If you locked into a fixed rate, five-year term TD mortgage back in 2021, you probably already know your monthly mortgage payments are going to increase when you renew this year. This might mean you have less money left over for other expenses.
Now, let's say you have your renewal, plus some big expenses – think windows in need of replacement or summer camp for both of your kids – on the horizon, you might be looking for a bit of flexibility when it comes to payments.
If that's the case, then a TD Home Equity FlexLine might be what you’re looking for.
But wait, what exactly is the TD Home Equity FlexLine?
Never heard of a HELOC? You're probably not alone. According to a recent TD survey, nearly half of those polled (47%) admitted that they're not familiar with home equity lines of credit. That number jumped to 58% among the prospective home buyers polled.
The TD Home Equity FlexLine is a home equity line of credit, or HELOC. That means, you can use it to unlock the value of your home to get a line of credit.
Put more simply, it's a type of loan that uses your home as collateral. When you use your home as collateral, you can often get a lower interest rate than with an unsecured line of credit.
The TD Home Equity FlexLine with optional term portions combines the flexibility of a line of credit with the structure of a mortgage. It can give you ongoing access to funds in a line of credit on one side¹, and predictable payments on the other.
You can then use the available credit towards expenses, both major and minor… like maybe replacing your 90s-era popcorn ceiling.
That sounds great, but how does the TD Home Equity Line of Credit really work?
- If you have 20% or more of your home's value², like for a down payment, you have the option to buy a home with either a traditional mortgage or a TD Home Equity FlexLine
- You can borrow up to 80% of the value of your home³. This is the plan limit
- You can have a line of credit up to 65% of the value of your home. This is the credit limit
- A TD Home Equity FlexLine can be comprised of a revolving portion and optional term portions
- Your revolving portion is your line of credit. Basically, you can use your house as collateral to get credit—up to 65% of the value of your home, or your credit limit
- Anything you borrow above that 65% credit limit must go into a term portion
- Term portions function similarly to traditional mortgages (you can have a fixed or variable rates, open or closed term, etc.)
Meet Jack and Jill, new TD Home Equity FlexLine clients
Let's say Jack and Jill are renewing their mortgage. They're in their mid-30s and bought their house in 2021, right when interest rates were low during the pandemic. Their adorable, mid-century bungalow is worth $1 million, and they have $400,000 left on their principal balance of their mortgage.
At renewal, they choose to refinance into a TD Home Equity FlexLine. That’s because they know they have some big expenses coming up, so a line of credit is appealing to them.
Since they can borrow up to 80% of the value of the home, they can access up to $800,000 total (remember, their house is worth $1 million). This is the plan limit. They work with their TD Mortgage Specialist to structure their TD Home Equity FlexLine as follows:
- $400,000, or what’s left on their mortgage, will go into a term portion, which has some similar features to a mortgage. They can choose a fixed or variable interest rate, an open or closed term, and an up to 30-year amortization period
As they make payments on their term portion, they will gain access to more credit. The credit limit will be $650,000. As a result of the term portion, they will only have $400,000 in available credit at the start. As they make payments on their term portion, the available credit will increase up to $650,000. Jack and Jill use their TD Home Equity FlexLine to finally update their pink-tiled basement bathroom.
They will only pay interest on the credit that they use in their revolving portion. While they can make minimum payments on the amount borrowed from their revolving portion, they can decide to pay off more or all of it at any time.
They could also choose to lock the amount they borrowed for their renovation into another term portion.
To help consolidate their debt and (potentially lower their payments on existing debt), they might also choose to pay off other debt with their available credit on their TD Home Equity FlexLine, like their outstanding car loan.
By rolling their existing debt into term portions in their TD Home Equity FlexLine, they can take advantage of lower interest rates and amoritization periods between 1 and 30 years that can help make their regular payments more manageable.
You can have multiple term portions in your TD Home Equity FlexLine. If you don't want to choose between a fixed or variable rate, you can choose a term portion with a fixed rate, and one with in a variable rate. You can have up to 40 term portions within your TD Home Equity FlexLine.
The final word on the TD Home Equity FlexLine
If you have a renewal for your TD mortgage on the horizon and want the structure of a mortgage, along with a line of credit, a TD Home Equity FlexLine might be for you.
If you have more questions, reach out to a TD Mortgage Specialist. They're often flexible with their time, too.