Home Equity Line Of Credit/HELOC Mortgages
Are you looking for a way to finance your child’s post-secondary education? Perhaps you are in need of some home improvements (a new roof) or home renovations (a new kitchen)? Do all of your major appliances need to be replaced (at the same time)? A home equity line of credit may be a good option. You may not have the funds immediately available to satisfy these needs or plans but that should not prevent you from moving forward. With the advice of a financial expert, you can evaluate your credit options and determine if a home equity line of credit is the best way to proceed.
Natasha Bridgmohan and her team of financial consultants at Mortgage Intelligence can help you get the financing you need to pay for these types of major expenditures. Let our years of experience with mortgages and associated credit services make it easier for you to work through the intricacies of a home equity line of credit.
What is a home equity line of credit?
A home equity line of credit allows homeowners to borrow cash on essentially an as-needed basis, using the equity in their home as collateral. The borrower is not advanced the entire sum initially, but instead uses the line of credit to borrow various amounts that total no more than the approved limit, similar to a credit card. The balance owing will vary depending on the funds utilized and repayments made. The minimum monthly repayment amount is based on the current balance owing, not on the approved limit.
For many homeowners, their home is often their most significant and most valuable asset. As a result, many homeowners use their home equity line of credit strictly for major purchases or expenditures (such as education, home renovations, vacation travel) rather than for everyday expenses.
Why apply for a home equity line of credit?
There are several benefits to obtaining a home equity line of credit, including:
- Easy access to funds
- The option of using the money only as you need it
- A lower interest rate versus other types of loans
- You pay interest only on the balance utilized
- No need to reapply every time you need funds – your line of credit is always available to you
- You do not need to break an existing mortgage to secure a line of credit – no mortgage penalty
How is a home equity line of credit calculated?
In Canada, a home equity line of credit is capped at 65% of the value of your home. In addition, the sum total of your outstanding mortgage balance plus your home equity line of credit cannot exceed 80% of the value of your home. To calculate your potential amount of home equity available, you will need to obtain an appraisal of the current market value of your home, and then determine 80% of its value. Subtracting the balance of your mortgage from this latter amount will give you the amount of home equity available (provided that the home equity amount does not exceed 65% of the total market value of your home).
Tip: A home equity line of credit would be a viable option for individuals with a good credit rating and who are disciplined in managing their finances.
Many homeowners may be hesitant to borrow funds against the equity in their own home. Some may be intimidated by the application process or the financial terms. Natasha Bridgmohan and her team of Toronto mortgage brokers are here to answer any questions and guide you through the entire line of credit process.
To obtain more information about applying for a home equity line of credit, consult the professionals at Mortgage Intelligence. Call us toll-free at 1-866-553-7467 ext 221.