A home equity line of credit is a form of credit that is provided by a lender while using the home as collateral. If you have just bought a home, it is what you can use to pay for the repair or maintenance of the same. The lender can provide up to 80% of the home equity. Home equity is the market value of the house minus any debt that you might have to pay back. HELOC rates vary from lender to lender but there are certain factors that boost the confidence of a lender.
A high credit score ensures that you have a good grip on your financials and you make regular on-time payments. High home equity means in case things go south, the home will be used to pay off the creditors. Since HELOC comes as a second mortgage, it will be paid after all the primary ones are paid off. A stable form of employment means you are well aware of your expenses and can easily adjust the payments of HELOC in it. You can contact an expert broker such as SN Mortgage to get step by step guide about home equity loans in Toronto.
Home equity line of credit in Ontario has many advantages and perks that one can use. Some of them are as follows:
- The interest rates on HELOCs are lower as compared to private loans.
- The interest rate that you have may be fixed based on your requirement.
- You only pay back what you have used, it is not necessary to withdraw the entire amount in one go. Interest is also applied only on what you use.
- Your borrowing limit is as high as your home equity. You borrow, you return you borrow again.
- You have the liberty to utilize the money for whatever purposes. However, it is recommended to use it for non-depreciating assets such as renovating a home in contrast to buying a car.
So many advantages do not come without any restrictions. There are cons to bear in mind while opting for HELOC. Disadvantages of home equity line credit are as follows:
- The interest rate might be varying unless it is fixed. This means your interest rate will be based on the prime market rates and will fluctuate with the market in the future as well.
- There might be a minimum withdrawal amount set for you to adhere to. You have to borrow that minimum amount of money when using HELOC.
- Your house is the collateral. In case anything happens and you are unable to pay back the amount borrowed, you have to understand that your house is at stake. It will be used to pay back the lenders.
- There are multiple fees that you have to pay such as closing fees or appraisal fees.
There is a long list of HELOC pros and cons but the end objective should be clear in mind. Anything that becomes a burden on you shouldn’t be taken on unless you have the means to pay for it. Get in touch with an expert mortgage agent now and get your HELOC approved well in time. An expert will connect you to the right lender without wasting any time. Use HELOC to solve your financial predicaments and pay for what you need at your convenience.