LawPro is the insurance company for most of the lawyers in Ontario and they recently released the results of a survey they took regarding what Canadians understood the impact of a Home Equity Line of Credit was on their legal situation.
Not surprisingly, well over ½ of the people who answered, didn’t realize it meant that their house is now collateral for other debts owed to the bank they take out the HELC with. Wow.
A house is most Canadians’ biggest asset and something that they generally do not want to expose to risk. To blindly take out an HELC without considering the impact on their house, well, unfortunately, it’s something I see far too often in my practice.
For the past 18 years I have frequently had to address the defence of “I didn’t understand what I was signing” in lawsuits enforcing obligations people have agreed to in writing. Generally, that defence doesn’t stand up, nor should it.
In the example of the HELC, the consumer is getting the benefit (presumably) of a much lower interest rate, this is due in part to the fact that the lender has secured the debt by the equity in the house – it’s easier to collect on in the event of default.
Of course, a consumer who didn’t take the time to read the document and ask questions, perhaps, gasp, spend $ 500.00 on a lawyer to explain it (because people tend to want to save money when it comes to lawyers, not understand the risk is fine by them) will cry how unfair this is and how they have been taken advantage of.
My answer and generally the Court’s answer: if you don’t want to be “taken advantage of” then read before you sign.