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What is better: a mortgage or a line-of-credit (LOC):

A LOC MAY have advantages over a mortgage:
a. it is more flexible as it is usually interest only
b. you can prepay any amount, and withdraw it later,
c. it has no "forced" principal reduction component,
d. it has potentially lower, usually 0, upfront fees
e. it can be up to 75% of the value of your property, behind a mortgage


A mortgage MAY have advantages over a LOC:
a. the interest rate may be lower, or
b. you can get a higher loan-to-value (if this is what you want), up to 95% or even 100%, or
c. it can be a fixed interest rate as opposed to a variable prime based LOC.

Always get a LOC when you do not need it. Don't wait until you're disabled or unemployed or have that awesome deal in front of you and need cash as the bank may not give it to you.

Some banks even allow you to have a LOC behind a mortgage with the LOC increasing as the mortgage decreases, for a total fixed amount.

Analyze pro's and con's .. then decide !

Any serious investor should have their LOC maxed out.. even if you don't need it .. it costs nothing until you tap into it !!

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Written by Thomas Beyer. Thomas is president of Prestigious Properties Group - www.prestprop.com
Prestigious Properties Group specializes in acquiring, managing, and turning around under performing multi-family apartment buildings. As of 2009 he currently oversees operation of approximately 85 million dollars of real estate assets, with a total of over 1,150 units in AB, BC, SK, MI and TX. He can be reached through phone at 403-678-3330, through email at tbeyer@prestprop.com