This post has me wondering about a larger HELOC.

We had 2 R9's on our credit, and just about have them cleared up. In another couple months we will be completely debt free except for the house.

House is worth $150,000, and we have $65,000 equity in it.

We also have 2 vehicles we paid cash for. No payments on anything else except monthly bills.

Yearly income is $85,000. We are looking to get a HELOC of $85,000 to do home renovations. That would leave us with $170,000 debt on the house, but the house would then be valued at about $280,000.

Do you think it will be possible for us to get a HELOC for $85,000 about a year from now (a year after debts are paid off?)

Any suggestions on how to make this happen?

We hope to also have about $25,000 in savings as well.

I heard the government any day now is no longer securing HELOC's.

In my opinion, you are an excellent candidate for a HELOC despite the fact that there is a R9 account on your Credit Report. If I was your bank manager and you approached me for a HELOC, you would be approved in less than a heartbeat. You have the income, stability and ability to service the debt together with the notion that a HELOC is fully secured. While initially, a HELOC is usually not registered on title, the agreement that you sign with the lending institution permits them to register the HELOC on title should you default on your interest payments. As you may know, with any line of credit be it secured or unsecured, you are only required to pay the interest monthly. Any repayment of principal is entirely up to you. All the lending institution requires is a bank account from which they can withdraw the monthly interest charge and the bank account does not have to be with the same lending institution. The difference between a secured and unsecured line of credit is the rate of interest that will be charged. The rate of interest charged for a secured line of credit is lower than an unsecured line of credit.

Now, here is the trick. If you approach your bank for a HELOC, and are declined, do not be discouraged. This happens frequently. There are plenty of national "brick and mortar" banks as well as "on line" banks such as PC Financial. You may approach one bank and the loans officer is uncomfortable with a R9 account showing on your Credit Report and declines your application. The next loans officer overlooks the R9 account and is more interested in your overall record, stability of income and your ability to service the debt.

Be very persistent in your application for a HELOC. Remember, it's not how many times that you fall down ( declined ) it's how many times that you get up.

Good Luck. I know you can do it.

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Educating one Consumer at a time

Wow, Footloose, that was a very informative response and I am very sorry you suffered as you did.

I have a question regarding credit report with one R9 and needing to look into a small HELOC for about $2,000 for an emergency house repair. I have steady (and good) income, and have had this mortgage for 4 years, putting 15% down initially. My mortgage is fixed, and I have 6 years left to go.

Is a HELOC out of the question to anyone with an R9?

You, my friend, are in a very "ticklish" situation and have very little "wiggle room". With 2 major debts with a combined total owing of $35,000+ and only 3 months in arrears, no lender or credit card grantor will settle for 50% especially when you own a home with a market value of $250,000. Your creditors "smell blood" and they will go for the "jugular".

Don't be surprised if one day soon, you will get a knock on the door with someone serving you with a Statement of Claim or one arrives by Her Majesty's Royal Mail. At this point, you are now officially in the system facing a lawsuit initiated by your creditors. They will attempt to take you to court in order to obtain a judgment for these outstanding amounts. If they obtain a judgment, they will apply to the court for an Enforcement Order to either garnish your bank account(s) and your disability income and seek a Writ of Seizure and Sale of your home.

Under the Ontario Wages Act, R.S.O. 1990, Chapter W.1, long term disability is considered as salary or wages. This is provided for under Subsection 7(1.1).

7(1.1) For the purposes of this section, payments from an insurance or indemnity scheme that are intended to replace income lost because of disability shall be deemed to be wages, whether the scheme is administered by the employer or another person.

The maximum that can be garnisheed is 20% ( 50% maximum for child and spousal support ) but can be reduced by application to the court if the garnishment is causing extreme financial hardship.

If a Writ of Seizure and Sale is issued by the court, a lien will be placed on your home but nothing will happen until you have to refinance your mortgage or sell your home. At that time, the lien will have to be satisfied. Failure to satisfy a lien when the home is refinanced will result in the sale of the home.

Your RRSPs cannot be attached as a result of an Enforcement Order.

A debt consolidation loan and a HELOC ( Home Equity Line of Credit ) is out of the question because your income will not support the service of these obligations combined with your poor Credit Report showing these debts with at least a R4 rating and quite likely going higher.

Credit Counseling will not work because with your income, you could not establish a debt management plan that would eliminate these debts in 5 years even if the interest was frozen or completely eliminated.

A Consumer Proposal will not work for the very same reasons.

Your last option is to make an Assignment in Bankruptcy. In bankruptcy, your home will form part of the estate together with the last 12 month's contributions to your RRSP unless your RRSP was purchased within an insurance company which means your RRSP is exempt from the bankruptcy estate.

Under no circumstances would I recommend that you collapse your RRSP to pay down your debt. These are your retirement funds and must be preserved as such. When the time comes that you want to retire and or you loose your disability income, you will appreciate this advice more than ever.

One final word. Before doing anything, contact a licensed Trustee in Bankruptcy. The consultation is always free so the price is right. Detail your situation to him/her and ask for their advice. I have very briefly outlined your options as I see them so that you have a better understanding of what you are facing. Give some very serious consideration to your options before embarking on a course of action.

P.S. I feel very qualified to give you this advice. You see, several years ago, I too walked in your shoes. I have no living relatives, landed in the hospital for several months with severe diabetes, had my toes amputated as a result of gangrene and when I was released, my employer informed me that my services were no longer required. In addition, with no income except a little employment insurance, I lost my house and defaulted on over $50,000 of credit card debt. Shortly thereafter, because of my diabetes, I lost my eyesight and today I am legally blind but use a special computer to help others.

I sincerely wish you the best of luck. You will come through these tough times just like I did. I'm now retired and exist solely on the Old Age Pension and the Canada Pension Plan. I still feel very blessed as I don't have cancer and I am mentally sharp. I thoroughly enjoy helping others understand their financial problems and how to cope with them.

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Educating one Consumer at a time

I have recently been put off work on long term disability and am unable to meet my payments on a CIBC Visa $17,500 and PC Credit Line $18,200.

I can pull about $18,000 from RRSPs, only about 10% equity in my $250,000 house. Should I try and see if the creditors will accept a 50% payment of the balances? I am 3 months in arrears now and starting to stress........