Home Equity Line Of Credit(HELOC)

Home Equity Line of Credit

What is Home Equity?

A common question by many home owners is “what is home equity?” Simply put, it is essentially the difference between any existing mortgages (or other encumbrances) and the appraised value of your home. In other words if you have a home with a 1st mortgage of $100,000 and the appraised value of your home is $250,000, this would mean that you have $150,000 worth of equity!

Many homeowners, especially in Brampton and Mississauga, look to their available equity to help them with their short term financial goals. These can include but are not limited to the following circumstances:

  • Debt consolidation
  • Vacation
  • Weddings
  • Investments
  • Second home

There are essentially two main ways to access your home equity, without selling your home. One method is to place a mortgage on your home in exchange for the funds that you require that fit within the guidelines of the financial institution or lender. These funds are lump sum amounts and the interest accrues on the total funds acquired from the date of closing.

Another way to access your home equity is with what’s known as your Home Equity Line of Credit (HELOC). It may sound straightforward, but what exactly is it? A HELOC is similar to a line of credit you would typically receive from the banks, however this type of loan is secured to your home. Unlike other types of mortgages, the HELOC is not a lump sum loan but rather allows you to access the funds you need when you need them. Interest is paid on the outstanding balance of the loan and not the entire limit. In addition, you have the flexibility to be able to pay back all or some of the loan at any time without any penalties or limitations.

If you are interested in learning more about equity take outs, or If you’re looking for home equity services or home equity line of credit in Brampton or Mississauga, you’ve come to the right place, so give us a call!

FAQ’s - Home Equity Line of Credit

Q: How does a home equity line of credit differ from a regular line of credit?

A: They’re essentially the same product in terms of function. The main advantage of a Home equity line of credit (HELOC) is that the rate is often lower + the credit limit is much higher. This is due to the fact that the Line of credit is secured against the equity in your home in the form of collateral. The overall risk is considered far less than that of its counterparty (Unsecured LOCs)

Q: What is the maximum I can get with a home equity line of credit?

A: The Heloc itself can usually be approved up to 80% of the value of the home but cannot itself, represent greater than 65% of the equity in the home. For example, if your home is valued at $1 million with an existing 1st mortgage of $150k, the Home equity line of credit can be approved up to $650k. Notice how the Heloc itself represents 65% of the value of the home but the total mortgages do not exceed 80% of the value either… [(150k + 650k)/1m] = 80%

Q: What happens if I don’t use the Home equity line of credit?

A: Absolutely nothing. If you don’t carry a balance, you don’t owe anything. This is very much similar to a regular line of credit or other types of credit products such as credit cards

Q: How long do I have to payback my home equity line of credit?

A: They’re essentially the same product in terms of function. The main advantage of a Home equity line of credit (HELOC) is that the rate is often lower + the credit limit is much higher. This is due to the fact that the Line of credit is secured against the equity in your home in the form of collateral. The overall risk is considered far less than that of its counterparty (Unsecured LOCs)
Call Now Button