Why Get A Home Equity Line of Credit?
A home equity line of credit, also referred to as a HELOC. It allows you to borrow against your home’s available equity. You can use it to get rid of high interest debt through consolidation or obtain funds that can be used for other expenses. It’s interest rate is typically very attractive.
When to Get a HELOC
As soon as you pay for 20% of your property, you can access a credit line with the home equity. You can use the money for home renovations, to pay for school tuition, large purchases or even for retirement. The bank will allow you to borrow up to your accessible credit limit.
Combining HELOC With Your Mortgage
There is the option to join the HELOC with your mortgage. HELOC is considered a more affordable line of credit, joining it with a standard mortgage allows you to get up to 80% of your property’s total value. You can be allowed to borrow more from this line of credit as you continue to make the monthly mortgage payments.
Other Flexibility With a HELOC
Probably the best part of HELOC is that the equity you’ve gathered in your home acts as a collateral which lowers the cost of borrowing as well as interest rates. This form of financing works really well for those who have managed to pay off a significant portion of their mortgage. A HELOC can be a suitable option if your property has appreciated in value over the years. You may even consider investing in home renovations if they will add on to the value of your property and help you qualify for more credit.
Pros and Cons of HELOC
The main advantage of a HELOC is that its interest rate is typically lower than traditional unsecured lines of credit. However, you need to understand the repayment terms of the HELOC. Home equity lines of credit usually have an interest-only phase. The period can vary but it’s typically between 5 and 10 years.
Once the interest-only period ends, you may notice that the payment sums could increase. Sometimes lenders allow one to re-apply for an extension of the interest-only time period. This gives thpaye borrower an opportunity to continue paying for only the interest for a certain period of time in order to enjoy low monthly payments.
If you are contemplating taking a HELOC please contact me directly to learn more as I would be happy to answer any questions you may have.
Patrick Palmer: The Mortgage Cat
Licensed Mortgage Agent (Lic.#16000311)
South Oakville Centre, 1515 Rebecca Street, Unit c33, Oakville, ON L6L 5G8