What is a home equity of line of credit?
A home equity line of credit, or HELOC for short, 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. The PC Financial home equity line of credit is referred to as the PC Financial Secured Borrowing Account.
What is the PC Financial Secured Borrowing Account interest rate?
The interest rate for PC Financial’s Secured Borrowing Account is based on CIBC’s prime rate, which is currently 3.00%. PC Financial does not publish the interest rate on their website, however, speaking to a representative revealed that their rate is Prime + 1.00% (4.00%).
Once you qualify for the PC Financial Secured Borrowing Account, you can borrow anywhere from $15,000 up to 65% of the value of your home. It’s important to note that your total home debt (mortgage + HELOC) cannot exceed 80% of the value of your home.
“One of the advantages of the PC Financial home equity line of credit is that you don’t have to have a PC or CIBC first mortgage to get it. Your first mortgage can be with another lender, such as RBC or TD, and PC will still approve you for their HELOC,” says Chris Molder, a Toronto mortgage broker familiar with the product.
There are one-time setup fees, which cover the cost of home appraisals, processing and administration, as well as legal fees. PC Financial will waive the legal fee portion if you use their service provider, otherwise you will have to pay for independent legal advice yourself. Assuming you use the legal service provider from PC Financial, your set-up fees will cost just $150.
Unfortunately, the PC Financial Secured Borrowing Account is not available in Quebec, the Northwest Territories, the Yukon and Nunavut.
- You can access funds online, by phone, or at any PC or CIBC ATM.
- You can get a variable rate lower than any other personal line of credit.
- Your interest is calculated on the daily balance, so you will only pay interest on the amount you use.
- Your minimum monthly payment is interest only.
- You gain 5 PC points for every $1.00 spent when using your bank card*
The value of your home = $400,000
Your outstanding mortgage balance = $200,000
The maximum allowable total home debt would be calculated as:
$400,000 x 80% loan-to-value ratio = $320,000
Then, you must subtract the outstanding balance on your mortgage to get the total allowable line of credit amount:
$320,000 – $200,000 = $120,000
Now, you still need to make sure that $120,000 doesn’t exceed 65% of your home’s value. To be sure, simply divide the HELOC amount by the value of your home:
$120,000 / $400,000 = 30%
In this example, you could access $120,000 through a HELOC, which only amounts to 30% of your home’s value.
The Final Word
The PC Financial Secured Borrowing Account may be a suitable form of financing to fund a renovation project, buy a second property or invest in your child’s future. Those who shop at Loblaws, No Frills, Fortinos, and Valu-Mart may find extra value from the PC point advantage that comes with the PC Financial Secured Borrowing Account. Regardless, taking on more debt is a serious commitment and is a decision that should be discussed with a mortgage broker or financial advisor.
*Only applicable to stores where President’s Choice products are sold.