“Once a mortgage loan has been paid off in full, is it possible to leave the mortgage line open and continue to use it to fund other future work? asks a reader.
When granting a mortgage, the financial institution uses a lien on the property as security.
If the borrower fails to meet their obligations, they can confiscate the home, sell it, and get their money back.
The statement
When the loan is fully repaid, the link does not disappear automatically. If he wants to break the mortgage, the borrower must obtain a mortgage waiver.
This is a deed issued by a notary by which the financial institution declares that the borrower has fulfilled all of their obligations. The connection is then permanently disconnected.
How much does it cost ?
Notary fees for drafting a release vary from $300 to $600 depending on the complexity of the deed.
In addition, there is an additional cost of approximately $150 for posting in the Quebec land registry.
Before requesting a release
However, staying connected to your financial institution has many benefits that should be explored before terminating. Here are a few.
- The line of mortgage costs nothing as long as it is not drawn.
- You can use the margin on any type of projects as you wish, be it renovations, travel, buying shares, investments, etc.
- In order to use the margin, it is not necessary to go to the notary.
- The interest rate on a home equity loan is lower than that on a personal loan. For example, on a $15,000 loan amortized over 5 years, the savings at maturity with the margin compared to a personal loan would currently be over $3,000. It’s not nothing!
The inconveniences
The disadvantages include:
- The interest rate of the margin is linked to the market, i.e. to the Bank of Canada’s base rate. Consequence: The monthly payments may vary depending on the current tariff.
- Given the ease with which margin can be leveraged, some tend to overspend. Since the home equity line of credit can be as much as 65% of the home’s value, it’s a sizable sum. For example, on a $300,000 house, the margin is $195,000. To avoid over-indebtedness, spending should be managed wisely.
Diploma
Maintaining your home equity line of credit has many more advantages than disadvantages.
On the one hand, it allows the implementation of projects, including the purchase of a rental property, on the other hand, it allows to deal with unforeseen events.
In short, putting an end to this free opportunity… is a thing of the past!
Advice
- Is it a want or a need? Prudent use of a line of credit is crucial.
- Make regular repayments. The goal is to avoid accumulating debt.
- Strategic use of your margin. This may allow you to consolidate other high-interest debt.