HSBC launched a great new promotion for mortgage planners this week on fixed and variable-rate mortgages. That’s made us look twice at HSBC’s venerable Equity Power Mortgage (EPM).
If you’ve got at least 20% to put down, you might find the EPM a very interesting option. Here’s a quick rundown…
The Basics
- Maximum Loan-to-value: 80%
- Minimum credit score: 650
- Rate options: Fixed, variable, or both
What we Like
- The EPM is a hybrid mortgage. You can get part of your mortgage at a variable rate and part at a fixed rate. This is key if you’re big on debt diversification.
- The variable portion is fully open after 36 months (i.e. no penalties for breaking it)
- You can get a fixed payment on the variable-rate mortgage so changes to prime don’t raise your payment (exceptions apply).
- Even though 80% is the maximum loan-to-value, HSBC can register the mortgage for up to 100% of the home value. This let you increase your credit limit later (e.g. if your home value rises) without doing a full new application and paying legal/closing fees.
- You can have five or more sub-accounts in the line of credit. (Good for separating investing and personal borrowing)
- It’s portable
Miscellaneous
- You can pre-pay up to 20% per year, in one lump sum, or by doubling up monthly payments periodically.
- Payments can be increased annually up to 20%.
- To readvance funds you have to call the branch and sign paperwork. We prefer automatic readvancing, a la FirstLine’s Matrix, RBC’s Homeline, etc. But if you don’t use the credit line regularly for investing then it’s not that big a deal.
- HSBC, last we heard, charges a $25 fee per re-advance.
- There’s no 40-year amortization on variables, only on fixed rate mortgages. Variables have a maximum 30-year am.
- The EPM is a collateral charge, and is not transferable.
- Call a mortgage planner for complete details.
The EPM’s interest rates are a bonus. If you’re closing by August 31, 2008 and have an excellent credit/income profile, you’ll get outstanding interest rates on this product. Call any mortgage planner or contact us for a quote.
Sounds like an interesting product, but as you mentioned, it’s not ideal for the SM or leveraged investing as you have to pay per re-advance. Are there many other mortgage providers that charge for every readvance?
Hi FT, Very few, but this product is not really meant for the SM and does have other unique benefits. Cheers, Rob
What does portable mean?
Means you can move the mortgage to a new house and keep your interest rate.