Real Estate

Do you regret having a collateral mortgage?

  • Last Updated:
  • Dec 10th, 2017 6:35 pm
[OP]
Jr. Member
Oct 21, 2017
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Do you regret having a collateral mortgage?

If you have a readvanceable collateral mortgage, do you regret having it and not being able to transfer out at the end of the term to another lender for a better rate without huge legal costs and not using the HELOC as much as you would like to?

For readvanceable collateral mortgages, do they still offer you a competitive rate at renewal compared to when you first got it? I understand the rate might be a tad bit higher because it is a product with the readvanceable feature.
15 replies
Deal Addict
May 31, 2007
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curiousgeorge1000 wrote:
Dec 7th, 2017 3:14 am
If you have a readvanceable collateral mortgage, do you regret having it and not being able to transfer out at the end of the term to another lender for a better rate without huge legal costs and not using the HELOC as much as you would like to?

For readvanceable collateral mortgages, do they still offer you a competitive rate at renewal compared to when you first got it? I understand the rate might be a tad bit higher because it is a product with the readvanceable feature.
NO regrets. Like I said in other thread, slightly higher rate (maybe .20) at renewal but HELOC is well worth it.

Some factors to consider:

How big your mortgage is
What are you using HELOC for?
Will you be paying down mortgage with extra payments
Deal Addict
May 31, 2007
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Actually new OSFI rules Jan 1 state if you switch lender, you are subject to a new stress test at rates approx 5%+. Keep in mind, maybe you won't be able to switch.

Before this mortgage brokers want you to switch because thats how they make money and offer you savings. Don't think this is going to work as well for them anymore.
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Jul 14, 2006
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I regret nothing (except for that one night in Bangkok)
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Dec 11, 2008
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I read a bit about these and decided against it. Another reason why I believe I did not go with TD. At the end i don't think it affects us since we don't plan to renew but at least we can now shop around for a good HELOC once the house is paid off.
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Aug 13, 2008
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Mississauga
Jungle wrote:
Dec 7th, 2017 7:16 am
NO regrets. Like I said in other thread, slightly higher rate (maybe .20) at renewal but HELOC is well worth it.

Some factors to consider:

How big your mortgage is
What are you using HELOC for?
Will you be paying down mortgage with extra payments
can you point us to some good reading material where I can I can find out advantages of HELOC when it comes to TD's collateral mortgages? vs. regular mortgages?
need to educate myself on how the other 3 factors are also impacted that you mentioned: size of mortgage / what is HELOC for / extra payments....
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bk2the6ix wrote:
Dec 7th, 2017 9:16 am
can you point us to some good reading material where I can I can find out advantages of HELOC when it comes to TD's collateral mortgages? vs. regular mortgages?
need to educate myself on how the other 3 factors are also impacted that you mentioned: size of mortgage / what is HELOC for / extra payments....
I don't have anything on hand other than try google search td heloc and put rfd in the search. I know I'm the past there has been some discussion on td heloc. I recall some didn't like how it was automatic preventing them, to switch mortgage.

For me personally i like the heloc because of so many reasons, can be used for investing (when time is right), emergency fund , Reno fund, or unexpected large expense like a roof on the house, furnace break down, etc or something. Then you just pay it off right after.

But I would exercise caution because I think almost most joe public probably use it as atm machine for consumption, bad habits then debt trap. This is not what you need use it for.

For us We made a lot of extra payments and lump sum to mortgage anyway so the savings was huge maybe knocking off almost 20 years of mortgage payments if we stayed on 30 year amortization. So switching mortgages for .2 saving may not have resulted in too much as balance kept getting lower.

Regardless we dumped a lot into the stock market using heloc 6 and 7 years ago and fast forward return on that is much higher then having no heloc and switching mortgage.

But again this may not work as well now because markets are not cheap and also most people likely underperform stock market so using leverage can be very risky and generally not advised because if investment fails you still hold the debt and payment.
Last edited by Jungle on Dec 7th, 2017 9:32 am, edited 1 time in total.
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Dec 11, 2008
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Jungle wrote:
Dec 7th, 2017 9:32 am
I don't have anything on hand other than try google search td heloc and put rfd in the search. I know I'm the past there has been some discussion on td heloc. I recall some didn't like how it was automatic preventing them, to switch mortgage.

For me personally i like the heloc because of so many reasons, can be used for investing (when time is right), emergency fund , Reno fund, or unexpected large expense like a roof on the house, furnace break down, etc or something. Then you just pay it off right after.

But I would exercise caution because I think almost most joe public probably use it as atm machine for consumption, bad habits then debt trap. This is not what you need use it for.

For us We made a lot of extra payments and lump sum to mortgage anyway so the savings was huge maybe knocking off almost 20 years of mortgage payments if we stayed on 30 year amortization. So switching mortgages for .2 saving may not have resulted in too much as balance kept getting lower.

Regardless we dumped a lot into the stock market using heloc 6 and 7 years ago and fast forward return on that is much higher then having no heloc and switching mortgage.

But again this may not work as well now because markets are not cheap and also most people likely underperform stock market so using leverage can't be very risky and generally not advised because if investment fails you still hold the debt and payment.
I think this is how I understood that as well. Unfortunately I feel like many end up getting this without know about it and the benefits/risks.
Sr. Member
Jan 9, 2010
793 posts
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Jungle wrote:
Dec 7th, 2017 7:16 am
NO regrets. Like I said in other thread, slightly higher rate (maybe .20) at renewal but HELOC is well worth it.

Some factors to consider:

How big your mortgage is
What are you using HELOC for?
Will you be paying down mortgage with extra payments
I'm not sure the HELOC point is valid. I have a standard charge mortgage with MCAP and have a HELOC at prime with CIBC.
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May 31, 2007
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moofur wrote:
Dec 7th, 2017 9:42 am
I'm not sure the HELOC point is valid. I have a standard charge mortgage with MCAP and have a HELOC at prime with CIBC.
Not sure how that works it sounds like you have a second mortgage on title with two different lender. A lot of time brokers mortgage are underwritten by big 5, maybe your Mcap is funded by Cibc and rebranded sold by Mcap.

Regardless with heloc you have a collaterals charge and must pay large fees to switch mortgage upon renewal. That is what the topic is about weather it's worth it.

Mortgage brokers in the past would argue to always switch as they can probably beat your lenders renewal rate.

The Ofsi stress test throws a big problem in this now because you'll have to pass a stress test to switch any lender n ow.

Some keep current lender as they see value in having heloc. .
[OP]
Jr. Member
Oct 21, 2017
108 posts
10 upvotes
Jungle wrote:
Dec 7th, 2017 7:16 am
NO regrets. Like I said in other thread, slightly higher rate (maybe .20) at renewal but HELOC is well worth it.

Some factors to consider:

How big your mortgage is
What are you using HELOC for?
Will you be paying down mortgage with extra payments
Mortgage size will be 35% LTV. Will be doing 35% down.

I'm planning to use HELOC for investment but in the meantime I'm planning to pay down the mortgage aggressively each year with prepayments of $20-30k. With the HELOC and readvanceable mortgage, I am able to maintain liquidity and get the money out easily when there's a downturn in the market or if I need the cash suddenly for emergency. I'm also planning to have 1 year of cash on hand for emergencies due to the commissioned job.

The readvanceable mortgage provides that flexibility and the readvanceable mortgage with HELOC rate is 2.99% 5 year fixed. It is 0.15% higher than a standard mortgage.
Sr. Member
Jan 9, 2010
793 posts
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Jungle wrote:
Dec 7th, 2017 9:58 am
Not sure how that works it sounds like you have a second mortgage on title with two different lender. A lot of time brokers mortgage are underwritten by big 5, maybe your Mcap is funded by Cibc and rebranded sold by Mcap.

Regardless with heloc you have a collaterals charge and must pay large fees to switch mortgage upon renewal. That is what the topic is about weather it's worth it.

Mortgage brokers in the past would argue to always switch as they can probably beat your lenders renewal rate.

The Ofsi stress test throws a big problem in this now because you'll have to pass a stress test to switch any lender n ow.

Some keep current lender as they see value in having heloc. .
Nope.. I've had this HELOC for a while and I've already switched lenders while keeping the HELOC with CIBC.... I remember having this discussion when I was setting up the HELOC and in summary they were only able to set up the HELOC to the amount of equity that I had in my home multiplied by a certain LTV %. Given that I have a relatively small mortgage (and a lot of equity), I was able to set up a rather large HELOC with CIBC.
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curiousgeorge1000 wrote:
Dec 7th, 2017 12:37 pm
Mortgage size will be 35% LTV. Will be doing 35% down.

I'm planning to use HELOC for investment but in the meantime I'm planning to pay down the mortgage aggressively each year with prepayments of $20-30k. With the HELOC and readvanceable mortgage, I am able to maintain liquidity and get the money out easily when there's a downturn in the market or if I need the cash suddenly for emergency. I'm also planning to have 1 year of cash on hand for emergencies due to the commissioned job.

The readvanceable mortgage provides that flexibility and the readvanceable mortgage with HELOC rate is 2.99% 5 year fixed. It is 0.15% higher than a standard mortgage.
You should see if you can actually make more money vs paying down your mortgage by investing in blue chip stocks. It depends what rate you secured. For example I'm at 2.10% fixed 5 years since this past summer. I'm doing my minimum payments and investing everything else in blue chips like Teleco's, Utilities and everything that is very secure even during a downturn. For example, Enbridge pays over 5% dividend right now. And capital gains will be there in the close future.

I too was like you, looking for ways to maximize my pre-payments, but then I realised, why would I do that, when I have secured such a low rate and I can take advantage of the current market. Of course timing could bite me in the arse, but I'm planning once the 5 years is close to end, to liquidate as much as possible and pay out as much mortgage as I can before renewing, depending of course the rates available 5 years from now the market status.
[OP]
Jr. Member
Oct 21, 2017
108 posts
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Messerschmitt wrote:
Dec 9th, 2017 3:26 pm
You should see if you can actually make more money vs paying down your mortgage by investing in blue chip stocks. It depends what rate you secured. For example I'm at 2.10% fixed 5 years since this past summer. I'm doing my minimum payments and investing everything else in blue chips like Teleco's, Utilities and everything that is very secure even during a downturn. For example, Enbridge pays over 5% dividend right now. And capital gains will be there in the close future.

I too was like you, looking for ways to maximize my pre-payments, but then I realised, why would I do that, when I have secured such a low rate and I can take advantage of the current market. Of course timing could bite me in the arse, but I'm planning once the 5 years is close to end, to liquidate as much as possible and pay out as much mortgage as I can before renewing, depending of course the rates available 5 years from now the market status.
Is your 2.10% 5 year fixed rate from HELOC or standard non collateral mortgage? That rate is very very attractive.

My 5 year fixed rate is 2.99% and HELOC is 3.5% (prime plus 0.3%).
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curiousgeorge1000 wrote:
Dec 9th, 2017 3:47 pm
Is your 2.10% 5 year fixed rate from HELOC or standard non collateral mortgage? That rate is very very attractive.

My 5 year fixed rate is 2.99% and HELOC is 3.5% (prime plus 0.3%).
Non-Heloc but the rate would've been the same if I went with Heloc. Just didn't wanted to complicate myself with collateral.

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