Personal Finance

Should I cancel my HELOC?

  • Last Updated:
  • May 20th, 2018 2:27 pm
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[OP]
Deal Addict
Nov 12, 2008
1925 posts
367 upvotes
Aurora

Should I cancel my HELOC?

I have a HELOC I opened 5 years ago for the sole purpose of receiving $2500 cash back.
I haven't touched it since then and have no plans on using it.

I'm paying a $6/month account fee and am inclined to close it, but what would be some reasons for keeping it open?
13 replies
Sr. Member
Feb 21, 2010
557 posts
102 upvotes
Scarborough
Assuming this is NBC, just go into branch and tell them you want to close it if they continue charging you $6 monthly. They will most likely give you a break for one year. You can then revisit this next year.
[OP]
Deal Addict
Nov 12, 2008
1925 posts
367 upvotes
Aurora
romeocanada wrote:
May 17th, 2018 11:49 am
Assuming this is NBC, just go into branch and tell them you want to close it if they continue charging you $6 monthly. They will most likely give you a break for one year. You can then revisit this next year.
Procrastination - I love it.
Yes it's NBC. If they don't call my bluff should I just close it? I imagine they'll look at my history that I haven't touched it in 5 years and see no advantage for them to keep it open.

I'm basically looking for any compelling reasons to leave it open, regardless of the $6 fee. I have zero intentions of using it. The only reason I know of is it's a safeguard against title theft, but I don't know how realistic it is to keep it for only this reason.
Deal Addict
Nov 24, 2013
4706 posts
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Kingston, ON
Gweedz wrote:
May 17th, 2018 12:28 pm
Procrastination - I love it.
Yes it's NBC. If they don't call my bluff should I just close it? I imagine they'll look at my history that I haven't touched it in 5 years and see no advantage for them to keep it open.

I'm basically looking for any compelling reasons to leave it open, regardless of the $6 fee. I have zero intentions of using it. The only reason I know of is it's a safeguard against title theft, but I don't know how realistic it is to keep it for only this reason.
-It’s a safeguard against title fraud if you don’t have a mortgage. If you still have a mortgage, then that charge would serve that purpose.
-It’s one of the lowest interest sources of debt, particularly revolving in nature. Maybe there’s something you’d need to borrow for?
-Getting a new HELOC down the road could involve an appraisal fee and legal fees in the hundreds of dollars. Sometimes those get (partially) waived/covered. $6/mo would take a lot to add up to that.

Maybe you’re debt averse, have no mortgage, debt, and no need for any going forward. A HELOC could be a source of funding for investments. With a demonstrable paper trail that you borrowed to invest, investment loans are tax deductible, so the net cost to you of doing so would be less than the nominal P+0.5% interest. There’s more details necessary to know whether that makes sense to do or not.
Deal Addict
Jul 15, 2009
1208 posts
339 upvotes
There might be a discharge fee for closing it.

You could use it as a chequing account.
Jr. Member
Aug 19, 2016
141 posts
59 upvotes
Close it. You can go elsewhere and get a HELOC or just a regular LOC that does not have any monthly fee.
Jr. Member
Aug 19, 2016
141 posts
59 upvotes
Mike15 wrote:
May 17th, 2018 9:20 pm
-It’s a safeguard against title fraud if you don’t have a mortgage. If you still have a mortgage, then that charge would serve that purpose.
Can you explain that one? I have a property in Canada with a HELOC attached to it, but no mortgage. Unlike the OP's, mine isn't charging me any monthly fee. I'm expecting at some point that Simplii is going to try and find a way to close it, since I'm a non-resident, and they seem to hate that utterly (made me close the checking account, etc., but I refused to pay any fee to close the HELOC and they backed off).
Member
Mar 30, 2009
355 posts
45 upvotes
Toronto
inside wrote:
May 17th, 2018 10:35 pm
Can you explain that one? I have a property in Canada with a HELOC attached to it, but no mortgage. Unlike the OP's, mine isn't charging me any monthly fee. I'm expecting at some point that Simplii is going to try and find a way to close it, since I'm a non-resident, and they seem to hate that utterly (made me close the checking account, etc., but I refused to pay any fee to close the HELOC and they backed off).
Because technically this part of your statement is false. A HELOC is a mortgage, it just happens to be a revolving line of credit (the credit advanced doesn't accrue interest until it is spent, the debt balance doesn't necessarily need to amortize, and becomes available again when it's repaid) as opposed to an installment loan (credit starts accruing interest immediately when advanced and doesn't become available again after it's repaid, and the balance is amortized). Since your lender has a lien on the title already it can't be released until the mortgage is discharged (i.e. the HELOC is closed), making it far more difficult for your title to be used fraudulently.

Now, if you have an installment loan secured by a lien on your title as collateral (what most people mean when they say "mortgage"), then you don't need the HELOC as a safeguard, as the lender has a lien on the title until the installment loan is paid off and discharged.

In any case, the point here is if someone has a lien on the title of your property, it's not getting released to anybody until that lien is removed. Doesn't matter whether it's because of a traditional mortgage installment loan, a HELOC, a CRA lien for back taxes, municipal lien for delinquent property taxes, deficiency judgement from a legal settlement, whatever. But a HELOC is the lowest cost way to do it (almost nothing beyond the costs to open it when it's unused), and provides the most benefit (immediate access to cheap cash without having to apply again later), which is why it's the generally recommended way to accomplish this (though I would not necessarily say it's a good idea to open a HELOC just for this reason, but if you have one open anyway, it's a decent reason not to close it).
Deal Addict
Nov 24, 2013
4706 posts
1424 upvotes
Kingston, ON
inside wrote:
May 17th, 2018 10:35 pm
Can you explain that one? I have a property in Canada with a HELOC attached to it, but no mortgage. Unlike the OP's, mine isn't charging me any monthly fee. I'm expecting at some point that Simplii is going to try and find a way to close it, since I'm a non-resident, and they seem to hate that utterly (made me close the checking account, etc., but I refused to pay any fee to close the HELOC and they backed off).
In line with Corvillus's response above,

Either a HELOC or a Mortgage (in the colloquial sense) constitute a charge that's registered against your property. The safeguard is this charge has to be discharged in order for the property to change hands. All I was trying to say was that if you still have a "mortgage," then you already have this safeguard. HELOC becomes a cheap option to maintain that protection once your mortgage is done. I couldn't really tell from the OP if they still had a mortgage or not.
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Jan 27, 2004
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Toronto
Gweedz wrote:
May 17th, 2018 12:28 pm
Procrastination - I love it.
Yes it's NBC. If they don't call my bluff should I just close it? I imagine they'll look at my history that I haven't touched it in 5 years and see no advantage for them to keep it open.

I'm basically looking for any compelling reasons to leave it open, regardless of the $6 fee. I have zero intentions of using it. The only reason I know of is it's a safeguard against title theft, but I don't know how realistic it is to keep it for only this reason.
One reason is quick and easy access to a low interest loan.
Another is that it will take you a good $1000 in legal fees toset it up at another bankif you choose to do so.
Otherwise... You made$2500?
Even if you go to a bigger bank that doesnt charge maintenence fees, youre still ahead. You got $2500 out of it.
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May 8, 2009
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Thinking Face definitely pro's and con's to closing it. Keep it if you have a decent chance of using it in the next few years. Else close it. There will likely be a closing fee for a HELOC, so see if they'll waive the monthly fee for you for a good while. $6/month would be enough to annoy me, but would have to assess the odds of using it and also the fees involved in closing it.

Got a uLOC with no monthly fee kicking around that I never use and will never cancel, but a HELOC is trickier. If you plan on moving / selling your home in the next while, then best to close that HELOC soon.
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[OP]
Deal Addict
Nov 12, 2008
1925 posts
367 upvotes
Aurora
Thanks to everyone for their replies. I've received enough info to decide, and even learned some things.

I'll ask them to waive the fee, if they give me any resistance I'll close it. I don't even bank with them so it would be good to simplify my portfolio.

Thanks again!
Deal Addict
Dec 12, 2009
2562 posts
831 upvotes
Toronto
Gweedz wrote:
May 18th, 2018 11:24 am
Thanks to everyone for their replies. I've received enough info to decide, and even learned some things.

I'll ask them to waive the fee, if they give me any resistance I'll close it.
You could look at it differently. If they gave you $2500 to open it, they prepaid their own fees for ~34.72 years.

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