s, I'd want the cash to invest more than paying down my mortgage.

 

 

[thepupil]

On 6/12/2021 at 10:39 PM, Monsieur_dee said:

Bought my first house a few years ago in Canada. I put too much down as a down payment. 30-40%. Is there any way besides a heloc for me to pull money out of my house without it being a 'loan' 

 

I'm looking at some re finance options.. But can't see anything of taking just cash out? 

 

One option I was thinking down the road would be selling.. And putting a smaller down payment on new house. 

 

Any advice is appreciated. 

 

I don't endorse or recommend them, but yes, there is another way besides HELOC to pull equity out of hose without it being a (traditional) loan. You can get a shared appreciation agreement which is actually a 2nd lien loan where you receive cash and the interest rate is equal to a percentage of the home's appreciation. In the US, the main vendors are Point, Unison, and someone else. I don't know about Canada. You have no payments until you sell the house, or in some cases for 10-30 years. 

 

 When I ran the numbers, the likely APR was too high and it didn't seem favorable. I'd only do this if I was desperate for cash or had a VERY negative outlook on the value of my house, since this is the only way to "short" your own house's value. If my house were to go up another 20% (+55% from 2019), all else equal, I may consider it. 

 

I am currently closing on a HELOC that's Prime -0.25% for first $50K (3%) and Prime -1% for the next $100K (2.25%), which seems pretty good to me. It's with Third Federal. Again not relevant for Canadians, but in case of use for Americans. 

Edited June 14, 2021 by thepupil

[DooDiligence]

1 hour ago, rkbabang said:

The best way to pull cash out of your house is a cash out refinance.   With the rates as low as they are, now is the time to do it.   You mentioned selling your house and putting less down on the next one.  A cash out refinance gives you the same result only you don't have to move.

 

That said, I just sold investments to pay off my mortgage.  There is something to be said for owning your home outright.  I don't have to retire, but I could if I wanted to.   It depends on your age, I guess.  If I was in my 20s or 30s, I'd want the cash to invest more than paying down my mortgage.

 

 

 

Couldn't agree more with you & @longlake95

When I look at what passes for risk/reward (in my world),

owning my home outright is a great investment.

 

Age ~ investment horizon + risk tolerance - near term cash needs = debt or no debt

this will change when I need to supplement cash flows with a legit reverse mortgage at 70 to 75yo +/- (in 11 to 16 years)

lots of assumptions regarding health & equity/home value performance.

 

[SouthernYankee]

DooDil,

 

Could you explain more about "a legit reverse mortgage"? The reason I ask is my brother had been trying to figure out a way for my parents to get more income, but the reverse mortgage idea kept looking like some sort of trap.

 

Cheers.

[Monsieur_dee]

5 hours ago, rkbabang said:

The best way to pull cash out of your house is a cash out refinance.   With the rates as low as they are, now is the time to do it.   You mentioned selling your house and putting less down on the next one.  A cash out refinance gives you the same result only you don't have to move.

 

That said, I just sold investments to pay off my mortgage.  There is something to be said for owning your home outright.  I don't have to retire, but I could if I wanted to.   It depends on your age, I guess.  If I was in my 20s or 30s, I'd want the cash to invest more than paying down my mortgage.

 

 

Thanks for advice... Only options I saw were heloc.. Looked it up quickly. Going to have to see what eq bank says the penalty is for breaking agreement early. Thanks again. 

[DooDiligence]

8 hours ago, SouthernYankee said:

DooDil,

 

Could you explain more about "a legit reverse mortgage"? The reason I ask is my brother had been trying to figure out a way for my parents to get more income, but the reverse mortgage idea kept looking like some sort of trap.

 

Cheers.

 

Reverse mortgages have gotten a bad rep & in many cases it's well deserved.

 

To me, a legit reverse would be; I'm 80 years old & my savings have been depleted & I need a check to supplement social security, and don't care about leaving an inheritance to anyone.

 

I probably won't need to do this but still include it in my planning.

[Monsieur_dee]

Looking like 3k to break mortgage. 

 

Bought for 455. Appraisal should come back at 500-600. 

 

Probably looking at to pull out 100k... 

New rate 2.25 % New mortgage $375k.

 

Looking at maxing out parents tfsa & or really want some money on the sidelines for next 3-5 years. 

 

I know cash is trash right now but I'd really like to be cashed up for next major pullback. & like @rkbabangsaid right now is time to do it. With low rates & high house prices. Other option is waiting too see if we even get a pullback in next 5 years. & waiting to refi then. 

 

Any feedback @Gregmal. Seems like you've been in the game for quite a while. Thanks in advance. 

[Gregmal]

You're doing it adequately IMO. Cash is trash but that isnt really applicable here. You're just adding leverage and in a way derisking your asset. If the market keeps cranking you'll be able to run another cash out refi at a $700k appraised value in a few years anyway. If the market drops...well, you'll be thankful you monetized it at a higher price. 

 

In my case I have ample liquidity at the moment so I have no interest in pulling the trigger on a refi right now. But if you dont then its a wise move. Always have liquidity on hand. That doesnt necessarily have to be cash, just access to it. 

[Monsieur_dee]

Always have liquidity on hand. That doesnt necessarily have to be cash, just access to it. 

 

How do you have ample liquidity without having cash? Short term bonds / stocks. 

 

Yeah I figure if either housing or stock market drops... I'll be more prepared . But like you said cash is trash in this high inflation environment. 

 

Thanks again. 

[Gregmal]

As far as personal finance is concerned...marginable securities, lines of credit, cash substitutes like SPACs, even something like a put which increases in size generally with a market decline will then because a source of funds to make investments with during distress. Home equity can be as well, although typically it takes a few weeks to tap into and markets can theoretically freeze up during periods of chaos, although this notion was somewhat disproven last March when I had zero trouble doing a refi. Not for everyone, but works for me. 

[rkbabang]

Besides cash and stocks there are bonds, a HELOC, or just simply a house with some equity that you could get a HELOC or do a cash-out refinance.  Maybe a margin account which you can tap.   Something else of value that you can sell (gold, luxury/antique cars, etc).

[Monsieur_dee]

Thanks guys. I might wait a few months (almost done basement) but cash refi seems like my best bet. Thanks a ton.