What is a home equity line of credit (HELOC)?
A home equity line of credit (HELOC) is a revolving line of credit that leverages the equity in your home. A HELOC lets you 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 Manulife, a home equity line of credit would be included in their Manulife One Account.
What is the Manulife One Account?
The Manulife One Account is an account that brings together your mortgage, chequing and savings accounts into one multi-purpose “borrowing and chequing” account. 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, which helps save you from having to pay interest on the full amount owing.
What is the Manulife One Account interest rate?
The interest rate for the Manulife One Account is based on their prime rate, which is currently 3.00%. Unfortunately, Manulife does not publish the interest rate on their website, as it is said to vary on a case-by-case basis.
What we can say for certain is that, unlike the National All-in-One account, the Manulife One may hold several products all with various interest rates. For example, your mortgage may be at 4% while your HELOC could be at 5%.
As history has shown, Manulife mortgage rates are generally not competitive compared to the best available on the market, and Manulife has been known to change the spread on the HELOC’s variable rate without notice.
Once you qualify for the HELOC portion of the Manulife One Account, you can borrow anywhere from $50,000 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.
- You can access the funds at any ATM, online, by phone or by cheque. You can also take it out as “cash back” during a retail transaction, or make deposits at any RBC teller.
- There is a monthly fee of approximately $15 or $180/year.
- Your interest is calculated on the HELOC less any positive balances from deposits.
- Deposits such as paycheques only offset the HELOC portion of your total debt (or other debt such as credit cards) but not the first position mortgage.
- The repayment frequency is flexible. However, it’s important to note that these accounts are reported to credit agencies, so you should make at least your interest payment each month, in order to stay in good standing.
The value of your property = $375,000
The outstanding balance on your mortgage = $200,000
The maximum allowable total home debt would be calculated as:
$375,000 x 80% loan-to-value ratio = $300,000
Then, you must subtract the outstanding balance on your mortgage to get the total allowable line of credit amount:
$300,000 – $200,000 = $100,000
Now, you still need to make sure that $100,000 doesn’t exceed 65% of your home’s value. To be sure, simply divide the HELOC amount by the value of your home:
$100,000 / $375,000 = 27%
In this example, you could access $100,000 through a HELOC, which only amounts to 27% 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 other loans. While most lenders offer HELOCs as separate mortgage products, a HELOC is built into the Manulife One Account. Compared to the only other ‘all-in-one’ product on the market, the National Bank All-in-One, Manulife offers less flexibility and less competitive mortgage rates. However, if you think this is a product you would like to consider, you should speak to a mortgage broker about your options today.