HELOC

A Home Equity Line of Credit (HELOC) is a line of credit secured by the value of your home above and beyond the balance owed. It's a revolving line of credit, so you can borrow on it as needed for the term of the loan and make payments based on your outstanding balance, much like a credit card.

What is home equity?

To put it simply, the amount of home equity you possess is equivalent to any assets you have, minus the liabilities you possess. In other words, what portion of your home’s value do you control in comparison to the portion of your home’s value that your lender controls?

As time passes and the balance on your mortgage shrinks through payments you provide to your lender, you begin to watch your home equity grow (an objective many home owners share!)

Now let’s take a look at what a line of credit is.

A line of credit is a loan (credit) provided by a bank or similar financial institution. It contains a pre-set limit that requires scheduled minimum monthly payments to maintain a good credit standing. In certain cases, an individual may find themselves in a financially undesirable situation where they rely heavily on one or multiple lines of credit.

This can be overwhelming and when bills/interest payments begin to add up, it can make it even tougher to pay back what is owed.

This is where a Home Equity Line of Credit (HELOC) can be beneficial!

How A HELOC Can Help You

A HELOC considers your current equity and credit standing and uses it to create a revolving line of credit. There are many uses for a Home Equity Line of Credit (HELOC), some which save you from a current unfavourable situation, and some which assist you with future investments.

A borrower may find themselves applying for a Home Equity Line of Credit (HELOC) if they are:

Consolidating Debt An individual who finds themself behind on payments for high-interest debt may find it beneficial to consolidate their debts into a single low-interest Home Equity Line of Credit. This will help lower required monthly payments, helping free up extra funds for everyday expenses.

Renovating What happens when it’s time to revamp the kitchen or renovate a large portion of the house in hopes of increasing resale value, but you don’t have the cash readily available to do so? These are large expenses to assume which often can’t be acquired with a regular line of credit. Applying for a HELOC can help greatly with financial support so that you can get that expensive (and much needed!) renovation done.

Higher Education The same can be said for higher education expenses. Attending university and obtaining a degree, masters, or PHD can greatly enhance your life financially. But how do you accomplish these accreditations when you are a homeowner with little equity outside of your home? Use a HELOC to help you with these expenses so that you have the opportunity bring your goals to fruition!

Investing Opportunity knocks! New promising business venture on the horizon? A Home Equity Line of Credit (HELOC) can assist in the start up costs associated with development, licenses, décor and supplies. It may be that financial crutch you need to get started down a promising path you would not otherwise be able to afford.

Are There Any Limitations With A HELOC I Should Be Aware Of?

Yes! As with any financial undertaking, make sure you are aware of any costs or risks associated with a HELOC:

It’s important to first consider the fact that a Home Equity Line of Credit may not exceed more than 65% of your home’s value as a stand alone HELOC – or – more than 80% of your home’s value when combined with a current mortgage.

If you’re a first-time home buyer, you may not qualify for a Home Equity Line of Credit right away - check in with your licensed mortgage broker to find out.

A Home Equity Line of Credit (HELOC) is considered borrowing against your home’s equity (this is why you’re allowed to secure what is often a significant line of credit). It’s important to ensure that payments are made on time because if you fall behind, you may be at risk for losing your home/part of your equity.

Just because you qualify for a large Home Equity Line of Credit does not mean you need to use all of it. You may withdraw/use as much or as little of it as you like, but keep in mind that interest payments will be charged on any amount of your HELOC you’ve used.

Beware if you have a bad credit report, depending on the lender, owning your own home may not be enough to obtain a HELOC. You may need to prove that you have a good credit standing and an attractive debt-to-income (DTI) ratio in addition to the ownership of your home.

Paying Off The Balance On Your HELOC

If you’ve withdrawn funds from your Home Equity Line of Credit (HELOC), you can pay the minimum monthly interest back on it. Some individuals decide to pay it off quicker in larger installments or even all at once!

Unlike other investments, you don’t face pre-payment penalties the same way you might when conducting an early renewal on your home. The balance on your HELOC may be settled at your earliest convenience.

On the other hand, if you sell your home but still have a balance owing to your Home Equity Line of Credit (HELOC), the lender will recoup what they are owed from any funds created by the sale of your home.

I Would Benefit From A HELOC, Where Do I Apply?

Applying for a HELOC can be an easy process, but when done on your own it doesn’t necessarily guarantee you the best rate. Working with a licensed mortgage broker (like myself, Kyle Benzies) can provide you with lending options which otherwise may not be offered.

I maintain positive, trusting relations with many banks and lenders which allows me to access more desirable rates and pass them off to you! I’ll look over your unique borrowing situation to help you decide what lending option best suits your goals, setting you up for a success.