TD Canada Trust has just follow other financial institutions and issue letters advising their clients that their Home Equity Line of Credit interest rate will go up to Prime + 1% instead of Prime.  They also suggest to lock in to a mortgage at the special one year rate of 2.5%.  You should be very carefully reviewing your options before making a decision.

I spoke with two mortgage brokers and they explained that locking-in may not be a good idea for most people who currently have a line of credit because:

  • you would lose the flexibility of a line of credit where you can reduce the outstanding balance anytime or borrow back when needed
  • you must make mortgage payments, not just interest payments
  • you would have to pay a penalty to get discharged if you want to go back to a line of credit later
  • The locked-in rate seems attractive but because it is calculated semi-annually and not daily, the actual difference between the two works out to be only about .2 or .3 basis point. Not worth the lost of flexibility.

To summarize, it may not be better for you to lock in in a mortgage product even if the rate seems attractive. Just give a call or drop me a line anytime.  I can refer a mortgage specialist who will help you determine what is best for you.