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Using mortgage cash account as HISA (lemm.ee)

submitted 1 year ago by nebs@lemm.ee 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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[–] Prezhotnuts@lemmy.ca 3 points 1 year ago (8 children)

They're basically offering a re-advanceable HELOC.

All the major banks have them but call them fancy names, Flex Line, home line or whatever.

Yes you could prepay down your mortgage faster to save interest. But when you withdraw those funds from the HELOC it's going to be at a way higher rate.

This strategy is very similar to the Manulife One Account. Probably explains it better than I can.

[–] nebs@lemm.ee 1 points 1 year ago (7 children)

Reading through how BMO explains it, it seems like pulling money out just adds back to the principle of my mortgage at the same mortgage interest rate, so no extra borrowing expense:

From BMO: “The re-borrowed funds are added to your mortgage principal at your existing interest rate for the remainder of the term.”

[–] Prezhotnuts@lemmy.ca 1 points 1 year ago* (last edited 1 year ago) (2 children)

So it's not even a HELOC, interesting. I wonder if there is a limit?

It says on the site it's not available with the smart fixed mortgage. I'm wondering if it's like open mortgage with a higher rate?

Edit. So I think only the pre payment money is available, and it's less flexible then a HELOC. But if you were saving for a big purchase like a trip or a car. I think it could work, unless that money can make more else where.

[–] nebs@lemm.ee 2 points 1 year ago (1 children)

Only the pre payment money is available to withdraw. I can prepay up to 20% of my mortgage every year. This feature of withdrawing your prepayment is available on regular BMO mortgages, I just switched to BMO in a 3yr fixed because they gave me the best rate.

My personal banking is with simplii and I’m not impressed with their HISA so thought about this scheme as a replacement.

[–] Prezhotnuts@lemmy.ca 1 points 1 year ago

Interesting!

I wouldn't really call it a scheme. Saving that interest while you prepay, pays down your mortgage quicker.

You just have to look at the numbers and with rates so high right now I think it makes sense. But I am not an expert.🤣

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