HELOC – Home Equity Line of Credit Mortgage
A HELOC, or home equity line of credit, as it is more commonly known, is a mortgage product designed to let you have more than one credit facility in the mortgage. For example, you may choose to have a fixed portion that you make regular monthly payments on, and a line of credit portion that you only pay interest on every month. With a HELOC you can access up to 65% of the value of your home with the line of credit portion, and up to 80% when combined with your mortgage (fixed or variable portion).
The great thing about having a line of credit portion to your mortgage is the ability to take as much or as little of the equity as you want. Life happens, having this flexibility makes sure you are ready when it does. The other nice option with the line of credit is being able to pay interest only. Obviously your mortgage is not going to go away any time soon paying interest only, but it is great for clients with irregular income.
HELOC is the Ultimate in Flexibility
If you are thinking you may want to borrow some money to invest, buy a car or send the kids to school, a HELOC is a great financing option. You can also separate different expenses for ease of accounting. Can’t decide between long or short term, do both within your HELOC! The home equity line of credit is not just a mortgage, it’s a valuable tool in your overall financial plan.
There are some great options in the marketplace, don’t settle for your bank’s product. Let us show you all the benefits of a true ‘all in one’ product, and how this mortgage can benefit you. Let a mortgage professional assist you in setting up a HELOC mortgage on your Edmonton home!
- Extremely flexible allowing you easy access to your homes equity
- Very similar to a large credit card at a great rate
- Centralizes all repayments for easy accounting
- You need to be disciplined, again, it’s like a large credit card
- Can easily be abused, dangerous for inexperienced borrowers
HELOC’s are Tied to the Lending Prime Rate
The line of credit portion (and variable rate if you have one) is tied to the prime rate. So it’s important to keep an eye on the prime as your rates can start to sneak up on you if the prime starts to rise.
Highlights of the historical Prime Rates for the past 10 years
- The lowest prime rate is 2.25% (April 2009-May 2010)
- The average prime rate is 3.75%
- The highest prime rate 6.25% (July 2007 – November 2007)
When a HELOC Can Be Useful
- Borrowing to Investing: a popular form of investing today in this low interest environment is leveraging. This is a strategy whereby you borrow the funds from your line of credit and invest them.
- A Large Purchase: If you are thinking about a vacation property, rental or maybe just a new car or boat, a line of credit is perfect. With payments being interest only on the line of credit portion, it makes these large purchases affordable.
- Consolidate Debts: If you are finding that some of your payments are getting a bit tough to manage, throwing them into your HELOC can get rid of them cheaper and quicker.
- Home Renovations: If your home is looking tired, maybe it’s time to give it a face lift. These renovations are usually not cheap however, so financing them back into your home is not only an affordable way to do it, but it’s also a great investment, boosting your homes value.
Regardless of why you need a home equity line of credit, they are a great tool to have and an affordable way to finance things on your ‘want’ list. Talk to us today about our all-in-one financing options!