# Should we get a HELOC?



## Romy (Jan 14, 2015)

Hello everyone.

We've recently paid off our mortgage and are looking to officially discharge it. Our bank (TD) charges a "mortgage discharge fee" which is about $330. They're pushing us hard to purchase a Home Equity Line of Credit for our property (HELOC), even saying they'll waive the $330 mortgage discharge fee in return for us opening a HELOC.

We have no plans to use a HELOC. We have money saved up in an emergency fund already, which we can tap into if necessary. Is there a downside to opening a HELOC we'd probably never use? The advantage to us would simply be to waive the mortgage discharge fee and save the $330. 

Thanks!


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## Just a Guy (Mar 27, 2012)

They appear on your credit report, unlike a mortgage but don't do any harm if you don't use them. 

If course, if you don't get one, knowing the banks, they won't give you one later if you need it.


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## Davis (Nov 11, 2014)

Some day you'll want to close down the HELOC, e.g., when you sell the house, and the bank will probably want to charge you the discharge fee then. It's not as bad idea having access to a HELOC until then though. Congratulations on paying off your mortgage.


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## Romy (Jan 14, 2015)

Davis said:


> Some day you'll want to close down the HELOC, e.g., when you sell the house, and the bank will probably want to charge you the discharge fee then. It's not as bad idea having access to a HELOC until then though.


True, and the discharge fee is similar. However, the bank said that when we close our current HELOC, they'll waive that discharge fee too, so long as we open a new HELOC on a new property.


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## Mortgage u/w (Feb 6, 2014)

If they are offering the HELOC free of any costs (there will be a title registration fee so ensure they cover that), then I would take it. You don't necessarily need to take the maximum either since you know you wont use it.

Biggest advantage I can see you keeping the HELOC (even if not being used) is for FRAUD SECURITY. Most property title fraud is committment on properties that have a clear title. By keeping the lien on, anyone wanting to fraud you will need to request a discharge from your bank at which point your banker will advise you.


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## gt_23 (Jan 18, 2014)

Romy said:


> Hello everyone.
> 
> We've recently paid off our mortgage and are looking to officially discharge it. Our bank (TD) charges a "mortgage discharge fee" which is about $330. They're pushing us hard to purchase a Home Equity Line of Credit for our property (HELOC), even saying they'll waive the $330 mortgage discharge fee in return for us opening a HELOC.
> 
> ...


Why not? I have never turned down a credit line even when I have no immediate use for it! It always good to have quick access to credit, particularly cheap credit like helocs.


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## amitdi (May 31, 2012)

Mortgage u/w said:


> Biggest advantage I can see you keeping the HELOC (even if not being used) is for FRAUD SECURITY. Most property title fraud is committment on properties that have a clear title. By keeping the lien on, anyone wanting to fraud you will need to request a discharge from your bank at which point your banker will advise you.


Great point mortgage u/w. I would keep the LOC for this one reason if nothing else. Automatic insurance


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## Guban (Jul 5, 2011)

Didn't realize there was a fee to discharge the HELOC.

I have one, and wasn't told of this. That's ok, though, as I don't plan on getting rid of it anytime soon. It is used as a chequing account, and I always keep a positive balance in it, so I never pay any fees. Free cheques, and a free bank account with a minimum account balance as low as zero.

I'm not really a good customer for the bank. Perhaps they should pay me to get rid of it!


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## carverman (Nov 8, 2010)

Guban said:


> Didn't realize there was a fee to discharge the HELOC.


Banks don't always tell you when you open a HELOC which is a secured line of credit using your property as collateral.
In essence it's like a lien registered against your property by the bank for the privilege of borrowing at a reduced rate of interest over a regular LOC. 
It requires some legal action on the banks part to register it with the Land Titles against the property. Usually they
don't charge it up front because they expect you to use it and they make money that way.



> I have one, and wasn't told of this. That's ok, though, as I don't plan on getting rid of it anytime soon. It is used as a chequing account, and I always keep a positive balance in it, so I never pay any fees. Free cheques, and a free bank account with a minimum account balance as low as zero.


They will charge you a discharge fee when you go to close it..even if you have never used it. I had one with CIBC. Used it for a couple years and then decided to switch banks. 
I had to pay them around $85 at the time I believe to get the discharge papers on the secured line of credit (HELOC), which came from CIBC head office in Toronto. 
Just the price of doing business these days.


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## Ben Tunite (Aug 30, 2016)

Romy said:


> Hello everyone.
> 
> We've recently paid off our mortgage .... Is there a downside to opening a HELOC we'd probably never use?


unfortunately YES, there can be a notable downside, the lien against your mortgage-less house may prevent a discount to your house insurance 

About 12 years ago we paid out our mortgage at Alta treasury branch (ATB). Shortly after we needed a small loan and set one up at TD Canada Trust. The bank rep strongly recommended that we also set up a HELOC since it would save additional appointments and paper work should we need another loan, and she graciously agreed to wave all fees so it would cost us nothing. Last month I was going over my books and phoned TD to cancel the HELOC since we'd never used it and now had sufficient emergency funds. The new TD rep closed the HELOC and mentioned we should inform our house insurance (TD Meloche Monnex) as our rate would go down??!!! huh?

Sure enough, the HELOC is also a lien and this precluded the application of a home insurance discount that I didn't know is applied when your home is free of liens. Perhaps I should have known but was too busy with my career to read up on, and never informed by either ATB when we paid off the mortgage nor by TD when we set up the HELOC. TD Meloche Monnex has now given us a discount of ~15% (now saving over $ 200/yr) after the HELOC was discharged. But TD sure gained alot of our money over the past 12 years for something I never used. I feel stupid but also somewhat slimed by less than clear upselling.


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## drnetworth (Jan 6, 2018)

Ben Tunite said:


> unfortunately YES, there can be a notable downside, the lien against your mortgage-less house may prevent a discount to your house insurance
> 
> About 12 years ago we paid out our mortgage at Alta treasury branch (ATB). Shortly after we needed a small loan and set one up at TD Canada Trust. The bank rep strongly recommended that we also set up a HELOC since it would save additional appointments and paper work should we need another loan, and she graciously agreed to wave all fees so it would cost us nothing. Last month I was going over my books and phoned TD to cancel the HELOC since we'd never used it and now had sufficient emergency funds. The new TD rep closed the HELOC and mentioned we should inform our house insurance (TD Meloche Monnex) as our rate would go down??!!! huh?
> 
> Sure enough, the HELOC is also a lien and this precluded the application of a home insurance discount that I didn't know is applied when your home is free of liens. Perhaps I should have known but was too busy with my career to read up on, and never informed by either ATB when we paid off the mortgage nor by TD when we set up the HELOC. TD Meloche Monnex has now given us a discount of ~15% (now saving over $ 200/yr) after the HELOC was discharged. But TD sure gained alot of our money over the past 12 years for something I never used. I feel stupid but also somewhat slimed by less than clear upselling.


Good point Ben Tunite! The 15% home insurance discount can definitely add up over the years. 

Romy, if you already have an emergency fund, and you don't plan on using any of the HELOC funds for investing (i.e real estate), then it makes financial sense to just pay the $330 discharge fee and start saving on your home insurance 

Congrats on paying off your mortgage!


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## Koogie (Dec 15, 2014)

+1000 to getting a HELOC for the benefit of security. Our family lawyer is a friend and insisted on us getting a HELOC on the house we purchased a few years ago (fully paid for). Title fraud is rampant and some of the stories she tells are hair raising. You'll pay nothing to have it anyway. And saving a little bit on your house insurance seems like poor recompense.


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## stardancer (Apr 26, 2009)

We have had a HELOC for many years at TD. We have used it twice- once in 1995 for house siding and again in 2017 when our vehicle died. I have tried to use our emergency funds for sudden expenses, but sometimes the funds just don't cover the full cost. Also, I get it paid off in 6 months, as I consider the HELOC as a loan.

I have often thought about closing it, but after reading about how it can prevent title fraud, I will keep it open until the last possible second.


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## Mookie (Feb 29, 2012)

So long as you have the self-discipline to use it only when necessary, then a HELOC can be a useful tool. 

A couple things before you sign up: 
- Try to negotiate the best rate you can on the HELOC now, while you have some small amount of leverage on the matter. 
- If you have any interest in leveraging, ask that they split it into maybe two separate HELOC accounts. This way you could use one for investment purposes (tax deductible interest) and the other for non-investment purposes. If you ever mix the two purposes in the same account, you lose the tax deduction.

I actually have 3 HELOC accounts so I can borrow to invest in my name and my wife's name separately, and the third is our "emergency fund", which almost never gets used. 

I know some will disagree with using a HELOC as an emergency fund, but this way I can use the money that would otherwise be in my emergency fund for investing, which will generally earn a much better rate of return than holding that emergency fund cash.


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## Gumball (Dec 22, 2011)

Mookie said:


> So long as you have the self-discipline to use it only when necessary, then a HELOC can be a useful tool.
> 
> A couple things before you sign up:
> - Try to negotiate the best rate you can on the HELOC now, while you have some small amount of leverage on the matter.
> ...


all very good points...great thread so far, very informative


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## Ben Tunite (Aug 30, 2016)

Koogie said:


> +1000 to getting a HELOC for the benefit of security. Our family lawyer is a friend and insisted on us getting a HELOC on the house we purchased a few years ago (fully paid for). Title fraud is rampant and some of the stories she tells are hair raising. You'll pay nothing to have it anyway. And saving a little bit on your house insurance seems like poor recompense.


it appears that even a HELOC may not prevent title fraud as shared in this story

https://www.theglobeandmail.com/glo...-seniors-can-become-a-target/article22517580/

...and for us we lost over ~ $2000 by not having the insurance discount for >11 yrs. From brief googling it appears that a one-time title insurance fee would've be cheaper to obtain. I think many folk who are aware of title fraud simply rely on the hope that the land titles assurance fund will help them out. I also suspect many folk are unaware of title fraud.


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## james4beach (Nov 15, 2012)

Koogie said:


> +1000 to getting a HELOC for the benefit of security. Our family lawyer is a friend and insisted on us getting a HELOC on the house we purchased a few years ago (fully paid for). Title fraud is rampant and some of the stories she tells are hair raising. You'll pay nothing to have it anyway. And saving a little bit on your house insurance seems like poor recompense.


Wow this is very interesting. I had no idea that the HELOC can provide this benefit.


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## marina628 (Dec 14, 2010)

We paid off our mortgage but kept the HELOC because of the mortgage fraud stories that were around 3-4 years ago , in fact we allowed our bank to place a much higher lien on the house in case we ever wanted to get more money,saves money overall in long run and not like I plan to sell or care what the lien is anyway .We have a $525,000 HELOC and keep an average balance of around 30k and write the investment interest off .One day though we plan to write a big cheque to purchase our next home for the kids to live in for few years then it will be our retirement home.


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## Koogie (Dec 15, 2014)

Ben Tunite said:


> it appears that even a HELOC may not prevent title fraud as shared in this story
> 
> https://www.theglobeandmail.com/glo...-seniors-can-become-a-target/article22517580/
> 
> ...and for us we lost over ~ $2000 by not having the insurance discount for >11 yrs. From brief googling it appears that a one-time title insurance fee would've be cheaper to obtain. I think many folk who are aware of title fraud simply rely on the hope that the land titles assurance fund will help them out. I also suspect many folk are unaware of title fraud.


Anecdotes are fun. 

We also purchased title insurance at time of purchase. Circa $180 one time fee if I recall. Anyone would be a fool not to.


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## Mortgage u/w (Feb 6, 2014)

A HELOC alone will not guarantee to prevent title fraud but will surely deter a fraudster making it harder vs free and clear title. 

Getting title insurance is a "no-brainer".

I would consider both - HELOC to deter most fraudsters and title insurance for that stubborn fraudster who gets through.


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## marina628 (Dec 14, 2010)

The lawyer we use has title insurance as part of his basic package ,I believe many do that now.


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## amitdi (May 31, 2012)

marina628 said:


> The lawyer we use has title insurance as part of his basic package ,I believe many do that now.


Title insurance is a one-time fee of $250 or thereabouts. Not that expensive if you consider the value of home.


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## Eclectic12 (Oct 20, 2010)

It is a cash cow though as notifying the "previous" owner of the change of ownership papers showing up seems an effective way deal with a lot of the fraud.
Particularly when the real owner is living in the house/condo at the same time the fraudulent change paperwork is being registered.


Cheers


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## Mortgage u/w (Feb 6, 2014)

marina628 said:


> The lawyer we use has title insurance as part of his basic package ,I believe many do that now.


In QC, we use Notaries who fall under the Civil Code. Title insurance is not very popular but becoming more common now.

Out of curiosity, what does Lawyer charge to register a title in RoC?
In QC, $1000 is fairly standard but will not include title insurance - it will cost another $250-$350 and I've heard some grumpy Notaries have charged as high as $500 for title insurance!


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## Ben Tunite (Aug 30, 2016)

Mortgage u/w said:


> ...what does Lawyer charge to register a title in RoC?
> In QC, $1000 is fairly standard but will not include title insurance - it will cost another $250-$350 and I've heard some grumpy Notaries have charged as high as $500 for title insurance!


no idea on cost of title registration in Alberta but I just obtained title insurance via my lawyer for $500, the amount is based on value of home. My lawyer didn't charge me to do this as is quick, this is the one-time fee for the title insurance alone.


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