Real Estate

HELOC - TD said NO

  • Last Updated:
  • Jul 2nd, 2019 8:50 pm
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[OP]
Newbie
Feb 28, 2018
16 posts
3 upvotes

HELOC - TD said NO

Hi all,

My wife was recently denied a HELOC with TD, stating her income was approx $1000 too short for the year.

Background:
Purchased home for $217k 3 years ago.
Now worth $312k
Last NOA states $51k
She is now in a new role and will likely earn closer to $60k this year.

All home & debt is under her name.

She applied for the HELOC as we have a child on the way & owe approx $40k which consists of a LOC & a credit card (partly student debt & party debt from having to undergo fertility treatments to conceive)

I earn the same as my wife though I was not part of the application as I am 2.5 years into a 5 year consumer proposal which I began before we wed (we just got married this year). I am not on the house title, nor any of her financials. She owned her home before I came into the picture and I moved in.

TD is requesting to include my income as well, but I’m sure my name on the application would make it even worse given my proposal.

What are our options? Try another bank? Credit union? My wife’s credit score is approx 720.

We are trying to get this sorted out before the baby arrives. We cannot carry on paying almost $500/month in interest, getting nowhere.

Thanks!
25 replies
Jr. Member
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Jan 7, 2019
118 posts
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HELOC apps are more difficult to approve. Try for a refinance conventional mortgage instead.
[OP]
Newbie
Feb 28, 2018
16 posts
3 upvotes
BrokeMillennial wrote:
Jun 15th, 2019 2:41 pm
HELOC apps are more difficult to approve. Try for a refinance conventional mortgage instead.
That’s what we initially went in for, but the TD advisor said this was a better route.
Deal Addict
Jan 15, 2017
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Can't go to another lender as TD registers its mortgages as collateral charges so there will be no equity available. Your only option now is to continue to pay down the debts and wait until her income is such that she will qualify on her own. You are correct that your proposal will negatively impact the application. The refinance option may involve paying pre-payment penalties which will eat into your equity and may not meet your borrowing needs.
[OP]
Newbie
Feb 28, 2018
16 posts
3 upvotes
skeet50 wrote:
Jun 15th, 2019 9:00 pm
Can't go to another lender as TD registers its mortgages as collateral charges so there will be no equity available. Your only option now is to continue to pay down the debts and wait until her income is such that she will qualify on her own. You are correct that your proposal will negatively impact the application. The refinance option may involve paying pre-payment penalties which will eat into your equity and may not meet your borrowing needs.
The mortgage term matures this year. So we can’t try another bank or credit union even though we have over $80k in equity sitting there?
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$40k in high interest debt is a sting, but still manageable.

Both of you should chase BT intro offers. Saving any on the interest charges on those balances will help you pay it off faster. I'm guessing the two of you combined could get $20-30k from MBNA. That's already at least half way there. Then hit up CIBC and RBC. Both can do reconsider line in branch, worst case scenario. Try PCO MC just for kicks (not much you can do if they say no). You'll save more in interest than you'd earn working a part-time job (though you could do that, too).
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AlwaysFlying13 wrote:
Jun 15th, 2019 9:20 pm
The mortgage term matures this year. So we can’t try another bank or credit union even though we have over $80k in equity sitting there?
You can certainly switch lenders when your term is up. You can even try and refinance with a different lender when the term is up. You will not be able to get a HELOC now though. When TD registers a collateral charge against the title of the home, it typically does so for greater than 100% of the value of the home. This means that there isn't any equity left for a HELOC, as whatever available equity is there is tied to TD.

Yours is an example of one of the disadvantages of a collateral charge - it ties you to one lender. If you are planning on moving your mortgage to a different lender at the end of the term, it will cost you money to do so as a collateral charge typically requires legal fees to discharge and make sure that you do not sign into another collateral charge.
[OP]
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Feb 28, 2018
16 posts
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Wow. That’s crappy!

So do we have any other low interest options besides a HELOC?
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AlwaysFlying13 wrote:
Jun 16th, 2019 9:21 am
Wow. That’s crappy!

So do we have any other low interest options besides a HELOC?
Well, you could sell stuff (and house if need be) to downsize and pay off the 40k, then you have a low interest credit card u can use.

How much left in the mortgage you have? 80k? 100k? Gotta be getting close to paying it off I would think
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[OP]
Newbie
Feb 28, 2018
16 posts
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tmkf_patryk wrote:
Jun 16th, 2019 4:08 pm
Well, you could sell stuff (and house if need be) to downsize and pay off the 40k, then you have a low interest credit card u can use.

How much left in the mortgage you have? 80k? 100k? Gotta be getting close to paying it off I would think
We are 29 & 30. This is my wife’s first home purchase almost 3 years ago, so no, not close to paying it off, lol!
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Apr 5, 2016
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Unfortunately equity doesn't mean much in a lending application anymore. It's all about debt servicing with income. Equity is just to determine the limit you can borrow up to. It only really matters if your equity is more than 70-80% which I used as an exception for seniors but hard to use for younger.

As it's all due to income and percentages, even if you are 0.1% over the guidelines, you'll be a hard decline.

It doesn't hurt for TD to add your name onto the application if you were upfront about being in consumer proposal. they may just need to add your name to prove the income. However, it seems that you are not on title, so they are most likely adding you on as a guarantor. Might ruin your future credit applications as they have no asset to show for but have this debt on your credit.

I would suggest switching to another bank. As you said the mortgage is due for renewal this year, most likely your penalty to break the term is 3 months interest. Even at like $200,000 at 3%, the 3 months interest is like $1500. There are many promos at many institutions offering up to $2000 cash back, more than easily covers your penalty.
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You didn’t as for a lecture, but here’s one for free.

Getting additional credit in the form of a HELOC or balance transfer or whatever without addressing the root financial issues is asking for trouble. In two years, you’ll be right back in the same spot as you are now, if not worse. And the fact that your wife is going on mat leave soon as well as the extra costs of having a child means it’s likely to be worse. The fact that you’ve wracked up that kind of debt while in a consumer proposal also doesn’t bode well.

Second, lenders would lend you at best 80% of the appraised value of your home. That means if your home is worth $320,000, the maximum HELOC + mortgage would be $256,000. In your posts, you said that the value of your home is $312,000, and you’ve got $80,0000 in equity, which means your mortgage is at $232,000, which is more than the original value of the house. So colour me confused... The net effect, though, is that there’s very possibly NOT $40,000 available to borrow.

Lecture mode off. Good luck.

C
[OP]
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Feb 28, 2018
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CNeufeld wrote:
Jun 16th, 2019 6:55 pm
You didn’t as for a lecture, but here’s one for free.

Getting additional credit in the form of a HELOC or balance transfer or whatever without addressing the root financial issues is asking for trouble. In two years, you’ll be right back in the same spot as you are now, if not worse. And the fact that your wife is going on mat leave soon as well as the extra costs of having a child means it’s likely to be worse. The fact that you’ve wracked up that kind of debt while in a consumer proposal also doesn’t bode well.

Second, lenders would lend you at best 80% of the appraised value of your home. That means if your home is worth $320,000, the maximum HELOC + mortgage would be $256,000. In your posts, you said that the value of your home is $312,000, and you’ve got $80,0000 in equity, which means your mortgage is at $232,000, which is more than the original value of the house. So colour me confused... The net effect, though, is that there’s very possibly NOT $40,000 available to borrow.

Lecture mode off. Good luck.

C
Not sure if I edited this section after you posted but a bulk of the accumulated debt was due to us undergoing fertility treatment to conceive our present pregnancy. This was not an accumulation of poor spending habits and irresponsible decisions, so we’re not worried about ending up back in a similar situation in the future, but just trying to lighten the current burden before baby arrives :)
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AlwaysFlying13 wrote:
Jun 16th, 2019 7:22 pm
Not sure if I edited this section after you posted but a bulk of the accumulated debt was due to us undergoing fertility treatment to conceive our present pregnancy. This was not an accumulation of poor spending habits and irresponsible decisions, so we’re not worried about ending up back in a similar situation in the future, but just trying to lighten the current burden before baby arrives :)
So not even halfway through a consumer proposal, you decided it was a good idea to fund something with high interest loan options, rather than save up the money first or even pursue a low interest option then. And now, when it’s time to pay the piper and reality has set it and it’s too expensive, you’re looking for alternatives. But it’s ok, because you don’t see this as an ongoing problem, even though your expenses are going to be going up at the same time as your family income is going down.

I don’t mean to be all judgey, really. I’m just pointing out from a non-emotional perspective how it appears. Even though you’ve only been able to legally get credit for 10 years, that’s twice now you’ve gotten yourself in tight situations.

I do wish you well, really. But I also know what tight money situations can do to relationships, and I know how expensive kids are. I also know how easy it is to get a HELOC going and get into the trap of making “interest only payments”, effectively treading water while never paying down the principal. It’s a dangerous slope to start down, if you don’t have your financial ducks lined up.

C
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CNeufeld wrote:
Jun 16th, 2019 9:22 pm
So not even halfway through a consumer proposal, you decided it was a good idea to fund something with high interest loan options, rather than save up the money first or even pursue a low interest option then. And now, when it’s time to pay the piper and reality has set it and it’s too expensive, you’re looking for alternatives. But it’s ok, because you don’t see this as an ongoing problem, even though your expenses are going to be going up at the same time as your family income is going down.

I don’t mean to be all judgey, really. I’m just pointing out from a non-emotional perspective how it appears. Even though you’ve only been able to legally get credit for 10 years, that’s twice now you’ve gotten yourself in tight situations.

I do wish you well, really. But I also know what tight money situations can do to relationships, and I know how expensive kids are. I also know how easy it is to get a HELOC going and get into the trap of making “interest only payments”, effectively treading water while never paying down the principal. It’s a dangerous slope to start down, if you don’t have your financial ducks lined up.

C
Some things are time-limited and worth going into debt for now, lest miss out forever.

Also I didn’t gather so much that they’re “tight” as they’re fed up with paying so much in interest while balance goes down slowly. The bank being happy to have her pay 1x.99% interest forever, but not approving to access some of her equity at 4.45% is an incredibly frustrating thing. Underwriting rules and all that, but if someone’s regularly making payments now but they’re taking them nowhere, it’s silly to say they can’t “afford” a lower payment setup that actually gets them somewhere.

That said, it is the new underwriting rules (in the last year or so) that are frustrating this. IIRC they make the qualification calculation assuming you’re maxing out the revolving HELOC and using a higher qualifying rate. It’d be much easier to get approved for an “Increase & Blend” mortgage with TD as far as I know, though that has its own trade offs.

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