Line of Credit / Heloc
New note from government ruling:
Maximum amount on a line of credit with lenders are 65% of the home value. Some lenders offer to the clients a product that allows them to registered 80% of the full amount of the value of their home and administer 15% on a fixed portion and the 65% on a line of credit portion.
- House value is $500,000
- 80% loan to value - $400,000 register against your home
- Fixed mortgage $75,000 @ 3.04% rate- 5 yr term/25year amortization
- Line of credit $325,000 @ Prime + 1.0% over 25 year amortization = interest only payments
Non - Insured Line of Credit (known as Heloc)
Note: Some of the major banks are registering collateral mortgages for the full value of your home or 80% value. Then they provide you with a line of credit for 65% loan to value only. When it you decide you want to take out more money your current lender has tied your equity up in their registration and you can only see if they will provide you with more money.
The disadvantage to these types of mortgages:
- the current lender on the line of credit can change your interest rate at any time.
- they are in control over your entire finances, so if you default they can call your mortgage and all your outstanding indebtedness on any of your dealings with them.
- No other institution can go behind the current line of credit because they have to take into consideration as to what is registered on title not what is outstanding.
Further discussions on this matter are welcomed.