Using Line of Credit to reduce Debit

We are going to open a line-of-credit account at CIBC next week. Our plan is to pay down our mortgage by borrowing from it. We have a fixed mortgage at TD, and the rate is 4.852%. It will be another 4 years until the term is due. The rate of the line-of-credit account is premium plus one point, currently at 3.5%. By borrowing up to 15% of the original amount of our mortgage and double the scheduled payment amount, we can save more than one point on the interest rate. In a long run, this could turned out to be lot of money.

But this is still not the whole story. We can save more than that and may pay off the mortgage in half time. The trick is: put all our cash into the line-of-credit account, including our pay checks. Since we will not spend all the pay in the same day, so the money will save some interest for us. (The interest is calculated daily)

Now I just regret we did not hear this great idea few years ago.

Stock markets soar as U.S. proposes rescue package

North American stock markets soared Friday in reaction to news of a U.S. government plan to buy up toxic assets, such as bad mortgages, from troubled banks.

U.S. Treasury Secretary Henry Paulson said Friday the bold plan will be expensive but less costly than if the government does nothing.

Paulson said he will work through the weekend with congressional leaders to finalize the plan.

It “must be finely designed and sufficiently large to have maximum impact,” he said. Yesterday, Paulson said the root cause of the stress in capital markets is the real estate correction.

BNN’s Michael Kane said the new plan was like “cancer surgery where you get the bad stuff away from the good stuff.”

In reaction, the Toronto stock market skyrocketed almost 600 points in early trading Friday.

Toronto’s S&P/TSX composite index was up 583.42 points, or 4.9 per cent, to 12,647.99.

New York’s Dow Jones industrial average spiked 380.97 points to 11,400.66.

Hong Kong’s Hang Seng Index jumped 9.6 per cent to 19,327.73, while Japan’s Nikkei 225 average rose 3.8 per cent to 11,920.86.

Britain’s FTSE 100 jumped 9 per cent to 5,329.6 and France’s CAC 40 shot up 8.2 per cent. Germany’s DAX added 5.7 per cent.

Daniel McCormack, a strategist for Macquarie Securities in Hong Kong, said the U.S. plan has given investors a “light at the end of the tunnel.

“The solution is of such a magnitude that it could eventually fix the problems,” he said. “That’s hugely important at the moment because that’s what markets are focused on.”

Meanwhile, in a dramatic step Friday, the U.S. Securities and Exchange Commission temporarily banned short-selling of financial stocks.

Short-selling is the practice of betting against company stocks.

Short-sellers borrow shares in hopes of selling them later at a lower price while claiming the difference.

Some short-sellers have been accused of spreading false rumours to make sure stock prices fall.

“The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets,” SEC chairman Christopher Cox said in a statement.

“The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets.”

Heavy amounts of short-selling have been blamed as one of the reasons for the fall of investment firm Lehman Brothers and other major companies.

With files from The Canadian Press