# TD HELOC - demand loan?



## Electric (Jul 19, 2013)

I borrowed quite a lot against the equity in my house to fund my daughter's education. I gather a lot of Canadians are doing similar these days given that the amount currently borrowed against real estate is around $320B. About $266B of that is for non-business reasons like mine.

I will have it all paid back by March 2018, because I have made it a goal not to owe nothing to nobody.

I just want to clarify something: can TD bank demand that I repay the outstanding HELOC amount whenever they like? And the bank can seize my house if I don't pay?


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## twa2w (Mar 5, 2016)

In theory, 
A HELOC is a demand loan, and yes if they demanded the balance, they could proceed with foreclosure or power of sale action.
Your actual terms and conditions may be somewhat different. Some banks have terms to say they can change the repayment structure to an amortized term and if you are then in default, tbey can take action. Others are solely at the whim of the bank. Read the standard charge terms of your mortgage and the credit line agreement for details.

In practice, as long as your credit is good and your interest is uptodate it is unlikely.


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## Electric (Jul 19, 2013)

That's what I thought. I actually converted the variable HELOC balance to a one year fixed rate loan ("Fixed Rate Advantage"), because I was able to reduce the interest rate from 3.45% to 2.28%. I don't understand why variable rate mortgages are cheaper than fixed rate ones, yet it is the opposite with my HELOC, but I am not going to argue.

Fully understand that it is unlikely, but it was unlikely that very small bungalows in YYZ and YVR would ever be well over $1mm. It was unlikely that the FOMC in the US would ever be buying $85B of securities every month.

I don't think I'll be borrowing against my HELOC at 3.45% to buy a car. Not risking my house for a car. I will get a regular car loan at 4.95%, and if something bad happens they can have the car because I don't need to live in it.


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## Koogie (Dec 15, 2014)

It's good that you understand, most don't and banks aren't educating them.

I was witness to a scene at a TD branch where a little old lady had a conniption. Her husband had died and she was in the process of selling their house and he had an outstanding HELOC on it. She couldn't believe that it was a mortgage on the house ("BUT WE PAID OFF THE MORTGAGE" she shrieked) and the sale was that day and this had just come to light (from what I could gather).

I guess someone had told her she pay off the HELOC after the sale, maybe, like any other loan.

A lot of people might be getting educations in the terms and conditions of HELOCs soon.


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## Electric (Jul 19, 2013)

Do you know if TD bank can seize assets in a TDDI investing account, to cover things like a missed mortgage payment? Does the answer change if it is an RRSP account?


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

Electric said:


> ...I don't understand why variable rate mortgages are cheaper than fixed rate ones, yet it is the opposite with my HELOC, but I am not going to argue.../QUOTE]
> 
> ^Because the mortgage carries a penalty charge if the term is broken vs the HELOC doesn't.
> 
> As for calling the loan, they will if you stop paying. Even though technically they can call it whenever they want, they will never do so if you don't give them a reason to.


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

Electric said:


> Do you know if TD bank can seize assets in a TDDI investing account, to cover things like a missed mortgage payment? Does the answer change if it is an RRSP account?


No they can't.


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## heyjude (May 16, 2009)

Has your daughter now received the education? Is she gainfully employed? If so, it would not be unreasonable to ask her to contribute to paying off that HELOC if you are concerned about your ability to do so.


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## Electric (Jul 19, 2013)

heyjude said:


> Has your daughter now received the education? Is she gainfully employed? If so, it would not be unreasonable to ask her to contribute to paying off that HELOC if you are concerned about your ability to do so.


She will graduate from her (boarding) high school in May, so it will be a while before she has a full time job.

Current HELOC balance is 10% of gross income but my job is not stable right now. The company I work for has a market capitalization less than its outstanding debt, has deeply negative free cash flow, and is laying off thousands of people. There is a lot of debt that has to be rolled over in 2019 and 2020, and I think it will be hard to sell that paper except at very high interest. It looks to me like the beginning of a death spiral because the profit margin is not high enough to support the interest payments I foresee. When you ask former business owners how they went bankrupt, a lot of them answer "Slowly at first, then all of a sudden."

I have read a lot of stories about the demise of companies like the one I worked for during the 1990s tech boom. One morning I was a rock star chip designer making $120k (a lot of money in those days,) and by afternoon I was out of a job. I was unemployed for a long time after that. Everyone on my street seems to have a $60k SUV or pickup in the driveway, and I'm sure they are all upside down, because they are all financed for 84 months with zero down. It doesn't seem to bother them that they have big obligations that have to be met out of future income, but I would never enter into these types of arrangements because of what I have learned about the brutally cyclical nature of engineering work in this country.


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## Electric (Jul 19, 2013)

Mortgage u/w said:


> Even though technically they can call it whenever they want, they will never do so if you don't give them a reason to.


I think there are exogenous reasons why TD bank would do that. TD Bank is one of the most shorted stocks in Canada (the company I work for right now is usually in the top five too). That indicates that there are a lot of smart people who don't like TD's runway. The people who have large deposits with TD, don't want to end up with their assets converted to TD shares, when the bail-in happens. So they may withdraw their assets, which means TD will have to reduce the credit they have extended to people like me, to avoid exceeding their government-mandated lending ratio. That means calling loans like mine.

In six months I will not owe anything to anybody. Zero mortgage, zero HELOC. March 1 2018 is going to be a very great day for me.

I have new car fever right now, but I think I will just buy a used Mazda 3 with cash. I do want a fancy pickup truck, but I have a feeling the longer I wait, the lower the price of used ones is going to get.


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## Userkare (Nov 17, 2014)

Electric said:


> Everyone on my street seems to have a $60k SUV or pickup in the driveway, and I'm sure they are all upside down, because they are all financed for 84 months with zero down. It doesn't seem to bother them that they have big obligations that have to be met out of future income, but I would never enter into these types of arrangements because of what I have learned about the brutally cyclical nature of engineering work in this country.


Good for you! So many people behave like their job, and it's income, are some kind of inalienable right. I wonder how many could pass the stress test of loss of income for 1 month, 2, 3, or even more. It's not a generational thing; I know folks in their late 60's who still are working in high paying jobs, and yet live from paycheck to paycheck with no savings. I even know retirees collecting CPP, living month to month; any major expense gets paid from the HELOC; they're using their house as an ATM.


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## Electric (Jul 19, 2013)

Thanks. I am quite privileged compared to a lot of people.

What the high HELOC balances actually mean is that the average middle class Canadian, can't afford a middle class lifestyle. There has been a transfer of wealth from engineers like me and other workers, who create the wealth in our society, to the rentier class.

There has been a substitution of debt for wealth, and it has gone on so long that people are totally used to it now. Their debt is just a number to them, devoid of practical meaning.

There is 100% going to be a reckoning, I just can't predict when.


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

Electric said:


> I have new car fever right now, but I think I will just buy a used Mazda 3 with cash. I do want a fancy pickup truck, but I have a feeling the longer I wait, the lower the price of used ones is going to get.


Funny but I'm looking for a new car too - wanting to replace a 10 year old Mazda 3. 
Think I'm going new though. Have my eye on the CRV. 

Been looking for used but have noticed that unless I go 5 years old +, the price difference for a new one makes more sense. I know...depreciation, etc, etc,. But the 1-2-3 year old cars I have seen are in terrible condition. As much as the dealer makes them look new, they all have issues. Who wreaks of smoke or B.O., who has repainted body parts, dents, rips, stains etc....just can't do it anymore. 

I find the leasing business has ruined the car industry. People don't care anymore - no pride in ownership. They buy, sorry, rent the most expensive car they can't afford, run it to the ground, return it and start over with another one. Dealers keep 2-3 year old cars and throw the rest to the little, shady guys at the corner street. When they advertise, "lady driven" or "highway kms" - you know you need to run!

Sorry for hacking the thread with an off-topic....


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## blin10 (Jun 27, 2011)

Electric said:


> I have new car fever right now, but I think I will just buy a used Mazda 3 with cash. I do want a fancy pickup truck, but I have a feeling the longer I wait, the lower the price of used ones is going to get.


with that mentality you'll be waiting until you're dead... you seem like a responsible person, why not get something that you want, you can't take it with you when you're gone


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## blin10 (Jun 27, 2011)

Mortgage u/w said:


> I find the leasing business has ruined the car industry. People don't care anymore - no pride in ownership. They buy, sorry, rent the most expensive car they can't afford, run it to the ground, return it and start over with another one.


what do people need to do, clean/wax their cars everyday ? most people do not care about cars, it is a tool for transpiration and they see leasing like a monthly bill (like you pay electricity, hydro, etc), and they don't need to worry about anything else (in terms of repairs, etc).... around 50% of cars are also driven by women and they're not into cars by nature, just like men (most) are not into cloths or bags...


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## Electric (Jul 19, 2013)

Mortgage u/w said:


> Funny but I'm looking for a new car too - wanting to replace a 10 year old Mazda 3.
> Think I'm going new though. Have my eye on the CRV.


What has been happening in the used car market, is that Canadians will turn a good unit into a dealer on trade. The dealer does not do anything with the car, he just calls the broker who comes the next day and loads it onto a car carrier. The broker will arrange for the unit to have its speedometer cluster swapped, and delivers it to an American dealer. The American dealer sells the car in US$ for the same dollar amount that it would have sold for in Canada. The broker takes his cut, and the two dealers split the currency exchange of 25-30%.

There was not a single good pickup to be found anywhere around here for the past few years, because of this activity. These are the same dealers who were whining when Canadians were buying vehicles in the USA, when the C$ was strong.

Right now the American used car market is in free-fall because of all the leasing activity in prior years, which you observe. So the felt demand for Canadian vehicles is in decline. I am starting to see some pretty good used trucks, whereas previously all I could find was units with stupid-high mileage or accident-repairs. I actually looked at one that was being advertised as a "demo," which turned out to be a theft recovery when I pulled the CarProof. You really have to be a used car dealer to say that a stolen car is a demo!

The CRV is a good choice. The depreciation is quite favourable. Make sure you get auto-braking as part of the Honda Sensing package, it really works and it will help keep your family safe. I was looking at Ridgelines at one point, but the price got up to $47k if I wanted the "good" headlights and all the safety gear. A good site to look at, is informedforlife.org, which aggregates all the crash test results onto one convenient page.


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## Electric (Jul 19, 2013)

blin10 said:


> with that mentality you'll be waiting until you're dead... you seem like a responsible person, why not get something that you want, you can't take it with you when you're gone


People can justify all kinds of purchases on that basis, and they do. It just turns them into debt slaves.


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## sags (May 15, 2010)

Demand letters could soon be sent out in certain geographical areas where home prices are declining. The banks have to meet the regulations.


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

blin10 said:


> what do people need to do, clean/wax their cars everyday ? most people do not care about cars, it is a tool for transpiration and they see leasing like a monthly bill (like you pay electricity, hydro, etc), and they don't need to worry about anything else (in terms of repairs, etc).... around 50% of cars are also driven by women and they're not into cars by nature, just like men (most) are not into cloths or bags...


....And that's exactly why I will go new. If no one takes care of their cars, I sure will not want to pick up their garbage.


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

Electric said:


> What has been happening in the used car market, is that Canadians will turn a good unit into a dealer on trade. The dealer does not do anything with the car, he just calls the broker who comes the next day and loads it onto a car carrier. The broker will arrange for the unit to have its speedometer cluster swapped, and delivers it to an American dealer. The American dealer sells the car in US$ for the same dollar amount that it would have sold for in Canada. The broker takes his cut, and the two dealers split the currency exchange of 25-30%.
> 
> There was not a single good pickup to be found anywhere around here for the past few years, because of this activity. These are the same dealers who were whining when Canadians were buying vehicles in the USA, when the C$ was strong.
> 
> ...


I haven't heard of that, but if its common practice across the country, we have serious issues.

Thanks for the tips on the packages. I am leaning towards the highest model so I'm assuming the auto-brake is included as well as the adaptive cruise - really like that one! Might as well spoil myself - planning to keep the car 10 years + so I don't want to be saying 'should-have' in a couple year's time.


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## Koogie (Dec 15, 2014)

Electric said:


> Thanks. I am quite privileged compared to a lot of people.
> What the high HELOC balances actually mean is that the average middle class Canadian, can't afford a middle class lifestyle. There has been a transfer of wealth from engineers like me and other workers, who create the wealth in our society, to the rentier class.


Sorry, but when exactly did sending your kids to a boarding school become a necessary part of a "middle class" lifestyle ? Sounds more like lifestyle inflation to me.
A lot of these large HELOC balances are caused by people trying to live a life that exceeds their paycheque. Plain and simple. 



Electric said:


> There has been a substitution of debt for wealth, and it has gone on so long that people are totally used to it now. Their debt is just a number to them, devoid of practical meaning. There is 100% going to be a reckoning, I just can't predict when.


There has also been a substitution of entitlement for common sense.


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## Electric (Jul 19, 2013)

Koogie said:


> Sorry, but when exactly did sending your kids to a boarding school become a necessary part of a "middle class" lifestyle ? Sounds more like lifestyle inflation to me.


Straw man. We are not middle class. The money I borrowed will all be paid back within 6 months, it was purely a cash flow thing because these schools demand 100% payment before the student arrives. The tuition is a bargain at twice the price given 1) no boys, 2) no "discovery math," and 3) she will 100% gain admission to her first-choice university and graduate on time.

There is definitely a substitution of debt for wealth in this country. If you look at housing price-to-income in places like YVR, the only thing you can conclude is that a lot of these loans will never be repaid. In a country like Germany, if you show up at the bank trying to buy a house with less than 30% down, they will give you a stern look, take the coffee out of your hands, and show you the door. Or at least they used to when I lived there. Here, if you have 5%, you are good to go because the taxpayer is backstopping the default risk.


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## Koogie (Dec 15, 2014)

Then what are you ? Upper middle class ? Upper class ? I don't know many working class engineers.
Sorry but you're the one whining about not being able to afford a middle class life while purchasing things that are outside of a normal middle class lifestyle.


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## sags (May 15, 2010)

If you got nothing.........you got nothing to lose.

The lenders are the ones who need to worry........and reports are the banks are starting to.


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## Electric (Jul 19, 2013)

It's really not important whether we are middle/upper middle/upper. I have 50 000 problems but money isn't one of them, and I never said it was - you simply failed to pick up what I am laying down. At the end of the day, though, I am a wage slave.

The beauty thing about the term "middle class" is that EVERYBODY considers themselves middle class. That is why Justinidiot will get away with saying his tax reforms are going to help the "middle class" by preventing income sprinkling among struggling small businessmen, while ignoring the millions his friends have stashed offshore to evade tax. The simple fact is that he is confiscating wealth any way he can, with any excuse that he thinks will fly.


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## Koogie (Dec 15, 2014)

Fully agreed. NOW you are making complete sense...:eagerness:


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## Userkare (Nov 17, 2014)

Userkare said:


> I know folks in their late 60's who still are working in high paying jobs, and yet live from paycheck to paycheck with no savings.


Well, I guess it was more widespread than my own personal observations; nearly half of Canadians are supposedly in that situation.. http://www.cbc.ca/news/business/payroll-salary-survey-1.4276782


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