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Using mortgage cash account as HISA (lemm.ee)
submitted 2 years ago by to c/personalfinancecanada@lemmy.ca
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Anybody have experience using BMO mortgage cash account? This is where you can pre-pay down the principle and then supposedly withdraw those funds when needed. I’ve been frustrated by the terms and conditions on my daily HISA so thinking this could be a way to get the equivalent of 5.15% (my current mortgage rate) for money that I don’t need to touch frequently. Seems like I can’t do better than this even in a HISA ETF.

My concerns are: am I thinking about this the right way? (Paying down principle on mortgage is equivalent to earning that percentage in a regular bank account?). Does this BMO mortgage feature really work like this? It wasn’t advertised to me, I had to dig into it.

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[–] 2 points 2 years ago

To my understanding, this is how re-advanceable mortgages work: the mortgage portion and the HELOC portion are separate. But, as soon as you make a repayment on the mortgage, your available borrowing limit on the HELOC increases.

This separation is useful, for example, when implementing the Smith Manoeuvre, as you need to keep track of the interest paid on the money borrowed to invest.

However, when renewing, the amount you owe on the HELOC might be incorporated into the mortgage, especially if you switch to a lender that doesn't offer re-advanceable mortgages.

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