Personal Finance

Using different financial institutions - HELOC and Mortgage

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  • Jul 11th, 2014 4:02 pm
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[OP]
Jr. Member
Sep 16, 2009
151 posts
8 upvotes
Toronto

Using different financial institutions - HELOC and Mortgage

I'm looking to purchase a property to renovate. Currently looking at various finance options. Here's a breakdown of what I'm looking at.

Option A: Mortgage and HELOC with the same financial institution
Pros: Don't have to pay separate closing costs
Cons: Interest rate is 2.99% not the best interest around

Option B: Mortgage with one financial institution & HELOC with a separate financial institution
Pros: Interest rate is lower than option A at 2.89%
Cons: Have to pay separate closing costs for HELOC (approx. $1500 - 2000)

From your perspective, what would you choose and why?

Thank you for your input in advance. Thanks
9 replies
Deal Fanatic
Mar 24, 2008
5716 posts
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Option A, the difference in rates is only 0.1%, nothing to lose your sleep over. Another pro is that you don't need to keep moving money around from one bank to another.
Deal Addict
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Jan 2, 2012
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Lenders offering a mortgage/HELOC combo re-advanceable product, generally have very competitive rates and there are no separate fees.

Talk to a broker, don't go to the lenders directly.
Deal Fanatic
Mar 24, 2008
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rob444 wrote:
Jul 11th, 2014 2:28 pm
Lenders offering a mortgage/HELOC combo re-advanceable product, generally have very competitive rates and there are no separate fees.

Talk to a broker, don't go to the lenders directly.
Why not? I had mine through RBC, they matched the rate with lowest mortgage rate (based on the term) in the market and gave me HELOC at 3.5%. This is without involving a broker or a third party. IMO, the bank will match the rate from Option B.
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ksgill wrote:
Jul 11th, 2014 2:31 pm
Why not? I had mine through RBC, they matched the rate with lowest mortgage rate (based on the term) in the market and gave me HELOC at 3.5%. This is without involving a broker or a third party. IMO, the bank will match the rate from Option B.
I don't think RBC deals with brokers in general, so in that case there's no choice.

In many cases banks play too many games. They often refuse to negotiate off their initial rate offer, and make you shop around and come back to them with a competing offer before they'll match it. Of course every case is different.

Using a broker is completely free and in MANY cases i've heard of them getting better rates from the same lender, as opposed to going to that lender directly. Plus they can ship around to multiple lenders to ensure you really are getting the best market rate.
Deal Fanatic
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^ ah makes sense. I just had to send a URL to Scotiabank's posted rate and they matched right away - that was a while ago though. Using a bank is completely free as well and if they match the rate, it's great, if not, I am willing to shop around.

Finding out the "best rate" is a joke, takes a few minutes of googling (Rate Hub) to see what the different institutions are offering.
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Jan 2, 2012
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ksgill wrote:
Jul 11th, 2014 3:45 pm
^ ah makes sense. I just had to send a URL to Scotiabank's posted rate and they matched right away - that was a while ago though. Using a bank is completely free as well and if they match the rate, it's great, if not, I am willing to shop around.

Finding out the "best rate" is a joke, takes a few minutes of googling (Rate Hub) to see what the different institutions are offering.
Ya it's super easy to find out market rates, but it's incredible how many people simply sign up for a mortgage based on what their personal bank offers them and don't bother (or don't know how) to check themselves what actual market rate is. For this reason the big banks usually stay firm on a bad rate and just hope the borrower will take it.
Newbie
Apr 19, 2009
3 posts
Calgary
sooperG wrote:
Jul 11th, 2014 1:32 pm
I'm looking to purchase a property to renovate. Currently looking at various finance options. Here's a breakdown of what I'm looking at.

Option A: Mortgage and HELOC with the same financial institution
Pros: Don't have to pay separate closing costs
Cons: Interest rate is 2.99% not the best interest around

Option B: Mortgage with one financial institution & HELOC with a separate financial institution
Pros: Interest rate is lower than option A at 2.89%
Cons: Have to pay separate closing costs for HELOC (approx. $1500 - 2000)

From your perspective, what would you choose and why?

Thank you for your input in advance. Thanks
What seperate costs are we talking here? From what I know the HELOC cost is about $400 and the mortgage has nothing additional (?). Or I am wrong?
I paid my mortgage off a few years back so I don't recall any charges other than land titles which I wonder if you have to pay separately anyways. Never had a HELOC, but I am interested in finding out the best option here.

Don't forget that the RBC homeline and other mortg/heloc products are collateral charges. That is very costly when trying to re-new mortgage with a different lender down the road.
Deal Fanatic
Mar 24, 2008
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rob444 wrote:
Jul 11th, 2014 3:51 pm
Ya it's super easy to find out market rates, but it's incredible how many people simply sign up for a mortgage based on what their personal bank offers them and don't bother (or don't know how) to check themselves what actual market rate is. For this reason the big banks usually stay firm on a bad rate and just hope the borrower will take it.
Agreed. Banks are greedy bastards and people should be aware of what they are signing up for. If they cannot, they should get a broker to do that for them - good point.
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Mar 24, 2008
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Red_Flame wrote:
Jul 11th, 2014 3:54 pm
...
Don't forget that the RBC homeline and other mortg/heloc products are collateral charges. That is very costly when trying to re-new mortgage with a different lender down the road.
Under the RBC homeline plan, the HELOC is a collateral charge but the mortgage is a conventional mortgage. All of the morgages offered by TD are collateral - something to watch out for.

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