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National Bank All-in-One (HELOC)

 
 
What is a home equity line of credit (HELOC)?

A home equity line of credit (HELOC) is a loan that leverages the equity in your home. The HELOC functions like a revolving line of credit where you can choose when and how much money to withdraw, so long as the amount does not exceed more than 65% of the value of your home. At National Bank, a home equity line of credit would be included in their All-In-One account.

What is an all-in-one product?

An all-in-one product combines your chequing and savings accounts, a mortgage loan, and a home equity line of credit (HELOC) into one account.

What is the National Bank All-In-One?

The National Bank All-In-One is a product that consolidates all your bank accounts, so that your debt is offset by your chequing and savings accounts. Because all of your accounts are combined, the positive balances in your chequing and savings accounts offset the negative balances on your mortgage and home equity line of credit (HELOC), which helps save you from having to pay interest on the full amount owing.

What is the National Bank All-In-One interest rate?

The National Bank All-In-One has a variable interest rate of Prime + 1.00%, which would make it 4.00% as of September 30, 2013.

The Details

Once you qualify for the HELOC portion of the All-in-One account, you can borrow anywhere from $25,000 up to 65% of the value of your home. Note that your total home debt (mortgage + HELOC) cannot exceed 80% of the value of your home.

Features:

  • You can access the funds at an ATM, online, by phone or by cheque, or at any National Bank branch location.
  • There is no monthly fee for the All-in-One account, but there is a $2.50 monthly fee for each sub-account (i.e. $2.50 for a HELOC, $2.50 for a mortgage, etc.)
  • You can get a variable rate lower than any personal line of credit.
  • Your interest is calculated on the daily balance, so you will only pay interest on the amount you use.
  • The repayment frequency is flexible. National Bank offers something called Fixed Payment Options, which allows you to set the principal repayment amount according to your budget and cash flow. There are two options: a minimum payment (the monthly interest) or a fixed payment (beyond the interest due).

Sample Calculation

The value of your property = $350,000
The outstanding balance on your mortgage = $150,000

The maximum allowable total home debt would be calculated as:

$350,000 x 80% loan-to-value ratio = $280,000

Then, you must subtract the outstanding balance on your mortgage to get the total allowable line of credit amount:

$280,500 – $150,000 = $130,000

Now, you still need to make sure that $130,000 doesn’t exceed 65% of your home’s value. To be sure, simply divide the HELOC amount by the value of your home:

$130,000 / $350,000 = 37%

In this example, you could access $130,000 through a HELOC, which only amounts to 37% of your home’s value.

The Final Word

A home equity line of credit is a mortgage product that can help you access funds to finance a renovation project, invest in your retirement fund or even purchase a second property. A HELOC can also be used to pay off high interest rate debts, such as credit cards or auto loans.

One drawback of an all-in-one product is that the interest rate on your mortgage is often higher than the average 5-year variable rate. Overall, however, National Bank’s All-in-One is a product that provides ultimate convenience with accessibility to a home equity line of credit.

Before deciding to leverage your home, you should speak with an experienced mortgage broker and come up with an option that will work best with your financial situation.