On December 10th, ING announced the launch of its newest mortgage product the home equity line of credit more commonly referred to as a HELOC. Up until now, ING has just offered closed variable and fixed mortgage products to its customers, staying away from ancillary products such as open mortgages, cash-back mortgages and the HELOC.
What is a home equity line of credit (HELOC)?
A home equity line of credit is similar to a regular line of credit but comes with a lower interest rate as it is secured by the equity in your home. The borrower and lender set a maximum amount that the borrower can withdraw. The funds are not advanced up front and the borrower can choose when and up to how much they wish to access (up to the HELOC credit limit of 80% loan-to-value).
Is the HELOC a good fit with ING’s brand?
ING has built its brand on simple, uncomplicated product offerings. They also have positioned themselves as the bank that encourages you to save, the bank that has no fees, and the bank that offers the unmortgage product, helping and encouraging you to get out of debt faster.
Some may wonder if the HELOC product matches ING’s unmortgage philosophy as a HELOC can often be a recipe for the never ending mortgage. Since the HELOC is a line of credit, borrowers are only required to make interest payments each month, and are not forced to pay down their balance. According to the Financial Post, critics of the HELOC feel that it can be a dangerous product for “spend-happy clients prone to get in over their heads” because it is “ too easy to borrow and consumers end up living at their limit”. When Ratehub.ca spoke with Martin Beaudry, Vice President of Lending at ING, he said the bank spent considerable time thinking about whether or not the HELOC was in the best interest of ING clients. ING came to the conclusion that “not all credit is bad credit and for ING customers that need access to credit, the home equity line of credit is the most affordable way to access credit. For that reason it is important for ING, to offer their customers this option.”
Plus, ING has added two unique features in line with their brand positioning. The fixed payback plan allows you to set up regular fixed payments to promote paying off your debt faster and not get tempted to just make the minimum payment. Additionally, you can also decrease your limit online to help you avoid borrowing more than you really need.
Ratehub.ca’s take on the ING HELOC
While we believe that taking on any credit should be evaluated carefully, credit can be a useful and necessary tool. If you find yourself in a situation where credit is needed to finance your child’s education, or start a business for example, a home equity loan can be one of your best options, as it comes with one of the lowest interest rates available.
According to a recent survey published by TITLEPlus, 37% of Canadians have a HELOC making it an incredibly popular product to access credit at an affordable interest rate. Canadian’s use HELOCs for a variety of reasons summarized in the chart below. While it is not generally recommended a HELOC be used for vacations or living expenses, using HELOC fund for a home renovation can improve the value of your property and thus financial positions.
HOW THE FUNDS WERE USED
%OF RESPONDANTS IN A HELOC
|Basic living expenses|
|Down payment for investment property|
Since HELOCs are a popular product among Canadians, it seems only natural that ING’s customers would want this product available to them.
This was confirmed by Martin Beaudry, who stated that 30% of client requests coming from current ING customers are for refinancing, a tool that many homeowners use to access equity they’ve built in their homes. The HELOC will now allow customers to access equity while avoiding some of the costly penalties that accompany refinances.
Ratehub.ca is excited to see ING’s HELOC on the market, the last remaining Canadian bank to offer this popular product. It should be noted that we are curious to see the marketing spin on the new product. While we admit it’s unlikely, the “remortgage” would be very appropriate.