Borrowing money is inevitable for most people, especially when life-altering events are around the corner — a child is going away for college, retirement, losing a job, major home renovations, purchasing an investment property, and so on. Taking out a loan from the bank is not the only, and best, a method for borrowing money in such scenarios. Many Canadians will opt for a home equity line of credit. It’s important to keep in mind that equity loans are not recommended as a source of income for day-to-day spending and should be reserved for occasions when other financial means aren’t possible to acquire. So what exactly is a home equity line of credit? How does it work for? And how can I — Jodi Habel — be of help to you if you are considering a home equity line of credit? All of the answers to your questions and more are just ahead.
What Is A Home Equity Line Of Credit Mortgage?
If you’ve seen HELOC anywhere, that stands for Home Equity Line of Credit. A similar, yet slightly different, type of equity take out. This is a type of mortgage product that is re-advanceable, meaning once you pay off part or all of the balance that portion is available for you to draw from again. . The amount available to you is dependant upon the equity you have available in your home and also the legislation governing some lenders. Typically, you’ll be able to receive up to 65% of your home’s value equity with this type of loan, however, it’s possible for that number to increase up to 80% in certain circumstances. With a regular mortgage, you receive a lump sum while with a HELOC, it’s similar to that of an unsecured credit line that you may be familiar with.
How A Home Equity Line Of Credit Mortgage Works
There are a variety of ways to make use of your home equity and for some, it’s best that we discuss them one-on-one to determine which approach is best for you to avoid confusion. For example, you can split the costs of purchasing your house by combining a fixed-term mortgage with a home equity mortgage. Additionally, you have the option of using home equity to finance a mortgage for a second property. Furthermore, you can opt for a standalone home equity loan that does not tie in with any other existing mortgages. The usual documents are considered: proof of income, statements of current debt, and credit score.
Refinance mortgage vs home equity loan
Essentially, home equity line of credit mortgages are a type of mortgage refinancing but they nonetheless differ from traditional refinancing. The latter entails negotiating a change of terms in your current mortgage to opt for a lower interest rate. Perhaps the amount of your mortgage will differ due to added costs such as home renovation. A home equity mortgage, on the other hand, allows you to receive financing from the home equity that you’ve already collected throughout time. Home equity line of credit mortgage repayment is usually interest-only payments and is completely open for repayment at any time without penalty which are a few reasons why many homeowners favor them. It’s possible to take out a home equity line of credit and use that financing (with low interest) to pay off a debt of high interest and then continue to pay only the low-interest loan.
How A Mortgage Broker Can Help
You may be surprised to witness a variety of rates and possible sums to take out when shopping around at different lenders. Banks, credit unions, and individual mortgage brokers will offer you different quotes about just how much money you can withdraw from your home equity and the requirements to do so. As with traditional mortgages, mortgage brokers typically offer the best home equity line of credit rates and are more flexible to your needs.
Please contact me, Jodi Habel, to make acquiring your home equity line of credit mortgage in Canada smoother than you can imagine. I have acquired relationships with major banks, credit unions, monoline, and alternative lenders through my 15 years of experience working in the industry.