The RBC Homeline Plan is a convenient way to have a mortgage as well as access to the equity in your home. This product combines a traditional mortgage and home equity line of credit (HELOC) into a single product.

You’re eligible for this product if you’re an existing homeowner with at least 20% equity in your home, or if you are buying a home and have a 20% down payment. As you pay off your mortgage, the amount of principal you paid off becomes available for use in your home equity line of credit. 

How does the RBC Homeline Plan Work?

The RBC homeline plan allows you to access up to 80% of the equity in your house. Let’s say your house is worth $500,000. This means you can borrow up to 0.80 x $500,000 = $400,000.

Here’s an example on how it works:

  • When you buy a $500,000 house you put down $100,000 (20%) as the down payment and have a $400,000 mortgage.
  • Each month, you’re paying off $1,000 in mortgage principal.
  • At month 0 (when you first move in) you will owe $400,000 on your mortgage and have $0 available in your line of credit.
  • After the first month, you will owe $399,000 on your mortgage and have $1,000 available in your line of credit.
  • After the first year, you will owe $388,000 on your mortgage and have $12,000 available in your line of credit.
  • The available balance on your line of credit keeps increasing as you pay off your mortgage, but cannot exceed 65% of your home value.

This product is great for giving people the flexibility to aggressively pay off their mortgage since the home equity is still accessible (albeit at a higher interest rate). If an emergency comes up, you still have access to the funds.

Furthermore, you can also split your mortgage portion into multiple mortgages. Looking at the previous example where you owe $400,000 on the mortgage, you can split that into fixed and variable portions. For example, you might have:

  • $300,000 at a fixed rate
  • $100,000 at a variable rate

This structure may allow you to take advantage of potential savings – while still giving yourself some safety through the fixed rate.

Some people also split the mortgage portion into multiple components if they want to use the money for investment purposes. All interest paid on a loan used for a business investment is tax deductible. Splitting the mortgage into multiple segments allows you to keep track of the tax deductible interest, and provide a clear paper trail if you ever get audited.

Additional Considerations on The RBC Homeline Plan

1. This is a “collateral mortgage” rather than a traditional mortgage. This means that the legal fees involved with switching lenders is higher than normal. In our experience, it’s usually a few hundred dollars more.

2. If you end up using some money from your home equity line of credit (HELOC), then it could make it harder to leave RBC as you would need to pay that money back in full before switching lenders.

3. Your home value is determined by an appraiser who is hired by the bank. Your assessment from the city is not used.

4. RBC can offer you life, disability, and critical illness insurance for your RBC Homeline Plan. The rates are not bad, but we suggest getting additional insurance quotes to compare as you can generally find something less expensive.

We are not financial advisors, and no content on this site should not be taken as financial advice. No guarantee can be made if you invest based on the information provided on this blog. We make no warranty of any kind regarding the blog and/or any content, data, materials, information, products or services provided on the blog.