LOC interest rate after residency

[FMinterview]

Is it still prime minus 0.25% when we finish residency and go into repayment?

[mavrik13]

That's my understanding.

[rmorelan]

yeah so far the rate doesn't change

 

[FMinterview]

On 3/28/2018 at 6:28 PM, rmorelan said:

yeah so far the rate doesn't change

 

Awesome! I plan to pay off my LOC ASAP after I graduate. However, what if I want to open up another LOC afterwards (for big purchases/down payments etc).. Have you heard of anyone qualify for the prime - 0.25% rate again?

[NeuroD]

4 hours ago, FMinterview said:

Awesome! I plan to pay off my LOC ASAP after I graduate. However, what if I want to open up another LOC afterwards (for big purchases/down payments etc).. Have you heard of anyone qualify for the prime - 0.25% rate again?

You can convert the LOC to a professional LOC.

[rmorelan]

5 hours ago, FMinterview said:

Awesome! I plan to pay off my LOC ASAP after I graduate. However, what if I want to open up another LOC afterwards (for big purchases/down payments etc).. Have you heard of anyone qualify for the prime - 0.25% rate again?

phD2MD is correct - a portion but at many banks not a full portion of the original LOC is converted to a personal LOC when you are done at favorable interest rates, and it is  hard to get the prime -0.25.. 

I mean also technically you cannot use an LOC for a downpayment on a house without incurring a stiff interest rate hike in your rates (100% mortgaged homes are risky business and require more mortgage insurance the government does not like them as they can lead to the disaster we recently say in 2007. Ha recently with the low rates the mortgage insurance rate was almost as high as the actual mortgage rate). Plus ha when you are earning 250K+ big purchases can be saved up for relatively easily, and if for some reason something comes up you can get a loan specifically for that (ha, like normal people).

I had  conversations about having some large LOC after and it makes bankers very nervous and isn't particularly profitable for them at that point. The LOC is bait to keep you at a bank when you have doctor level investments - ideally in their managed funds where they are earning tens of thousands of dollars a year in management fees for 30 years without really any actual cost on their end. THAT is their return on investment, and the LOC is just a loss leader (250K at prime -0.25%? yeah the bank can find a more immediately profitable way to use that money - like one of their 100 thousand mortgages with an actual associated asset at a rate higher than prime -0.25%. ). By the time many pay off the loan you have a mortgage, all your bank accounts, kids RESPs and investments at one place - moving is a pain, and we are creatures of habit.   

 

[FMinterview]

On 4/2/2018 at 5:52 AM, rmorelan said:

phD2MD is correct - a portion but at many banks not a full portion of the original LOC is converted to a personal LOC when you are done at favorable interest rates, and it is  hard to get the prime -0.25.. 

I mean also technically you cannot use an LOC for a downpayment on a house without incurring a stiff interest rate hike in your rates (100% mortgaged homes are risky business and require more mortgage insurance the government does not like them as they can lead to the disaster we recently say in 2007. Ha recently with the low rates the mortgage insurance rate was almost as high as the actual mortgage rate). Plus ha when you are earning 250K+ big purchases can be saved up for relatively easily, and if for some reason something comes up you can get a loan specifically for that (ha, like normal people).

I had  conversations about having some large LOC after and it makes bankers very nervous and isn't particularly profitable for them at that point. The LOC is bait to keep you at a bank when you have doctor level investments - ideally in their managed funds where they are earning tens of thousands of dollars a year in management fees for 30 years without really any actual cost on their end. THAT is their return on investment, and the LOC is just a loss leader (250K at prime -0.25%? yeah the bank can find a more immediately profitable way to use that money - like one of their 100 thousand mortgages with an actual associated asset at a rate higher than prime -0.25%. ). By the time many pay off the loan you have a mortgage, all your bank accounts, kids RESPs and investments at one place - moving is a pain, and we are creatures of habit.