HELOC ? - any bank give more then 80% limit?

[chen0289]

is it true every bank gives only up to 80% of the house equity for HELOC? I put 20% down and paid the mortgage for a year now and only have access the amount of principal I paid. I thought the point of HELOC is a credit line=equity you have in the house?

[Dilton]

No, it's illegal.

[hoob]

is it true every bank gives only up to 80% of the house equity for HELOC? I put 20% down and paid the mortgage for a year now and only have access the amount of principal I paid. I thought the point of HELOC is a credit line=equity you have in the house?

Yes, the point is you can access the equity you have in your house right now and as forecase for the years to come. Hence the need to build in a risk tolerance of 20% (recently down from 25%.)

What you paid for the house and borrowed as a mortgager is only one factor in determining the "equity" in your house.

[actng]

you're lucky if yours is rolling, where your LOC credit limit increases with every mortgage payment you make.

mine is fixed at the credit limit where i first signed my mortgage contract. the limit does not increase as i make mortgage payments. if i need more limit, i have to call TD and ask for it to be raised.

in some ways this is good. in others not so much.

either way, 80% mortgage + LOC combined is max.

[scarface]

No, it's illegal.

Not quite - he put 20% down and then paid for a year. It won't be much, but the principle amounts being paid over the year can be re-advanced, depending on the mortgage product you have. So long as the LTV is less than 80%, it is "legal"

What you paid for the house and borrowed as a mortgager is only one factor in determining the "equity" in your house.

Bingo - the problem is that you may have signed a conventional mortgage without a readvanceable line, and therefor the only lenders who will give you a loan for the 5% or so equity you have built in will probably charge you absurd rates. Go back to your lender and see if they can switch you to a hybrid "homeline" type product that will give you a readvanceable line, so long as you meet the income/credit requirements, which are usually higher than for a standard mortgage.




As others have said, if you have a re-advanceable mortgage the limit on the HELOC goes up. The sneaky little trick on these is that the banks use their own systems to evaluate what a house is worth, and they will increase the limit to 80% of what they "see" the value as. House similar to yours sold for more than you paid? Give them a call, chances are if you are a strong customer they will increase the limit. My "limit" is now what I paid for my condo 8 months ago, because I got a screaming good deal (50k below assessment) and similar ones sold for 80k more than I paid. They took an average selling price and adjusted mine up to that, minus 20%.

[afiglee]

you're lucky if yours is rolling, where your LOC credit limit increases with every mortgage payment you make.

mine is fixed at the credit limit where i first signed my mortgage contract. the limit does not increase as i make mortgage payments. if i need more limit, i have to call TD and ask for it to be raised.

Actually you may be lucky if you got your TD mortgage over a year ago and it was not registered as a collateral charge. If that was the case at the end of your mortgage term you will be free to shop around without paying too much in fees if TD does not give you the best rate. Your HELOC may stay with TD as it is a different product.

[actng]

Actually you may be lucky if you got your TD mortgage over a year ago and it was not registered as a collateral charge. If that was the case at the end of your mortgage term you will be free to shop around without paying too much in fees if TD does not give you the best rate. Your HELOC may stay with TD as it is a different product.

i still don't understand 100% how to identify a collateral charge but based on the conversations we had at the bank, I wouldn't be surprised if they registered me as a collateral charge. there was some fancy math going on where they approved me for a much higher amount for HELOC but only gave me a small portion of that. hard to explain when i don't know what was going on. for now i am content.

[scarface]

The anti-collateral mortgage rhetoric is being bandied around by mortgage brokers as a way to drum up business, and in many cases is really unfounded.

If you want any sort of HELOC, you need to pay legal fees to have it registered on the title. These fees are comparable to what it would cost at the end of your term if you wanted to move a collateral mortgage to a different lender, provided you can find a lawyer (which is not that hard) that doesn't charge an arm and a leg.

You are running a risk of being locked in with less than good rates (which in my opinion, outside of TD is very low provided you are a reasonably strong client), and having to pay later to move, against the upfront shot at paying half the fees, getting a superior product, and having the simplicity of one transaction.

Don't get me wrong - if I didn't want a HELOC I wouldn't be getting a collateral mortgage, but the systemic effect is what is interesting here.

People who are putting less than 20% down (and who can't qualify for the "homeline" type products), and generally, by and large a higher credit risk, even when you don't consider the downpayment differences. They are therefore more likely, after their original term, to not qualify for the "best" rates with the big banks, because they wouldn't have anyway. One job loss, change, etc could cause this to happen. These people are at a huge disadvantage with a collateral mortgage, but even then, most people would gladly pay $1000 in legal fees if it meant the different between a 5.49 posted big bank rate and the 3.49 a broker could offer.

My point is that for most people who will be reading this (and are taking the time to make an informed decision) the collateral route is not the evil it is made out to be - in many ways, you are simply trading a small risk of a small additional cost for convenience and a superior product.

[afiglee]

The anti-collateral mortgage rhetoric is being bandied around by mortgage brokers as a way to drum up business, and in many cases is really unfounded.

While collateral charge morgtage will work for some it has too many limitations. If you constantly need to tap into your equity to invest, do renovations, the Smith Manoeuvre, etc. then it may be a good option. You might also want to look at an account that combines the mortgage, secured line of credit, and even a checking account. Manulife One, for example: http://www2.manulifeone.ca/

But if you just want to pay off your debts and have a HELOC to leverage occasional major purchases, it is better to have a regular mortgage and a HELOC with a resonable finite credit limit. At renewal you can move your regular mortgage to another lender and it will cost you around $270 (discharge + eReg fees). My regular mortgage with TD is up for renewal and when I asked them what they can offer the "financial advisor" offered me a 5 basis points discount from their posted "special rates" "if his manager approves". So I told him it was not good enough and I had no problems taking my mortgage elsewhere. A day later I had a call from TD telling me they would match the best rate available on the market.

With a collateral charge to ensure your "loyalty" (i.e. chain you to the bank) the bank will register 80% of your property as a collateral charge (at the beginning TD registered 125%) so you have no equity in your home left if you want to get an equity loan at another lender. And they will register it at Prime+10 in case they want to increase the interest rate. So even when you pay down most of your mortgage you still will not have any equity in you home available to get a HELOC elsewhere.

A collateral charge mortgage is callable. Thechnically the bank can ask for their money back at any time. Although the probability is very low there were instances in the 80's when people were kicked out of their homes after they lost their jobs even though they were making mortgage payments. Now it is very unlikely to happen.

[actng]

how do i know if i have a collateral mortgage or not?

[afiglee]

how do i know if i have a collateral mortgage or not?

Call your lender and ask.
You can also read the mortgage papers you signed with the lender. There are a lot of fancy words and expressions that normal people have a hard time understanding but at least you will get a general idea.
Do not be disappointed if you mortgage is a collateral charge. Use the benefits of it (like increasing credit limit on HELOC if you really need it). You may not encouter the issues the collateral mortgage presents.

[ksgill]

Not quite - he put 20% down and then paid for a year. It won't be much, but the principle amounts being paid over the year can be re-advanced, depending on the mortgage product you have. So long as the LTV is less than 80%, it is ...

Question was if there are banks that give more than 80% of the value of the house as HELOC. Dilton is right. What you are suggesting is that your loc increases as you pay your mortgage down, which is correct BUT some HELOCs don't change as you pay down the house. Am I wrong?

[scarface]

Question was if there are banks that give more than 80% of the value of the house as HELOC. Dilton is right. What you are suggesting is that your loc increases as you pay your mortgage down, which is correct BUT some HELOCs don't change as you pay down the house. Am I wrong?

Not at all - I should have been more clear. To the best of my knowledge the only HELOCs that increase are ones attached to a collateral mortgage due to the nature of needing the prom note etc that they have. A standard HELOC will not - you would need a change at land titles to increase it, which is a benefit of a collateral mortgage (where the banks register for purchase price, or in the case of TD 125% or something along those lines)

I read the OP's question as asking if they could somehow tap the equity that he has built up - it wouldn't be illegal at this point for a lender to come along and give him a HELOC (or secured loan) for whatever equity he has, so long as it stays below 80% LTV.

The 80% LTV rule is "bent" quite frequently after purchase of a property - in my case, less than 8 months after I have available credit up to roughly 95% of the purchase price of my home, because the bank deemed it worth far more than I paid.


As far as wanting to know - pulling a land title search will do it - depending on province the type of mortgage will show differently - either as security (in the case of a collateral mortgage, or as a mortgage). The collateral mortgage will also show a registration for the full purchase price, not the net (which would be the actual amount of your mortgage).