Real Estate

Closed Term Credit Line to replace existing mortgage

  • Last Updated:
  • Jun 3rd, 2020 6:11 pm
[OP]
Newbie
Oct 23, 2010
61 posts
2 upvotes
Toronto

Closed Term Credit Line to replace existing mortgage

The mortgage I have on my property is currently up for renewal. I'm looking to refinance the mortgage to take out additional equity against my house.

A mortgage advisor from one of the big banks informed me about an option to have a Closed Term Credit Line effectively replace my mortgage.

From the way it seems, this option seems almost identical to a mortgage (rate is identical to a mortgage; early repayment options are available), but with the added bonus of being able to continue drawing from the line so long as the initial balance was repaid.

Are there any drawbacks from going ahead with this or why this isn't a more popular option?
1 reply
Deal Fanatic
User avatar
Feb 2, 2014
8329 posts
2334 upvotes
Toronto
sen6es wrote: The mortgage I have on my property is currently up for renewal. I'm looking to refinance the mortgage to take out additional equity against my house.

A mortgage advisor from one of the big banks informed me about an option to have a Closed Term Credit Line effectively replace my mortgage.

From the way it seems, this option seems almost identical to a mortgage (rate is identical to a mortgage; early repayment options are available), but with the added bonus of being able to continue drawing from the line so long as the initial balance was repaid.

Are there any drawbacks from going ahead with this or why this isn't a more popular option?
Because the rate is high, it's not identical.

For a mortgage, best rate for a transfer is Prime -.60% 5-year variable. For a refinance, Prime -.30% 5-year variable.

For a HELOC, typically rates are Prime +.50% (although you may get lower YMMV).

I think you're misunderstanding what the rep said (or the rep is not that good). With these all-in-one products, you can have a mortgage component and a LOC component. The mortgage component may be about the same as a standalone mortgage (vs the all-in-one product), but the LOC rate is certainly not the same.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

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