Question:

Mr. Lozinski, My Credit Union recently told me they wanted me to discharge my closed term 1st mortgage and sign a HELOC. The mortgage is under Standard Charge Terms No.200033 which contains Power of Sale provisions in case of default. The HELOC is under Standard Charge Terms No. 9017 which says "payable on demand" in case of default. My income is 100% commissions and can be sporadic. Should I agree to this change? Will I have the same rights if I am in default? Thank you, Ruth

Answer:

Hi Ruth, Your question may be best asked of your lawyer. I would assume two things. One, you have a lot of equity in your home that you can draw from. Two, although your payments may be a little late from time to time, they are always made. Based on those two assumptions, they may be giving you reasonable advice and at the same time they will make a higher rate of return on your mortgage, currently 6%. A HELOC (Home Equity Line Of Credit) works like a VISA card with a giant limit. You can borrow up to your limit and pay back as much as you want each month. That way, if you are short at the time of your scheduled payment, you can draw funds to deposit to your bank account sufficient to pay your mortgage on time. Although I don't know your entire situation, I would suggest that you should perhaps ask the Credit Union to give you a discounted fixed rate on your First Mortgage and give you a second mortgage HELOC up to the maximum you qualify for and use the HELOC as a buffer to take you through your slow income periods and pay it down when the money comes in. John Lozinski 613-721-0010 jlozinski@bellnet.ca

Answered By: John Lozinski

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