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  • Aug 29th, 2021 12:19 am
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[OP]
Newbie
Mar 23, 2015
14 posts
3 upvotes
Ottawa

Explain HELOC

Hi, I'm considering some renovations and financing options. Possibly a HELOC. I wonder if someone could explain the process of getting a HELOC. I am in the middle of a fixed mortgage term and don't want to break the mortgage due to high penalty.

Some things I'd like to know:
What lenders have stand alone HELOCs and do not require that my mortgage be at the same bank (tangerine application says I must switch to a tangerine mortgage - I'm with Scotia - that defeats the purpose as I would just borrow the extra money if I was refinancing)?

What fees can I expect to pay if setting up a HELOC?

Are banks posted prime + x rates accurate or can I expect better (like with a mortgage)?

Anything else you think is important.

Thanks all.
12 replies
Deal Addict
Jan 15, 2017
4322 posts
3900 upvotes
Ottawa
As you are with Scotia, check to see if they placed you into a STEP. If so, it is easy to apply for a HELOC with them.

With a new HELOC application you should expect to pay for an appraisal on the home as well as legal fees to add the HELOC to your home's title. Expect $700 - $1200 to set ip up.

Most HELOC rates are exactly what you see online. There is little room for negotiation.

The most important thing to know about HELOCs is it is based on the amount of equity that you have in your home. HELOC's act like mortgages and are not eligible for mortgage default insurance. This means that the balance of your mortgage + your HELOC limit cannot exceed 80% of your home's overall value. If you don't have a mortgage on your home then a HELOC cannot exceed 65% of your home's value.
[OP]
Newbie
Mar 23, 2015
14 posts
3 upvotes
Ottawa
Thanks. This is great. I don't think we are in the STEP with Scotia, but will look into it
Deal Addict
User avatar
Sep 19, 2013
2461 posts
888 upvotes
Winnipeg
Setup fees are about $1K, needs a lawyer + appraisals. Sometimes some lenders cover a portion of that. Typical rates are P + 0.5%, but there are promos now & then, where you can get P or so. I have rarely heard anything lower than that.

The term you should ask the lender is whether they can go in 2nd position or go behind the mortgage lender. What this means is if you go bankrupt, your mortgage institution will have 1st claim and HELOC lender will have 2nd claim on the money.

There are FI rules where some FIs dont do 2nd position behind any other FI, some go 2nd position only behind some particular FIs. Check with Motusbank, they had a promo around this time last year.
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Jr. Member
Feb 26, 2005
182 posts
64 upvotes
London
I've just recently set up a HELOC with Simplii and the fees were significantly less than what has been quoted elsewhere in the thread. I believe (though I'd have to double check) that the only fee was something like $160.

Edit: Just double checked the paper work - set up fee was $150, interest rate was prime + 0.5%
Last edited by Planker on May 27th, 2021 2:53 pm, edited 1 time in total.
Member
Dec 13, 2010
413 posts
481 upvotes
Vancouver
Planker wrote: I've just recently set up a HELOC with Simplii and the fees were significantly less than what has been quoted elsewhere in the thread. I believe (though I'd have to double check) that the only fee was something like $160.
Yep, Simplii has a very low setup fee. They don't seem as open to lower interest rates because of this, although I do see that some people were able to get lower than prime+0.5% with them.

Most other lenders are $600 legal/setup + $300 appraisal for HELOCs
[OP]
Newbie
Mar 23, 2015
14 posts
3 upvotes
Ottawa
Do you need to have your mortgage with simplii to apply for their heloc? I noticed that tangerine requires this.
Thanks!
Sr. Member
Nov 22, 2012
649 posts
731 upvotes
NS
BradS937 wrote: Do you need to have your mortgage with simplii to apply for their heloc? I noticed that tangerine requires this.
Thanks!
No, Simplii does 2nd position HELOC.
Deal Expert
Aug 2, 2001
17009 posts
7345 upvotes
I have setup two HELOCs (switched for a lower rate) and both only required an appraisal. The other fees were all covered by the bank.

I would recommend going with a mortgage broker for this. They will hunt around to all the different lenders and find you the best deal. They do not make a lot of money off this, but they also do not have to do much wok to get it for you either. My broker the first time got me prime, With a different broker the second time I was able to get prime - 0.5% first year, then prime after (I currently pay 2.45%).


This was years ago so perhaps things have changed. With my interest rate at prime I haven't bothered looking for anything else and did not feel like chasing a promo rate around.
Member
Dec 3, 2008
454 posts
85 upvotes
Hamilton
in my case the bank (td) was covering fees for a srew up they did , originally they wanted to charge me appraisal fees and admin cost .. about $1000 ..when they were taking care of the all the charges they said they didnt need a house appraisal so it seems they can drop charges if they want . ps. house is paid off. they also said my monthly income is tied to amount i can borrow... house is worth $650,000
kevv
Member
Jan 4, 2009
385 posts
72 upvotes
Toronto
jevonb wrote: No, Simplii does 2nd position HELOC.
Echoing this.

Motusbank do second position also, but they have a pickier list of who your current mortgage provider is with though. They once gave me this list: Royal Bank CIBC Bank of Montreal Scotiabank TD National Bank Firstline Laurentian Bank Equitable Trust Home Trust and Credit Unions (including Meridian).
Sr. Member
Nov 22, 2012
649 posts
731 upvotes
NS
alfredkcp wrote: Echoing this.

Motusbank do second position also, but they have a pickier list of who your current mortgage provider is with though. They once gave me this list: Royal Bank CIBC Bank of Montreal Scotiabank TD National Bank Firstline Laurentian Bank Equitable Trust Home Trust and Credit Unions (including Meridian).
I only found out Motusbank was so picky after I wasted time submitting 2 applications and they did 2 credit checks. They should state their restrictions on their application. They will never get any of my businesses as I've since banned them from my approved list of FI''s.

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