National Bank All-In-One (HELOC) | RateHub Mortgage Blog

What is a home equity line of credit (HELOC)?

A HELOC allows you to borrow money from the equity in your home, but functions like a regular line of credit, so you can choose when and how much you want to borrow.

What is an all-in-one product?

An all-in-one product combines your chequing and savings accounts, a mortgage loan, and a home equity line of credit (HELOC) into one account.

What is the National Bank All-In-One?

The National Bank All-In-One is a product that consolidates all your bank accounts, so that your debt is offset by your chequing and savings accounts. Because all of your accounts are combined, the positive balances in your chequing and savings accounts offset the negative balances on your mortgage and home equity line of credit (HELOC), which helps save you from having to pay interest on the full amount owing.

What is the National Bank All-In-One interest rate?

The National Bank All-In-One has a variable interest rate of Prime + 1.00 per cent, which is currently 4.00 per cent.

The details

For a home equity line of credit, the maximum amount of credit you can access through the National Bank All-In-One is set by a loan-to-value (LTV) ratio. Like most Canadian financial institutions, the line of credit may not exceed 65 per cent of the value of the property.

The bank also offers something called Fixed Payment Options, which allows you to set the principal repayment amount according to your budget and cash flow. There are two options:

1. A minimum payment: Only the monthly interest (and insurance premiums, if applicable)
2. A fixed payment: A fixed payment each month, beyond the interest due

The National Bank All-In-One functions like a readvanceable mortgage. That means your credit limit increases dollar-for-dollar as you pay off your principal. For example, let?s assume your monthly payment is $500, of which $300 is interest and $200 is principal. The second you make your monthly payment, National Bank automatically increases your line of credit by $200.

Features:

• No monthly fee for the main account
• Each subaccount is $2.50/month
• Minimum HELOC limit is $25,000
• Can be used to finance a principal or secondary residence
• One consolidated monthly statement (i.e. banking, savings, mortgage, HELOC, etc.)
• Principal payments are readvanceable

Sample HELOC calculation:

• The value of your property = $350,000
• The outstanding balance on your mortgage = $150,000

The maximum available credit is calculated using a 65 per cent loan-to-value ratio:

$350,000 x 65% = $227,500

Then, you have to subtract your outstanding mortgage balance:

$227,500 ? $150,000 = $77,500

The maximum amount of equity you could pull from your home is?$77,500, using the National Bank All-In-One.

How the National Bank All-In-One works:

As mentioned before, because all of your banking accounts are combined into one account with subaccounts, any positive balances in your chequing and savings accounts would offset how much you owed on your home equity line of credit. Any incoming deposits (i.e. paycheques) would also offset how much you owe, for the amount of time the money stays in your account.

For example, let?s say you owe $70,000 on your home equity line of credit (HELOC) and you decide to deposit a $10,000 inheritance into your All-In-One account. For the amount of time that stays in your account, you would owe $10,000 less on your HELOC. Since interest is calculated daily, you would save on interest even if the inheritance only stayed in your account for a few days.

The final word

By combining all your debt into a home equity line of credit, you could save on a number of interest payments. For example, if you have a car loan at 5.00 per cent, a credit card at 11.00 per cent, and a big store credit card at 26.00 per cent, your combined debts would only be subject to the National Bank All-In-One interest rate of 4.00 per cent.

One drawback of an all-in-one product is that the interest rate on your mortgage is higher than the average 5-year variable rate, which is currently at 2.55 per cent. Subjecting your mortgage debt to National Bank?s 4.00 per cent rate reflects a premium of 1.45 per cent.

Overall, National Bank?s All-In-One is a product that provides ultimate convenience with accessibility to a home equity line of credit.

Source: http://www.ratehub.ca/mortgage-blog/2012/11/national-bank-all-in-one-heloc/

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