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)