[sprocket1200]

Dr. V, you are the best and i totally agree! read? why would some one who is going to get rich in real estate ever read a contract? or think about the future?? haha

can't wait until that house comes up for sale....I'll give them 40 cents on the dollar for it...

 

[houska]

Be careful in comparing apples to oranges here. One issue is of course what is the base rate, as mentioned. The other is the type of loan:

A HELOC will generally have interest only payments and can be repaid at any time, but is a demand loan, which means the bank can unilaterally change the conditions, like they did when they raised rates from P to P+1 a while back.

A closed term VRM will generally have interest and principal payments and be restrictive how much extra principal you can repay, but the bank (and you) needs to stick to the terms of the loan for the duration. Due to there being less flexibility for you, the rate on this will be lower. The repayment privilege conditions may vary between institutions and may be worth more to you than a few tenths difference in rate.

An open term VRM is like a closed term, but you have complete flexibility to pay back how much you want whenever. In return, you'll generally have a slightly worse rate.

 

[Racer]

An open term VRM is like a closed term, but you have complete flexibility to pay back how much you want whenever. In return, you'll generally have a slightly worse rate.

Another great post by houska. I would add that sometime the rate for open mortgages is more than slightly worse. I haven't been rate tracking or anything, but the MCAP rate for open was something like 7%.

 

[Racer]

TD sent me a letter on my two HELOCS and said they were raising their rates to prime +1% from prime. Can they do this? I have spoken to people that have prime - 1%, but they got that a while ago.

I don't have balances on them now but plan to use then in 2010 to possibly buy some real estate and want to get the best rate

What should I do?

Thanks

mcu, houska explained it well. Demand loans can be changed by the lender at any time.

I've mentioned this in other threads (sorry for the repetition folks), but we got the same letter and replied with a letter of our own. I told them I recently transferred my banking to them because my husband said that they were a stable and fair-minded institution. I told them I was now questioning that and invited them to reconsider their proposal, as I would be happy to reward their loyalty with ours (i.e. by not switching all of our accounts to another bank).

They called us three days later and offered us Prime+0.5. Not a huge change, but there you have it.

Good luck!