RBC Homeline Plan (Home Equity Line of Credit)

Alyssa Furtado
by Alyssa Furtado June 29, 2011 / 9 Comments

What is a home equity of line of credit?

home equity line of credit (HELOC for short) is a revolving line of credit that allows you to borrow the equity in your home, often at a much lower rate than a traditional line of credit. A HELOC cannot exceed more than 65% of the market value of your home, and together with your mortgage can’t add up to more than 80% of the market value of your home. RBC’s home equity line of credit is referred to as the RBC Homeline Plan.

What is the RBC Homeline Plan interest rate?

At RBC, you have the option to go fixed or variable. As of September 25, 2013, the 5-year fixed rate for the RBC Homeline Plan is 3.89%. However, the 5-year variable rate for this product is RBC Prime + 0.00%. RBC’s Prime is currently at 3.00%, so this would make your rate 3.00%. It’s important to note, however, that the relationship of a variable rate HELOC can be changed by RBC at anytime. For example, RBC could increase this to Prime + 1.00%, bringing it up to 4.00% respectively.

The Details

Once you qualify for the RBC Homeline Plan, you can borrow anywhere from $5,000 up to 65% of the value of your home. Again, remember that your total home debt (mortgage + HELOC) cannot exceed 80% of the value of your home.

Features:

  • You can access funds from your credit line through online banking, ATMs, any RBC branch or by writing a cheque.
  • You can get a variable rate lower than any traditional line of credit.
  • You also have the option to split your total home debt and put some under a fixed rate and some under a variable rate.
  • You only pay interest on the amount of money you have borrowed.
  • You can choose from several payment options, including: monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly and accelerated weekly payments.
  • You can also choose an amortization period of up to 30 years, if your mortgage is put into the RBC Homeline Plan.

Sample Calculation

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 RBC Homeline Plan is a mortgage product that can help you access the funds you need to finance a renovation project, pay for school or even purchase a second property. A HELOC can also be used to pay off high interest debts, such as personal loans or credit cards. 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.


  • Lisa says:

    Can you please explain this line a little more:

    “HELOCs do not have a fixed relationship to the prime lending rate, unlike variable mortgage rates. The relationship between a HELOC and the prime rate can, in theory, change if your lender wishes to do so.” ??

    I assume, the HELOC Agreement you sign will identify an interest rate on your Line of Credit portion as prime rate plus/minus some incremental amount (for example “Your Primary Line of Credit interest rate will be our Prime Rate plus 0.5%”). Do these agreements have a clause that reserves the right for the bank to change that incremental amount? If so, can you show me some examples thereof?? Thanks.

    • RateHub says:

      HELOC mortgages are a little different that your typical mortgage because they are also a line of credit with balances that can change daily, which makes them a little more complex. HELOC spreads can change at any time (unlike a variable mortgage) because the line of credit portion is not in place (up to lender’s discretion). Most lenders will use their own ‘prime rate’, rather than the national prime rate.

      You can find an example here: http://www.thestar.com/article/699446–td-jacks-up-home-credit-lines

  • Lisa says:

    Thanks. I’d be interested in seeing the clause(s) in these Agreements that gives the bank(s) the reserved right to make such a change (except for changes resulting from bank Prime Rate movements) after the binding Agreement (which explicitly specifies borrowing costs) has been signed…. has anyone got an example?? (I don’t see such a clause in the RBC Homeline Plan Agreement.)

    • RateHub says:

      Hi Lisa,
      The clauses that you speak of really dig into the technicality of a HELOC agreement and aren’t exactly plainly written out. It would be best to speak to a (real estate) lawyer as they understand the specifics and can explain it much better than we can. If you don’t already have a lawyer to speak to, we can recommend one.

  • Manish says:

    Hello,
    This plan looks perfect for my requirements. Is having mortgage with RBC a pre-requirement to be eligible for this plan? I have mortgage from another lender than RBC.

    • ratehub says:

      Hi Manish,
      You are free to switch from your current lender to RBC if their HELOC mortgage interests you, but you will likely face stiff mortgage penalty charges. It’s best to sit down with a mortgage advisor/broker to determine if the cost will be worth it.

  • Rohit says:

    Hi,
    I have mortgage with RBC (5 year variable) and have RBC home line plan at P+0.5%. As I am paying down the mortgage, the amount I can borrow under HELOC is increasing, but I haven’t borrowed anything.

    Would this mean it will be more difficult for me to switch to other bank at the end of the current term (which is 5 year ) ?

    • Hi Rohit

      You are correct in understanding that it is more challenging to switch at the end of your term.

      HELOCs can be useful for some borrowers but there are cons. One of the biggest cons about having a HELOC is that it is impossible to transfer at maturity from one lender to another. That is why banks are so eager to promote HELOCs because it marries the client to the bank. With a traditional mortgage it is easy for one lender to transfer the mortgage with relatively no cost to the borrower. However HELOCs are set up with multiple charges or in a way that prevents them from being transferable. If a borrower wants to switch lenders they need to discharge their existing mortgage and set up a new one. This costs money in discharge fees and legal fees to set up the new mortgage.

      I hope this helps.

      • Rohit says:

        Thanks for clarification. Is it possible that I close HELOC with RBC, as I haven’t borrowed anything from HELOC ?

        Or should I wait for my term to end and then close HELOC before moving to another bank if getting better rate ?