Merix Altering its HELOC

Merix is making major changes to it's popular HELOC product.  The goal is to make it more appealing to the company's investors. 

Merix's HELOC is a readvanceable mortgage that lets borrowers re-borrow money after they pay down their principle.  The mortgage was originally designed to be a single mortgage "charge."  (i.e.  one part)

According to the company, however, the problem with the current HELOC structure is that it can't easily be securitized.

Therefore, effective 11:59pm EDT Tuesday, March 18, the HELOC will change as follows:

• Merix will register the new HELOC as a 1st mortgage for the locked-in portion and a 2nd collateral mortgage for the line of credit.  There will potentially be refinance costs if borrowers switch to a new lender when their term is up.  (a la Scotia's STEP mortgage for example)  See additional comments below.
• Clients will need to lock in at least 1/2 of their approved credit limit in a 5-year fixed or a 5-year variable.
• No longer will the HELOC support multiple "mortgage" portions with different terms and rate types.

Merix also announced that it's enhancing the HELOC's commission model for mortgage planners.

Unfortunately for borrowers, these changes bring few benefits.  They're necessary only to allow Merix to resell this mortgage to its investors.  Without these changes, the HELOC would likely disappear altogether.

Comments

[JR]

This is by far the best mortgage site in Canada. There is nothing else as timely. I hope you guys never retire early.
Jack ;)

[Nicolas Lutz]

May suggest you have a look at the Desjardins Versatile Line of Credit.

I know Desjardins is not everywhere but for those who can get the Versatile, it's quite good.

http://www.desjardins.com/en/particuliers/produits_services/financement/hypothecaire/marge_atout.jsp

Might even be good for the SM.

Nicolas

[Canadian Mortgage]

Hi Nicolas, Thanks for the note. We'll research this product for inclusion in our readvanceable mortgage comparison. Cheers, Rob

[Rob]

"That means there will now potentially be refinance costs if borrowers switch to a new lender when their term is up (a la Scotia's STEP mortgage)".

What exactly do you mean by this?

[Canadian Mortgage]

Hi Rob,

Merix's HELOC has a collateral charge. Therefore you'll likely pay legal fees, etc. if you want to move to a new lender (switch) when your Merix term is up. This is similar to how it works with Scotia's STEP and Firstline's Matrix mortgage for example (and virtually all closed readvanceables with a revolving line of credit for that matter).

By contrast, when you have a regular vanilla mortgage you can often switch lenders at the end of your term without paying legal & appraisal fees--assuming you leave the key terms (amortization, amount, people on title, etc.) the same.

By the way, the word "now" in the story might have confused things so we've clarified the wording a bit.

Thanks for the question!