I took out a Scotia Total Equity Plan (STEP) mortgage with an automatically re-advancing home equity line of credit this year to facilitate a Smith Manoeuvre. It is my only dealings with that institution.

Before agreeing to give them the mortgage, I was assured in person that the HELOC would automatically re-advance any principle paid on the mortgage each month without delay and without requiring myself or any bank personnel to request increases to the line of credit. I specifically asked about this because of the complaints of previous STEP customers who often had to submit monthly requests in writing to their branch to enable their line of credit increases, tying up their money after each payment. The mortgage product seemed to be implemented in various ways at various branches and people were treated very differently at different locations.

While my line of credit apparently is designated as automatically re-advancing, I am finding that the bank in practice is actually seizing every single one of my principle payments for more than a month.
They actually freeze multiple principle payments such that they overlap! Their total amounts show up a few days after each payment clears as part of a euphemistically titled “Additional Credit Available” total listed as curious subset of the “Total Credit Available” on the overall STEP account. This is money that is actually NOT available to me and is not included in the money available to borrow in the HELOC account until more than a month later.

After some 30 to 60 days the missing money finally shows up As available to borrow on my HELOC, without interest.

Scotiabank is effectively borrowing every one of my payments on the principle of my mortgage.

I have gone back and forth with the bank and they cannot formulate an answer as what they are doing with the money nor why they need to freeze payments that have already cleared. Payments that are guaranteed by a collateral lien on my house for more than the HELOC & mortgage combined.

As I write this in the first weekend of December they have the principle of my October mortgage payment unavailable to me, along with my November principle payment and a five digit lump sum payment that I made on the mortgage principle over two weeks ago. All are totalled and listed as ”additional credit available’ that has NOT been available to me to invest in this climbing stock market as I wished, and as I had been promised.

In the past STEP customers have apparently been treated incredibly differently depending on their branch managers, how the product was set-up, etc.
I was told last week that “It’s the same timeframe for every customer with a Scotia Total equity plan. The timing and processing is automated and can’t be changed.”

Apparently I must take it up with the office of the bank president before they will take it to their Ombudsman. In the meantime I am trying to get them to answer me in writing.
It’s only a two year closed, so it is easier to vote with my feet than break the mortgage.
But It is incredibly disappointing that the bank is doing this when they they promised they wouldn’t when I signed the mortgage application.

Are the principle payments of other STEP customers being tied-up for more than a month on every payment?
What is the experience of other Smith Manoeuvre customers, are your payments made unavailable so long that they overlap?

Statistics: Posted by Cleanhead — Dec 1st, 2019 3:55 pm

* This article was originally published here