Personal Finance

HELOC Limit Calculation for Properties > $900K

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  • Nov 13th, 2011 10:52 pm
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Member
Oct 29, 2009
263 posts
6 upvotes

HELOC Limit Calculation for Properties > $900K

I was told by a coworker that some banks reduce the portion of your home exceeding $900K by 50% when determining your HELOC limit.

Anyone familiar of what banks do this?

For example:

Home Value: $1,200,000
Mortgage Outstanding: $600,000
HELOC Limit = $900,000 x 0.80 = $720,000 - $600,000 = $120,000 + ($300,000 x 0.50) = $270,000
3 replies
Newbie
Nov 10, 2011
2 posts
I believe this is dependant on what financial institution you work with. I know with the FI that I work with, we reduce the limit of any mortgage from 80% to 50% above $750K. This would include our HELOC product as well.
Member
Jul 13, 2007
399 posts
192 upvotes
Calgary
CIBC calculates like this:

80% of the value up to $1M
60% on the balance over

$1.2M Property
Max lending value = $800k + $120k = $920k
$920k lending value - $600k mortgage = $320k HPLOC limit
Deal Fanatic
Jul 1, 2007
8569 posts
1763 upvotes
Depends on the city you live in too. Back when I did mortgages at TD there was a short time when Edmonton was considered "Urban" and Calgary "Major Urban" where the "sliding scale" was applied at $500,000 for properties in Edmonton and $750,000 in Calgary. After the boom continued to inflate house prices for a few more months Edmonton also became "Major Urban".

I think it really has to do with liquidity of expensive properties in various markets. ie: in a small town in the maritimes a $750K property is a mansion and there's a very small market for it (in case the mortgagor defaults), thus the bank doesn't want to take as much risk with it. In Vancouver it's a 1500 sq ft starter home.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.

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