Personal Finance

TD flexline heloc

  • Last Updated:
  • Aug 29th, 2021 7:30 pm
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6 replies
Deal Fanatic
Jun 29, 2007
5567 posts
2093 upvotes
Vancouver
If it is a heloc, once it is set up, it likely doesn't cost you anything so why not just keep it just in case emergency comes up?
Sr. Member
Dec 13, 2010
852 posts
1312 upvotes
Vancouver
Menthol wrote: How long after signing can you cancel if you don't need anymore.
Is there a reason why you wouldn't want to keep it, even as an emergency fund?

They're good products to have available - unless you don't trust yourself to use it responsibly, which is fair. Or is the HELOC preventing you from getting another loan of some sort?
[OP]
Deal Addict
Mar 14, 2004
3327 posts
652 upvotes
North Etobicoke
The problem is I was told if I fixed a portion of it I can avoid the admin/appraisal fees. I was not told I would have to pay interest immediately on the fixed portion (and I was not aware, first time doing this) and I cannot start to use the funds immediately. So the fixed portion was placed into my account and I have to pay interest but cannot make use of it. An options
Member
Jun 6, 2017
221 posts
380 upvotes
Menthol wrote: The problem is I was told if I fixed a portion of it I can avoid the admin/appraisal fees. I was not told I would have to pay interest immediately on the fixed portion (and I was not aware, first time doing this) and I cannot start to use the funds immediately. So the fixed portion was placed into my account and I have to pay interest but cannot make use of it. An options
The fixed TD flex line is kind of like a mini mortgage term. At the end of the day this will be explained in the credit agreement you signed. If it’s a 2 year closed term then you’ll have to wait 2 years (it depends entirely on what you chose). Look at what it says about prepayment privileges it may have 20/20% per year which you could use to save interest. Depending on the amount this was for you may not have saved much money.

There is no general answer to this, if it was an open term (also an option but unlikely) then you can pay it off anytime.
Deal Fanatic
Jul 26, 2007
6727 posts
4296 upvotes
Toronto
TD flexline HELOC is TD way of saying HELOC.

I have this product for past 2 decades and paid in full few times. Made use of fixed portion within the HELOC like conventional mortgage. When that's paid off say in 5 years, amounts get added back into the HELOC, immediately on every payments.

So if you want to fixed portion of $50k, remove the funds either cashing it out or transfer to your checking account or call/visit TD to have them to do for you. Once you see $50k owed in HELOC, you can ask TD by calling/visiting and locking in a rate and term. Usually 1 year is cheapest but sometimes 2 to 5 years have good promotional rates. Even better is if you haggle for better interest rate.

The interest will occur as soon as you take out the funds from HELOC and at fixed rate inside the HELOC. Currently I have 2 fixed portions in my HELOC and there was no admin fees locking in my fixed portions.
Sr. Member
Dec 13, 2010
852 posts
1312 upvotes
Vancouver
Menthol wrote: The problem is I was told if I fixed a portion of it I can avoid the admin/appraisal fees. I was not told I would have to pay interest immediately on the fixed portion (and I was not aware, first time doing this) and I cannot start to use the funds immediately. So the fixed portion was placed into my account and I have to pay interest but cannot make use of it. An options
Ah, I see. So they've given you the cash, but you just aren't able to make use of it yet. Generally speaking, since this is essentially another mortgage portion, you can't just pay it all off without penalty (3-months interest for variable rates, more for fixed rates due to IRD). You can usually pay off a portion of it each year without penalty; TD is most likely 15%.

Check the terms of this new fixed portion that you signed into:
  • is it a 5-year term?
  • is it a fixed or variable rate?
  • what is the interest rate of this fixed portion?
  • what are the pre-payment privileges (generally TD is 15% per year)

How long until you're able to use the funds? One option is to put the funds they gave you into an EQ bank High Interest Savings Account, at 1.25%. Doing this will also allow you to deduct the interest you pay on the new mortgage term at TD, against your taxes. So depending on your marginal tax rate, putting the funds into the HISA may cover your interest, or at least reduce it to the point that the cost will be minor.

For example, say you're at a 40% tax bracket, and the interest rate on your new mortgage portion at TD is 2.0%. If you put the funds into an EQ HISA, claiming the interest deduction would make your effective interest rate: 2% X (1 - 0.4) = 1.2%. This is lower than the EQ 1.25% HISA, so you basically come out slightly ahead/break-even (because you have to pay some taxes on the earned interest in the HISA).

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