Home Equity Line of Credit in Canada
Homeowners can gain access to extra funds by unlocking the equity in their home with a home equity line of credit in Canada. Compared to other mortgages, a home equity line of credit offers more flexibility, allowing you to access money as needed and pay it down at any time.
What is a home equity line of credit in Canada?
A Home Equity Line of Credit (HELOC) is a revolving loan secured by your property’s equity. Your equity is the difference between the amount owing on your mortgage and the market value of your home. For example, if your home is worth $500,000 and you have $200,000 owing on your mortgage, your available equity is $300,000.
In Canada, you can borrow up to 65% of your property’s value through a home equity line of credit. With a HELOC, you will only pay interest on the amount of money you use. So while $300,000 would be available to you in our example scenario, you could keep the loan open without paying any interest until you needed the money.
Ways to use a home equity line of credit in Canada
Here are some of the most common uses for a home equity line of credit in Canada:
Paying for major home renovations and repairs
Whether your roof has sprung a leak or you plan on upgrading some areas in your home, a HELOC helps you access funds when you need them. The interest rates are typically lower than what you will pay on a credit card or an unsecured line of credit.
Maintaining an emergency fund
Experts recommend maintaining an emergency fund equivalent to three to six months of expenses. Some Canadians maintain a HELOC and only make withdrawals when financial emergencies arise. Our flexible payment options offer you breathing room to get back on track.
Are you going back to school as a mature student? Or perhaps looking to help a loved one pay for schooling? A home equity line of credit can help in either scenario. Given how variable student costs can be, you will appreciate the flexibility and accessibility.
If you would like to use your home equity for making investments, a HELOC is a great option. Since you will only pay interest on the amount of capital you are withdrawing at any given time, you don’t have to worry about interest rates eating into your potential profits.
You can use a home equity line of credit to consolidate all your loans into one. With debt consolidation, you don’t have to worry about making multiple payments every month while incurring heavy interest charges. A HELOC has a lower interest rate than credit card debt or unsecured loans. You can make minimum payments only on your home equity line of credit, which is not an option available for other loans.
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Frequently asked questions about home equity line of credit in Canada
What is a home equity line of credit?
A home equity line of credit is a mortgage product that offers flexibility as money can be accessed as needed and paid down at any time. It uses your home as collateral for the loan, which means you will pay a lower interest-rate.
How much do I have to pay monthly towards my home equity line of credit in Canada?
The amount you will need to pay monthly will vary depending on how much you use. If you borrow $300,000 yet only use $5,000, your repayments will be calculated on $5,000.
What is the maximum home equity line of credit in Canada?
In Canada, you can borrow up to 80% of the value of your home. Individual lenders may limit you to a lesser amount based on an assessment of your financial situation. Contact us at Mortgage Maestro for a personal evaluation and a quote concerning how much you can borrow and at what interest rate.