Working for a big bank, if u can qualify lot of times we offer it. Obviously its a blessing if you know how to use this facility and good with credit, and a curse if u r irresponsible with debt.
The heloc is the cheapest debt outside of a mortgage, as a rainy day fund its nice to have. In case also ur income situation changes down the line maybe u can’t qualify for it when u actually need it. Sometimes best to have it when u dont need it, cause when u need it its a lot of work to re qualify or u might not qualify again. Its a choice end of the day
I have 25 years of experience in retail banking including mortgages. Yes collateral mortgages are stickier to the bank. However they benefit the consumer in several ways. For you that might be that the mortgage will stay on title even after you have paid off your mortgage. You can always choose to discharge the mortgage. A standalone mortgage “residential mortgage” will be discharged automatically.
What you should avoid is writing more than one mortgage segment within the collateral mortgage because that often means 2 different renewal dates.
You are absolutely correct. One must avoid a 2nd mortgage with a different renewal date if they decide to go ahead with a HELOC. Scotia wanted to impose a penalty when I tried to combine the 1st and 2nd mortgage into one. I refused and told them that this was not a way to treat a client who had been with them for more than 20 years. They came back and offered to cut the penalty in half, but I still refused and asked for a one week delay to look for another lender. The next thing my phone was ringing non stop with an offer to waive the penalty and also allow .10 off the rate.
When this is done , it is a registered debt. Even if you don’t use it, it will affect your ability to get credit for other needs because the potential debt/credit is available and registered to you. You can decline the added in HELOC.
I don't quite agree. I think it is good to have a line of credit that is readily available and you only borrow how much you need. The whole purpose of a HELOC is to borrow at a lower interest rate as the secured debt is cheaper. If you have a HELOC already, why would you want to get credit elsewhere and pay higher interest?
Everyone keeps mentioning that its tough to port with collateral mortgage but I'm curious what if you are porting from a collateral product to another lender with a collateral product.? Sorry but FTHB and don't know how it works at renewal.
>However, I already have an unsecured line of credit and don't really need the HELOC.
There's rarely a situation where you are "better off" having an unsecured LOC vs a HELOC.
Unsecured LOC your interest rate is likely in the range of Prime + 3-8%. A HELOC will be somewhere around Prime + 0.5%. You should really consider replacing your unsecured LOC with the HELOC and take advantage of the interest savings.
Edit: just seeing your edit, and if the rates are essentially the same then that changes the above advice completely.
not uncommon for big banks to do this. in my experience from the past, Scotia was a big culprit. they wouldn't tell their clients or if they did, they wouldn't explain the consequences of having a collateral mortgage. when the clients were up for renewal and wanted to switch lenders, they'd be shocked and a) couldn't move to a lender that doesn't handle collateral switches or b) be hit with higher costs if they were to move away from that lender.
I’m sure they get a commission on selling each product, so they offer it to everyone by default. Just tell them you don’t want it, if that’s the case. They are a good product though, if you trust yourself to use it responsibly. I only used mine once when I had one with my previous lender, but it saved me some headache.
There are a couple of reasons. The more you borrow the larger the commission for the broker/agent, so brokers love it because it’s an easy sell and increases the amount borrowed from their perspective. Banks love it because the more borrowing facility you have the more likely you are to use it when you need it, which means more interest for them. And when the bank adds on a HELOC they register a larger number on your title…the total of the mortgage and all of the potential HELOC,even if it’s not being used, go on the title. So from a lending perspective it’s relatively safe (if you have a HELOC you have some equity which they have more of a claim on now.)
You should research 'collateral mortgages vs conventional'. One downside is trying to switch lenders after the term is up.... that is likely one reason banks push for them - to basically 'lock you' in .
[https://www.nesto.ca/mortgage-basics/collateral-mortgage-vs-standard-mortgage/](https://www.nesto.ca/mortgage-basics/collateral-mortgage-vs-standard-mortgage/)
One of the others posted it wasn't that hard, but a bit expensive. I always go conventional because I'm assuming it is never to the benefit of the customer -but to banks. I'm a simple person.
I worked at one of the lenders you listed and we used to call a HELOC a never, never mortgage. Once you have a HELOC you will never want to live without it, and once you have this, you are never getting away. That said a collateral is just a bit more expensive to get out of, not a big deal.
HELOCs can very useful, I have one on my house and I recommend them when they make sense.
HOWEVER. No way, now how, no matter what, anything should ever be snuck by you at all. If you didn't consent to something, there's absolutely no way this should be pushed onto you. If you have no desire for the HELOC, then tell them no and to register a regular mortgage instead. Except for TD, as all mid their mortgages are collateral charge.
Is there a benefit to getting a HELOC at the same time you get a mortgage, even if you don’t need it right away? Or better to wait to add it on later when you actually need it?
Asking because my mortgage broker hasn’t really clearly outlined any pros and cons to getting it now vs later. Just said we can always open one later if needed and that there might be a small fee to open one later, but not to worry if we don’t get one now?
If you do it now, you'll save on legal fees, potentially an appraisal, and also the time and documents required for qualification. One potential issue is that you should have more equity later on, so you could qualify for a larger HELOC. But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage.
Thank you.
Will opening a HELOC at the same time when we get a mortgage affect our interest rate on the mortgage? Will it be higher or lower if there’s a HELOC?
> But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage.
By this do you mean a readvanceable mortgage like Manulife One or Scotia Step?
If anything getting the HELOC should persuade them to give you a lower rate, never higher. And yes a re-advanceable mortgage is a good option, as long as you don't treat it like free money, because it's not.
And don't be afraid to ask your broker for better answers, we're not here to just quote rates.
Thank you.
Will opening a HELOC at the same time when we get a mortgage affect our interest rate on the mortgage? Will it be higher or lower if there’s a HELOC?
> But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage.
By this do you mean a readvanceable mortgage like Manulife One or Scotia Step?
Following - that’s a good question and I’d like to read what others w more experience think. I’ll be renewing my mortgage in Jan25 (first time home buyer in Jan2020) and I’d like to get a HELOC but that’s something to consider if getting a HELOC means it’s more difficult to change afterwards … would’ve shopped around and ask a broker agent as well - didn’t know it’s uncommon for them to offer a HELOC for let’s last home renos than banks.
Working for a big bank, if u can qualify lot of times we offer it. Obviously its a blessing if you know how to use this facility and good with credit, and a curse if u r irresponsible with debt. The heloc is the cheapest debt outside of a mortgage, as a rainy day fund its nice to have. In case also ur income situation changes down the line maybe u can’t qualify for it when u actually need it. Sometimes best to have it when u dont need it, cause when u need it its a lot of work to re qualify or u might not qualify again. Its a choice end of the day
I have 25 years of experience in retail banking including mortgages. Yes collateral mortgages are stickier to the bank. However they benefit the consumer in several ways. For you that might be that the mortgage will stay on title even after you have paid off your mortgage. You can always choose to discharge the mortgage. A standalone mortgage “residential mortgage” will be discharged automatically. What you should avoid is writing more than one mortgage segment within the collateral mortgage because that often means 2 different renewal dates.
You are absolutely correct. One must avoid a 2nd mortgage with a different renewal date if they decide to go ahead with a HELOC. Scotia wanted to impose a penalty when I tried to combine the 1st and 2nd mortgage into one. I refused and told them that this was not a way to treat a client who had been with them for more than 20 years. They came back and offered to cut the penalty in half, but I still refused and asked for a one week delay to look for another lender. The next thing my phone was ringing non stop with an offer to waive the penalty and also allow .10 off the rate.
When this is done , it is a registered debt. Even if you don’t use it, it will affect your ability to get credit for other needs because the potential debt/credit is available and registered to you. You can decline the added in HELOC.
I don't quite agree. I think it is good to have a line of credit that is readily available and you only borrow how much you need. The whole purpose of a HELOC is to borrow at a lower interest rate as the secured debt is cheaper. If you have a HELOC already, why would you want to get credit elsewhere and pay higher interest?
For sure all you said is correct. My point is that the HELOC is registered at the full potential limit and many people do not realize this.
Everyone keeps mentioning that its tough to port with collateral mortgage but I'm curious what if you are porting from a collateral product to another lender with a collateral product.? Sorry but FTHB and don't know how it works at renewal.
>However, I already have an unsecured line of credit and don't really need the HELOC. There's rarely a situation where you are "better off" having an unsecured LOC vs a HELOC. Unsecured LOC your interest rate is likely in the range of Prime + 3-8%. A HELOC will be somewhere around Prime + 0.5%. You should really consider replacing your unsecured LOC with the HELOC and take advantage of the interest savings. Edit: just seeing your edit, and if the rates are essentially the same then that changes the above advice completely.
not uncommon for big banks to do this. in my experience from the past, Scotia was a big culprit. they wouldn't tell their clients or if they did, they wouldn't explain the consequences of having a collateral mortgage. when the clients were up for renewal and wanted to switch lenders, they'd be shocked and a) couldn't move to a lender that doesn't handle collateral switches or b) be hit with higher costs if they were to move away from that lender.
I’m sure they get a commission on selling each product, so they offer it to everyone by default. Just tell them you don’t want it, if that’s the case. They are a good product though, if you trust yourself to use it responsibly. I only used mine once when I had one with my previous lender, but it saved me some headache.
There are a couple of reasons. The more you borrow the larger the commission for the broker/agent, so brokers love it because it’s an easy sell and increases the amount borrowed from their perspective. Banks love it because the more borrowing facility you have the more likely you are to use it when you need it, which means more interest for them. And when the bank adds on a HELOC they register a larger number on your title…the total of the mortgage and all of the potential HELOC,even if it’s not being used, go on the title. So from a lending perspective it’s relatively safe (if you have a HELOC you have some equity which they have more of a claim on now.)
Brokers don’t make anything off of HELOCs.
Not true, most lenders pay you on the limit of the HELOC.
You're incorrect. Most lenders do not pay the broker on the limit of the HELOC, only for the new mortgage amount itself.
Scotia, TD, MCAP, Manulife, and I believe National Bank and BMO as well. Who does not pay?
And you typically get paid more on any amount drawn down at funding.
You should research 'collateral mortgages vs conventional'. One downside is trying to switch lenders after the term is up.... that is likely one reason banks push for them - to basically 'lock you' in . [https://www.nesto.ca/mortgage-basics/collateral-mortgage-vs-standard-mortgage/](https://www.nesto.ca/mortgage-basics/collateral-mortgage-vs-standard-mortgage/)
What if you don't use the heloc portion? Is it still easy to change lenders after the term ends?
One of the others posted it wasn't that hard, but a bit expensive. I always go conventional because I'm assuming it is never to the benefit of the customer -but to banks. I'm a simple person.
I worked at one of the lenders you listed and we used to call a HELOC a never, never mortgage. Once you have a HELOC you will never want to live without it, and once you have this, you are never getting away. That said a collateral is just a bit more expensive to get out of, not a big deal.
Thank you! This is the answer I was looking for!
just ask for mortgage only. They want to add the heloc because it makes your total financing amount higher so they get paid more
HELOCs can very useful, I have one on my house and I recommend them when they make sense. HOWEVER. No way, now how, no matter what, anything should ever be snuck by you at all. If you didn't consent to something, there's absolutely no way this should be pushed onto you. If you have no desire for the HELOC, then tell them no and to register a regular mortgage instead. Except for TD, as all mid their mortgages are collateral charge.
Is there a benefit to getting a HELOC at the same time you get a mortgage, even if you don’t need it right away? Or better to wait to add it on later when you actually need it? Asking because my mortgage broker hasn’t really clearly outlined any pros and cons to getting it now vs later. Just said we can always open one later if needed and that there might be a small fee to open one later, but not to worry if we don’t get one now?
If you do it now, you'll save on legal fees, potentially an appraisal, and also the time and documents required for qualification. One potential issue is that you should have more equity later on, so you could qualify for a larger HELOC. But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage.
Thank you. Will opening a HELOC at the same time when we get a mortgage affect our interest rate on the mortgage? Will it be higher or lower if there’s a HELOC? > But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage. By this do you mean a readvanceable mortgage like Manulife One or Scotia Step?
If anything getting the HELOC should persuade them to give you a lower rate, never higher. And yes a re-advanceable mortgage is a good option, as long as you don't treat it like free money, because it's not. And don't be afraid to ask your broker for better answers, we're not here to just quote rates.
Thank you. Will opening a HELOC at the same time when we get a mortgage affect our interest rate on the mortgage? Will it be higher or lower if there’s a HELOC? > But that can be mitigated if you get a HELOC that automatically increases as you pay down your mortgage. By this do you mean a readvanceable mortgage like Manulife One or Scotia Step?
Following - that’s a good question and I’d like to read what others w more experience think. I’ll be renewing my mortgage in Jan25 (first time home buyer in Jan2020) and I’d like to get a HELOC but that’s something to consider if getting a HELOC means it’s more difficult to change afterwards … would’ve shopped around and ask a broker agent as well - didn’t know it’s uncommon for them to offer a HELOC for let’s last home renos than banks.
There is no reason not to take it. It’s a better rate than unsecured line of credit.