Home Equity Line of Credit (HELOC)

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Rumy Gill - Mortgage Broker

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How can a home equity line of credit help you with your home renovation project?

With rising costs in the real estate industry and mortgage interest rates, you may think, how can you finance your home renovation project? It hasn't had a fresh coat of paint for some time now and looks like the oldest house in the neighborhood, where will you get the funds to make it look stand out from the rest again? Well, the Home equity line of credit can be the answer. It is also known as HELOC and you can find out more about it if you can contact our team of professional money lenders at NOB.  We will tell you the necessary details and once you share your requirements with us, we can take care of advice on what type of HELOC loan would be ideal for you. We serve clients in Toronto and the surrounding areas. Get in touch with us and request a callback.

But what is Home Equity Line of Credit?

Well, it's not another type of mortgage. Home Equity Line of Credit or HELOC, in short, revolves around the amount of credit that has been building up over the amount of time on your home and can be secured against it.

Generally in this type of loan, you can secure up to 80% of your home’s market value. For example, if your property’s net worth is around $500,000 and your mortgage is around $200,000, your HELOC amount could be as much as $200,000. However, the lender will always have the final say on how much the HELOC amount can be. 

You can you the HELOC amount anyhow you can. You can use it to give your home a fresh look, invest the amount for your business.  It can be used for medical emergencies, you can also pay back your mortgage using HELOC. No one will ask you any questions.  

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Please note that the lender or the financial institution will not release all the funds at one time as a lump sum. You will have access to all the money you need and once you pay the amount back, you can use it again. The major benefit is, you pay interest only on the amount of equity you use.You can get in touch with our team members now to resolve any queries you might have regarding HELOC. We will be more than glad to assist you.

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Like any mortgage loan, you will have to meet some criteria to qualify for HELOC.

  • You must have a good credit score. If your credit score is more than 730, you may get the best interest rates, if your credit score is less than 650, you are not eligible at all.
  • The remaining equity amount (after the loan) should be minimum of 20%
  • You must submit proof of income
  • Your debt to income ration should be in between 40-50%

The many pros and cons of HELOC

We will talk about the pros first

  • You can use the amount to for any reason, for example: find your grandchildren’s post-secondary education, go on a holiday etc.
  • You can access the funds through cheques and credit cards
  • The interest rates are lower when compared to credit cards and unsecured loans
  • If you have sufficient equity, you can borrow a large amount in funds
  • The interest can be tax-deductible
  • You can borrow as much as you need (not more, not less)
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Now, about the disadvantages

  • A major disadvantage for HELOC is, the interest rates are always changing (variable) which means if the prime rate increases so do your interest rate and so does your monthly return payments
  • Some HELOC requirements are very hard to meet, especially if you have a poor credit scoreIt is advisable to consider all aspects before you apply for a HELOC loan. If you can't make a payment you can lose your home. However, no need to worry. Your best interests are always our top priority. We will assist you throughout to avoid any financial disaster.

Looking for a Home Equity Line of Credit?

Speak to mortgage broker about the most affordable option given your credit score income and property

Recent Deals Approved:

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Mortgage Refinance $570k Approved - Toronto,Ontario

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Frequently Asked Questions

How does a home equity line of credit work?

When you take out a home equity line of credit, you're borrowing money from the bank with your home as collateral. HELOCs are different from other types of home loans because you don't borrow a fixed amount and pay it back over time.

Do you need an appraisal for a home equity line of credit?

Generally, all that's required to apply is an appraisal of your home and verification of your income. This also means that approval comes more quickly. Usually, you can get a home equity loan or HELOC in a matter of weeks– it's much quicker than the months-long ordeal of securing a mortgage.

How long does a home equity line of credit take?

If you have enough equity at the time of closing your home purchase, you can get a HELOC in as little as 30 to 45 days, which is the time it takes for loan underwriters to process the application. They use this time to confirm you meet lending requirements for the new debt.

How much equity do I need for a home equity line of credit?

That means you'll need to own more than 20% of your home before you can even qualify for a home equity loan. 

How much does a Heloc cost?

A HELOC costs little to nothing to establish, and the annual fee to have the funds available.Furthermore, interest payments are tax deductible, just like mortgage interest, and accessing the money is as simple as writing a check or using a debit card

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