Home Equity???? - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

brownie · 09-19-2006, 08:29 PM

Just wondering has anyone on here taken out a homeline of credit???My mortgage is coming up soon for renewal and seeing that the houses are through the roof here I have some equity built up.Just thinking of taking some equity out for another piece of land(future cottage).Do they blend it right in with the mortgage or is it totally seperate???Any tips before going to see the bank.Thanks for any info.

Brownie

teamchachi · 09-19-2006, 08:34 PM

My mortgage is a massive credit line that is secured against the house. It's called an RBC Home line. Every month they take out only the interest for the month - there is no payment. The whole thing floats at prime.

They'll give you 75% of the value of your home.

So if your place is worth $400K, they'll let you borrow up to $300K. Let's say you only owe $200K on your house, that means you have $100K to play with.

Makes sense?

MoneyGuy · 09-19-2006, 10:48 PM

Quote:

Originally Posted by teamchachi

My mortgage is a massive credit line that is secured against the house. It's called an RBC Home line. Every month they take out only the interest for the month - there is no payment. The whole thing floats at prime.

They'll give you 75% of the value of your home.

So if your place is worth $400K, they'll let you borrow up to $300K. Let's say you only owe $200K on your house, that means you have $100K to play with.

Makes sense?

The above info is all correct. That's the usual and maybe best way to do this.

I've done this for on my house and talk to clients about it for various purposes. There are different ways to do this. PM if you have questions. I don't do actually do these as part of my business and my sole motive here is to help a guy out.

MoneyGuy, CFP

Draug · 09-19-2006, 10:51 PM

Quote:

Originally Posted by brownie

Do they blend it right in with the mortgage or is it totally seperate???
Brownie

You can have it either way.

Teamchachi, above, has his entire balance owing as a secured line of credit.

I, on the other hand, have a blend of a traditional mortgage and secured line of credit. It is called a Matrix Mortgage, and the one I have is with FirstLine Mortgages.

The first $190K is a traditional 5 yr closed mortgage, with a fixed rate of 5.5%. As is typical, a payment comprised of interest and principle is required each month. A one time, yearly, payment can be made in addition to the monthly payments, and that amount can be up to 20% of the outstanding balance. Additionally, the monthly payments can be increased by up to 25% each year if I desire, or decreased by the same amount if I ever had increased it.

The amount from $190K to 75% of the total value of my home is a secured line of credit, that floats at prime (6% right now). Only the interest is payable each month, on the balance of the line of credit. As I pay principle on the $190K mortgage part, it becomes available to borrow with the line of credit. In practice, I can always have outstanding debt that equals 75% of my home's value, if I desire. All, or part, of the line of credit can be paid at any time.

This type of mortgage is a great product for me. It is awesome having over $150K instantly available by just writing a cheque. Very quick access to the money can allow you can take advantage of all kinds of investment opportunities that, otherwise, you may not have been able to. I could have gone with the full 75% HELoC, as Teamchachi did, but it was a little too risky for my taste - I didnt want to have to deal with a huge debt load if the prime rate shot up too far and too fast, at a time when I happened to be using the line of credit. I felt the Matrix Mortgage was a good blend for me and my situation at this point.

photon · 09-20-2006, 12:33 AM

My line of credit is at prime - 0.5, so there!

Reaper · 09-20-2006, 08:32 AM

Quote:

Originally Posted by photon

My line of credit is at prime - 0.5, so there!

Your bank's prime lending rate or the Bank of Canada's lending rate?

TheCommodoreAfro · 09-20-2006, 08:55 AM

Quote:

Originally Posted by photon

My line of credit is at prime - 0.5, so there!

Hell, in Japan you'd be making 0.25% interest on your line of credit

! No good interest vehicles in this part of the world.

(closes his eyes and runs away from thread having sold his place in Sunnyside 24 months ago before all of the land price silliness in Calgary)

photon · 09-20-2006, 09:03 AM

Quote:

Originally Posted by Reaper

Your bank's prime lending rate or the Bank of Canada's lending rate?

Lol the bank's (So I'm at 5.5% right now). If you know where to get a line of credit at the Bank of Canada's lending rate (what, 4.25% right now) I'd like to know about it.

V · 09-20-2006, 10:30 AM

I have a mortgage with TD, and a HELOC with ATB, on which I pay prime -0.51% for the first year.

My mortgage comes due next May. I wonder if I'll be able to cancel my ATB HELOC at that time as well and go all in with that Matrix Mortgage or something similar.

I'm guessing the Matrix Mortgage is only available for your prinipal dwelling? I wish I could get that for my rental property as well.

photon · 09-20-2006, 11:03 AM

Yeah ATB has it for that rate but like you said it's only for the first year. Mine's until I give it up (which I probably never will).

Heh I wanted to refinance my house and the broker wanted to create a new LOC. I asked if he could get the prime - 0.5% and he said no chance, so I asked him why I would do that then! (other than they make more $$ from a total refinance vs. an addon financing).

Shazam · 09-20-2006, 11:22 AM

The only way to consistently get the BoC's prime rate is if you're a giant lender, like a bank.

Reaper · 09-20-2006, 01:37 PM

Quote:

Originally Posted by photon

Lol the bank's (So I'm at 5.5% right now). If you know where to get a line of credit at the Bank of Canada's lending rate (what, 4.25% right now) I'd like to know about it.

Well, our mortgage is locked in at 4.5% with 4 years 9 months to go.

photon · 09-20-2006, 02:21 PM

Right, but there's a difference between a mortage and a line of credit, the rates aren't comparable.

Reaper · 09-20-2006, 02:29 PM

Quote:

Originally Posted by photon

Right, but there's a difference between a mortage and a line of credit, the rates aren't comparable.

Absolutely, I just can't believe I managed to get a 2.3 point discount on my bank's posted mortgage rate for a 5 year fixed mortgage.

White Doors · 09-20-2006, 06:06 PM

It's still debt and you have to pay it back. Home equity is good for sure, but personally, I'd only use it for an emergency or to buy an investment property.

Red · 09-20-2006, 06:15 PM

Quote:

Originally Posted by White Doors

It's still debt and you have to pay it back. Home equity is good for sure, but personally, I'd only use it for an emergency or to buy an investment property.

Very true. HELOC and the like are for most part a pretty bad idea. It gives people a false sense of wealth that leads to gross overspending. Calgary's real estate market has given people a lot of equity, but when it all comes back to earth, watch out....

V · 09-20-2006, 06:18 PM

Are we going to have to go at it again Red??

Sylvanfan · 09-20-2006, 06:40 PM

Well if you already have debt, and a HELOC is at lower interest than what you're currently paying why wouldn't you use it?

Also when I hear Real Estate come back to Earth what does that mean? Houses are going to suddenly drop in value by 25%? I don't expect growth to keep up at it's current pace but unless some serious deflation occurs and people start leaving Calgary by the bus load, real estate prices will not be moving down. Even places that had their real estate markets get killed in recent years like Prince Rupert, and Prince George BC have had the prices come back to previous highs.

Red · 09-20-2006, 06:53 PM

Quote:

Originally Posted by Dominicwasalreadytaken

Are we going to have to go at it again Red??

No need for that. Only time will tell the true story. I have nothing against being gutsy and trying to come ahead, but I've also been around long enough to know that most people are not capable or disciplined to follow up on their dream plans. What we see nowdays is a lot of people overextending themselved in hopes that 'things will take care of themselves'. Not much room for error when you have a 300K debt on a house.

Red · 09-20-2006, 07:05 PM

Quote:

Originally Posted by Sylvanfan

Well if you already have debt, and a HELOC is at lower interest than what you're currently paying why wouldn't you use it?

Also when I hear Real Estate come back to Earth what does that mean? Houses are going to suddenly drop in value by 25%? I don't expect growth to keep up at it's current pace but unless some serious deflation occurs and people start leaving Calgary by the bus load, real estate prices will not be moving down. Even places that had their real estate markets get killed in recent years like Prince Rupert, and Prince George BC have had the prices come back to previous highs.

The markets don't have to drop by 25% to make troubles for a lot of people. Most people live paycheck to paycheck, a 2% rate hike in addition to a 10-15% market decline could be a lot to handle.