Personal Finance

Do banks (Scotia) usually increase HELOC automatically when you pay/prepay main mortgage?

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Deal Addict
Feb 21, 2004
1584 posts
378 upvotes
Montreal

Do banks (Scotia) usually increase HELOC automatically when you pay/prepay main mortgage?

New to HELOCs. Do banks usually increase your available HELOC cap automatically when you pay or prepay extra $$$to your main mortgage?

I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation. The high turnover in branch employees these days ain’t helping.

For those wondering, I’m not planning on going on a credit-fueled shopping binge to help the economy, am just about to implement the cash dam strategy.
24 replies
Deal Addict
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Mar 9, 2012
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Kitchener
Mine auto-increased as the mortgage is being paid down. I don't go into the branch at all. Example: mortgage is $250,000, HELOC is $150,000 so total is $400,000 -- you pay mortgage down to $240,000, HELOC becomes $160,000 so total is $400,000.

Now, if you're trying to increase your overall total, to say, $420,000 -- then yes, you'd need to go in to sign papers.

However, to note, in my case, there is a MAX to my HELOC, which is lower than the total mortgage and HELOC, so if I pay off my mortgage, I would have a HELOC of $350,000, not $400,000.
Why can't we all just get along?
Deal Addict
Feb 21, 2004
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Montreal
@jeff1970 Which bank are you with? Is it a special option that you had to request?

Yes the HELOC limit is now 65% of LTV since Dec 2016 I believe due to changes in federal lending rules because people were using them to buy stuff
Member
Jan 2, 2009
208 posts
94 upvotes
I was with Scotia and their step program as well. Had a mortgage and a Heloc. It did not auto increase. I didn't need the entire amount so it didn't really matter to me. The time when they adjusted and upped it was when I resigned a new mortgage term. I only signed 2 year terms so every couple years I was able to get it increased.
Deal Fanatic
Dec 12, 2009
6145 posts
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Toronto
CIBC has one that auto increases monthly based on mortgage pay down. No need to keep going in branch.
Deal Addict
Jul 19, 2004
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Vancouver
HoTiCE_ wrote: New to HELOCs. Do banks usually increase your available HELOC cap automatically when you pay or prepay extra $$$to your main mortgage?

I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation. The high turnover in branch employees these days ain’t helping.

For those wondering, I’m not planning on going on a credit-fueled shopping binge to help the economy, am just about to implement the cash dam strategy.
On your credit agreement that you signed, is there a box for auto limit increase? They should have an auto increase option but I'm not sure if they changed that or not.
Deal Addict
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Mar 9, 2012
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Kitchener
HoTiCE_ wrote: @jeff1970 Which bank are you with? Is it a special option that you had to request?

Yes the HELOC limit is now 65% of LTV since Dec 2016 I believe due to changes in federal lending rules because people were using them to buy stuff
I am with NBC. I didn't make any request. In fact, it is what the advisor recommended. One problem with my Mortgage/HELOC (All-In-One) is that the mortgage doesn't show on any credit reports, it shows up on a revolving line of credit.

Just check, my HELOC is maxed at 65% as well....interesting....I wouldn't have known that had you not mentioned it!
Why can't we all just get along?
Deal Addict
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Dec 8, 2010
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I asked our banker once why our HELOC didn't auto increase (with Scotia); she said there was some (IIRC ongoing) fee to enable it, and thought we'd rather just come in and sign.

We don't actually use the HELOC at the moment, not like we're doing the Smith Manoeuvre and want to invest any extra immediately, so we didn't change anything, we just up the HELOC when we happen to be in for something else anyway.
Newbie
Oct 5, 2016
45 posts
20 upvotes
HoTiCE_ wrote: New to HELOCs. Do banks usually increase your available HELOC cap automatically when you pay or prepay extra $$$to your main mortgage?

I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation. The high turnover in branch employees these days ain’t helping.

For those wondering, I’m not planning on going on a credit-fueled shopping binge to help the economy, am just about to implement the cash dam strategy.
At TD, you have options on how to set this up. This is how mine works:

Let's say your house is appraised at $500k. A line of credit is setup for 80% of that amount ($400k).
The mortgage sits inside the line of credit as a line entry with a rate, term, and amortization period (just as it had before).
The difference between the mortgage and cap on the line of credit is the revolving portion.
As the mortgage is paid down, the principal paid becomes available automatically in the revolving portion for borrowing.

The entire $400k (80% of appraised value) is accessible but only 65% of the appraised value ($325k) can be borrowed using
the revolving portion. The other $75k can be borrowed by selecting a term, rate, and amortization period.

To increase the HELOC cap ($400k), you would need to have another home appraisal done.
Deal Guru
User avatar
Feb 2, 2014
11233 posts
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Toronto
HoTiCE_ wrote: New to HELOCs. Do banks usually increase your available HELOC cap automatically when you pay or prepay extra $$$to your main mortgage?

I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation. The high turnover in branch employees these days ain’t helping.

For those wondering, I’m not planning on going on a credit-fueled shopping binge to help the economy, am just about to implement the cash dam strategy.
Unless it has changed recently, Scotia doesn't auto-update :(

It's been quite a few years since I have inquired about this, but at that time, that was the correct answer.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Expert
Oct 6, 2005
16872 posts
2557 upvotes
HoTiCE_ wrote: I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation.
You have two balances:

1. STEP Limit
2. Credit Product Limit (Mortgages, LOCs, etc.)

Your maximum Credit Product Limit = STEP Limit.

Your STEP Limit is set when you sign your STEP/Mortgage agreement.

Your LOCs don't auto increase - you need to request a limit increase, up to your STEP limit. You can e-mail your PBO rather than go into the branch, that's what I do.
Jr. Member
Jul 23, 2008
108 posts
26 upvotes
HoTiCE_ wrote: New to HELOCs. Do banks usually increase your available HELOC cap automatically when you pay or prepay extra $$$to your main mortgage?

I’m with Scotia and their STEP program and am being told I need to go in branch to sign EVERY single time I want to increase the HELOC cap even if I have room. I asked 3 different Scotia advisors from 2 different branches and you’d think they know but am getting conflicting answers and am waiting on escalation. The high turnover in branch employees these days ain’t helping.

For those wondering, I’m not planning on going on a credit-fueled shopping binge to help the economy, am just about to implement the cash dam strategy.
Scotiabank does offer this...its called Automatic Limit Increase (ALI) I have this on My Mortgage...the verbage from my original Mortgage Approval is below

You have selected the Scotia Total Equity ® Plan Automatic Credit Limit Increase option. You agree that the credit limit increase will
be allocated to one selected revolving credit account as long as the revolving credit account has not reached the maximum credit limit.
You acknowledge that the Scotia Total Equity Plan Automatic Credit Limit Increase option requires that your collateral mortgage be title
insured by FCT Insurance Company Ltd., Stewart Title Guaranty Company or Chicago Title Insurance Company and you acknowledge
that you must pay the premium for the title insurance directly to FCT Insurance Company Ltd., Stewart Title Guaranty Company or
Chicago Title Insurance Company.
Deal Fanatic
Apr 5, 2016
6116 posts
4613 upvotes
Calgary/Vancouver
The one I have with CIBC auto increase HELOC when paying down mortgage. Every monthly payment I pay to mortgage will increase the HELOC limit. It's their Home Power Plan. If I wanted to increase it myself, then I'll have to start a new application.
Member
Mar 30, 2009
374 posts
53 upvotes
Toronto
All of the big 6 banks have some kind of collateral charge based plan that allows you to readvance your equity up to 80% total loan to value, with up to 65% being revolving accounts with interest only minimum payments, the remainder being required to amortize on a traditional installment loan. BNS has the STEP, CIBC has the Home Power, TD has the FlexLine, BMO has the ReadiLine, RBC has the HomeLine, NBC has the All in One. All of these plans do basically the same thing overall, however they may have different types of accounts that can be in the revolving / amortizing portions (and in the case of NBC, you can actually have cash accounts within it offset your revolving accounts, unless things changed, but they have a monthly fee while the others don't). And as another poster said, in the case of BNS, you have to specifically set it up to readvance your equity on a credit line, as it apparently doesn't do that by default.
Member
Mar 30, 2009
374 posts
53 upvotes
Toronto
HoTiCE_ wrote: @jeff1970 Which bank are you with? Is it a special option that you had to request?

Yes the HELOC limit is now 65% of LTV since Dec 2016 I believe due to changes in federal lending rules because people were using them to buy stuff
Yep, in fact the reason these hybrid plans exist at all is as a way to circumvent the spirit of that regulation while still technically adhering to it. So you can still keep at 80% utilization as before, you just have to periodically shuffle debt into installment terms. (i.e. the terms on my TD FlexLine say the "plan limit" is 80% - all debt, while the "credit limit" is 65%, which is the max the revolving can be, however nothing is actually stopping you from say, dropping down to 40% total utilization from payments over time, then immediately putting 10% on the credit line to invest or do a home reno or whatever, then immediately transferring it to a 30 year installment term, which now goes under the "plan limit" umbrella instead of being restricted by the lower "credit limit", not that this is necessarily a good idea mind you, but it's obvious to me that they wanted to make it easy to do.)
Deal Addict
Feb 21, 2004
1584 posts
378 upvotes
Montreal
coolspot wrote: You have two balances:

1. STEP Limit
2. Credit Product Limit (Mortgages, LOCs, etc.)

Your maximum Credit Product Limit = STEP Limit.

Your STEP Limit is set when you sign your STEP/Mortgage agreement.

Your LOCs don't auto increase - you need to request a limit increase, up to your STEP limit. You can e-mail your PBO rather than go into the branch, that's what I do.
@coolspot Do they still make you sign a physical document? My PBO just emailed me some forms to sign...every time I will want that LOC increase. This is going to annoy her real quick as I'll look at increasing every 2 months as I aggressively pay down my main mortgage
Deal Addict
Feb 21, 2004
1584 posts
378 upvotes
Montreal
And to add further effort to my cash damming strategy, Scotia does not allow pre-payment on my mortgage....FROM my Scotia bank account. The reason is that my mortgage is currently linked via PAD to my Tangerine account so money can ONLY come from there...

Completely backwards.

As a new Scotiabank day to day customer, I am really disappointed by the convoluted online banking system so far. They are years behind other banks and even Desjardins here in Quebec
Deal Expert
Oct 6, 2005
16872 posts
2557 upvotes
HoTiCE_ wrote: @coolspot Do they still make you sign a physical document? My PBO just emailed me some forms to sign...every time I will want that LOC increase. This is going to annoy her real quick as I'll look at increasing every 2 months as I aggressively pay down my main mortgage
I don't recall - I think LOC increase is just verbal as long as it's below the STEP limit. It's been a lot of years since I needed an increase. We rarely use our LOC.
HoTiCE_ wrote: And to add further effort to my cash damming strategy, Scotia does not allow pre-payment on my mortgage....FROM my Scotia bank account.
I think it's better to do lump sum payment than an extra payment, because the lump sum is applied directly to your principal, whereas an extra payment is principal + interest?
Deal Addict
Feb 21, 2004
1584 posts
378 upvotes
Montreal
I'm confirming that a form needs to be signed each and every time even though I am well below the overall STEP limit.

Extra payment goes 100% towards capital
Deal Addict
Aug 26, 2004
3724 posts
869 upvotes
Toronto
I recently went through this myself. I have a HELOC at Scotiabank. Opened it about a year ago. They do auto increase as you pay down the principle. However, not all branches offer this option. What I did was I found a branch that offered this as an option and transferred the mortgage there. Then I went in to sign a form that auto increases the amount with each payment. It was important for me as I've been doing smith manuvre for 13 years.

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