Real Estate

Split-able Collateral Mortgages and Line of Credits

  • Last Updated:
  • Jun 15th, 2020 3:23 am
[OP]
Deal Addict
Apr 5, 2016
4590 posts
3136 upvotes
Calgary/Vancouver

Split-able Collateral Mortgages and Line of Credits

I know for BMO, their Homeowner Readiline can be split into infinite possibilities of revolving and installment portions, not just one revolving and one installment. Example, you can split one HRLC limit into 5 different installment portions and revolving if you choose to do so. Let's say you have $1,000,000 limit and you want to split it 5 ways. You can do five $100k revolving line of credits and five $100k installments each with its own rate, term and amortization. You can technically ladder your mortgage rates the same way you can ladder GIC's. For a risk averse client, you can split 50% into a fixed rate and 50% into variable. Helps with the prepayment penalty as well.

I do this for a lot of clients who are looking for investment loans and third party lenders. It helps them keep track which portion is for which investment account for easier accounting. There are also people who are private lenders and use their properties as collateral to loan out. If they have 3 clients they want to loan money out to, they can split their limit into 3 ways and each person pays their own separate account. Makes keeping track of the interest accrued much easier.

Also, one thing to note you can do this at any time. Even if you have an installment already, you can split it at maturity with no cost. No change to the collateral so no additional legal and appraisal fees. You can even negotiate the rates, terms and amortization as well. Even the revolving portion, you can have separate rates, but they don't advertise this. :P

As most of you know, as you pay down the installment, the revolving portion increases. Well you can also choose which portion you want increased. You can have 1 revolving limit and multiple installments both contributing to the same limit. You can also split it so you have 2 revolving and whatever installment underneath those 2 contributing to the limit. Or however many revolving portions you want. As to the example above, you can have all five installments contributing to its own separate revolving limit. Like the private lender example, once someone pays off their portion of the loan say 50k, the limit goes back back 50k only and the lender can loan it out again. It's like a pyramid scheme LOL.

Now question came up as my client told me CIBC does not allow this unless you want to put multiple collateral charges on the property. With BMO's HRLC, there is only one collateral charge regardless of how many products attached. I always assumed other banks can do splitting but guess I was wrong, so my question is, what other financial institutions allows you to split the mortgage?

Also, not just BMO's HRLC can split, you can also split a traditional BMO HELOC, although I would suggest doing a HRLC instead cause you get the ability to add installments later on if you want.
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