When your mortgage term reaches its maturity, three things happen.

  • There’s no penalty for pre-paying it in part or in full. You can move it to another financial institution or refinance it without a prepayment penalty.
  • You’ll get an offer from your bank to stay with them for another term. Each term option will come with an offered rate. This is a great time to shop around for the best terms.
  • Your circumstances and goals may have changed, so it’s back to the drawing board to ensure the way you choose is ideal for you.

The best way to decide this is to follow three simple but logical steps.

Your circumstances. How are you doing financially, how much debt do you have, and what is the situation where you are now?

Your goals. What would you like to achieve? For some, this may be to keep things going as they are. For others, this may involve consolidating debt or paying for a significant life expense. A change of homes may be in the wings, or a major lifestyle change may be in the forecast.

Choose a course of action. What you decide should suit your circumstances and help you achieve your goals. Simple as that may sound, it’s easy to lose sight of the forest for the trees. Choosing the correct terms, options and features can significantly narrow your search to just a few banks.

Long-term, strategic planning of your finances will have a meaningful impact on your life and, depending on your choices, can either save or cost you considerably.

I suggest treating this as an opportunity to adjust and maximize your gains in the long run. The offer you get from your bank is meant to be a sign-and-forget option, and they will often price it with that in mind. Put yourself first and call a professional. Let me help you put some of these items into perspective.

How much are you looking to borrow?

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To start, you need to understand the basic math of investing. You either buy low and sell high, or you buy well and keep for a while. Ask yourself, which one do you want to do, and how will your numbers look? Together, we can work out some scenarios and prepare you for your search.

Cash flow is what you make every month minus what you spend. What you spend every month should include a buffer for any unplanned expenses (which you should be saving up for anyways). Positive means you’re in the plus and visa-versa.

The bank views cash flow-positive property as a more robust investment and is more likely to lend preferentially against it.

How do you estimate and budget for cash flow? That’s a more extensive conversation that we can have.

Every investment comes with its own set of risks. We can consider mitigation strategies to help you manage some risks, but not all are inherent in a given investment. Real estate is no different. The plan you choose will have its own set of risks. How you manage or minimize them will depend on your unique approach.

Buying a property out-of-the-box means you’re not inheriting old problems, and the place will come with a warranty. As they say, the new car smell is never free.

An upfront conversation about your numbers can put some of these elements into perspective and help you plan your real estate portfolio around your goals, abilities, and lifestyle.

The answer is it depends. First, you should ask at least three people: your accountant, mortgage broker, and lawyer. There are considerable implications of doing so, but I’ll stay in my lane and speak only to the borrowing ones.

When you finance a property held in a holding company, there are rules you have to follow. In addition, you will:

  1. Limit your choice of lender and product options.
  2. Incur costs and be bound by some additional conditions of financing.
  3. Forfeit some privileges you may be otherwise entitled to when buying a property as an individual. And notwithstanding all of the above, it still makes sense to go the hold-co route for some specific scenarios.

Call professionals, take good notes, and run some solid numbers to make sure this makes sense for you - before you make a move. Ask to be referred to tried and true professionals who can help you improve the quality of the answers you get.

Investment concepts, where the outcome hinges on elbow grease or downright speculation, are often harder to sell to a lender. These projects will hold the operator (you) to a higher standard of financial ability to service this debt should your project hit choppy waters.

In contrast, opportunities, where properties have a strong cash flow and a solid long-term value projection, will be a lot easier. Financing costs will be lower, and the emphasis will be placed on the property itself rather than its investors.

A home equity line of credit (HELOC) is secured credit. Your home acts as a guarantee that you will repay the money you borrowed.

Up to a maximum credit limit, you can borrow money, repay it at your discretion, and borrow again. It typically comes with higher rates than their regular mortgage counterparts. You can best use them for consolidating short-term and/or recurring costs.

There are other factors to consider, and every situation is different. Talk to a professional to help weigh your options.