There’s a new readvanceable mortgage in town.  After an 11-month hiatus, Merix Financial has re-launched its HELOC. 

Compared to Merix’s previous iteration, this version is somewhat unique.  For instance:

• You can have up to a three components:  a 5-year fixed, a 5-year variable and/or a line of credit (LOC).  If you like, your mortgage can be split among these segments.
• You can lock in $25,000 portions of the LOC to a fixed or variable rate at any time.
• Unlike most lender’s HELOCs, this one is fully insured (so Merix can securitize it)
• The entire mortgage–including the LOC—is portable (a nice feature not found in many readvanceables).
• Since it’s insured, TDS can go up to 44% with a 680 Beacon

Merix’s HELOC is also unique in that it has a defined term (5-years).  Most open HELOCs don’t have terms.  Merix says it needed to make it a 5-year product because it’s easier to securitize.

The trade-off of this is the penalty.  If you break it before five years, Merix charges 3-months interest or IRD or an administration fee—whichever is greater (IRD applies only to fixed portions).  The administration fee equals .025% of the total authorized loan amount times the number of months remaining.

The penalty applies even if the entire mortgage resides in the LOC portion—which is unusual.  This is attributed to the considerable fees lenders must pay to set up HELOCs in the Canada Mortgage Bond program.

On the upside, the HELOC is fully and automatically readvanceable.  In other words, as soon as you make a mortgage payment (or pre-payment), your available line of credit increases instantly and proportionately.

Some more details…

• Minimum Beacon:  680 (650 for secondary applicants)
• GDS/TDS:  35%/42% (up to 44%)
• Term:  5 years
• Maximum LTV:  80% (0.15% higher rates apply above 75%)
• Mortgage Types:  Owner occupied, 2nd homes, rental (1-4 units), and BFS
• LOC Sub-accounts:  One
• Qualification Rate:  3-year fixed rate or contract rate
• Prepayment Options: 
• Fees:  $5 per month
• Maximum Amortization:  25 years
• Pre-Approvals:  Not available
• Down Payment:  Must be from own resources
• Maximum Loan:  $1 million (or more if customer pays the insurance premium)

Our wish list for this product is relatively short:

1. Multiple sub accounts (a la National Bank’s All-in-One, Scotia’s STEP, BMO’s Readiline, etc… Multiple LOC accounts are handy for segregating personal and investment borrowing.)
2. Online account access and funds transfers (Currently, you need to fax or email LOC withdrawal requests.)
3. No penalty for breaking if the mortgage is entirely in the LOC portion (That said, Merix notes that its HELOC is not intended for short-term financing options.)

All in all, it’s great to have Merix back in the HELOC game.  Its new HELOC has some positive traits and is definitely worth a look.

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Please note:  Other details may apply. Speak with a Merix-approved mortgage planner for complete information.