Understand “readvanceable mortgages” when house hunting

05 Jul 2017

You've saved up a 20 per cent down payment and are eager to get into the real estate market. For the remaining amount, it's likely your bank will offer you a readvanceable mortgage. But should you take it?

This popular product, marketed under different names from one bank to another, combines term mortgages with home equity lines of credit. Like a credit card, the amount of money available in your line of credit decreases as you borrow and increases as you pay it back. Your credit limit may also increase automatically as you pay down your mortgage. Some lenders bundle other financial products like car loans or credit cards together under a readvanceable mortgage, typically at an attractive interest rate.

At first glance, this may seem appealing. But keep in mind any applicable fees and the risks of tying different credit products together before signing on the dotted line.

Readvanceable mortgages make it more complicated and expensive to switch lenders to get a better interest rate when your mortgage is up for renewal. You may need to repay all credit products tied together under the readvanceable mortgage. And because it's secured by a collateral charge against your home, there are additional legal fees you wouldn't incur when moving a traditional mortgage.

“Lenders can demand that you repay your home equity line of credit, lower your credit limit or increase your interest rate at any time,” cautions Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada. “This would impact all credit products bundled together in your readvanceable mortgage.”

Remember that a home equity line of credit is secured using your home as collateral — meaning if you can't pay back the money you owe, your lender can take possession of it.

Find more information online at canada.ca/money.

www.newscanada.com

Subscribe to our newsletter!


Thank you for your subscription

Latest Articles

Sep 08, 2017

Black/African Films at TIFF 2017

in Movies by Meres J. Weche
At this year's Toronto International Film Festival (TIFF), three African films… Read more >>
Jul 05, 2017

Understand “readvanceable mortgages” when house hunting

in Finance and Money by News Canada
You've saved up a 20 per cent down payment and are eager to get into the real… Read more >>
Jul 03, 2017

Tackling mental health at the Fringe Festival

in Arts by Meres J. Weche
The annual Toronto Fringe Festival, coming up from July 5-16, continues its… Read more >>
Jun 30, 2017

Darryl Hinds: The Farce is very strong in this one

in Entertainment by Meres J. Weche
Canadian television audiences have for many years enjoyed viewing the CBC’s AIR… Read more >>
Jun 10, 2017

5 unique and useful wedding gift ideas

in Lifestyle by News Canada
Here are some creative ideas being seen in wedding catalogues and registry wish… Read more >>

Search Site

Latest on Instagram

Featured Events

22 Sep 2017 20:00 – 14 Oct 2017 20:00
Tarragon Theatre
Theatre

23 Sep 2017 20:30 – 21 Oct 2017 20:30
Remix Lounge
Music

30 Sep 2017 20:00 – 23:00
Randolph Theatre
Festival

11 Nov 2017 12:00 – 20:00
Harbourfront Centre
Dance

Find a Job

Join Our Mailing List

Copyright © 2005 - 2017 Culture Shox Media Inc. All rights reserved unless otherwise stated.

Privacy Policy

Our website is protected by DMC Firewall!