When it comes to buying and maintaining a home, there are many ways you can achieve these goals without breaking the bank and getting broke in the process. One of these types of credit is HELOC or home equity line of credit, however, not many may be aware of what it actually means.
If you are looking to take out a second mortgage, need extra funds for a home renovation or even for your child’s tuition, taking out a HELOC may be the right financial decision for you. This blog post will help you gain more knowledge about how this type of line of credit and how it works.
The Advantages of Applying for Home Equity Line of Credit
There are many advantages to getting a HELOC. However, it does also come with its downsides and risks. Here are some of the facts that you need to know before you apply to take out a loan like this.
What is HELOC?
A HELOC or home equity line of credit is a revolving line of credit that will be secured against your home. If you have reached a certain amount of equity on your home, you may be eligible to use that equity to apply for a HELOC. Many people have the assumption that a HELOC is the same as a reverse mortgage, but it is not. There are many key differences between the two. In fact, HELOC isn’t a mortgage at all. Rather, it is a loan tied to your home that can be used for any purpose.
How HELOC Works in Canada
The first step to applying for a HELOC in Canada is to approach a bank or another financial institution and check with them to see if you qualify. Keep in mind that the more equity you have on your home, the larger the amount you will be able to apply for on your HELOC.
There will be some fees that will go with the application for the HELOC such as legal fees, appraisal fees and processing fees. Also, the maximum amount of the line of credit cannot exceed 65% of your home’s appraised value.
Why You Should Consider Applying For a HELOC
One of the key advantages of a HELOC is that the interest rates will most likely be lower than other types of loans. You will also be able to have access to extra funds and flexibility in how you spend it. You will also be able to continue living in your home while you apply and eventually pay off the HELOC.
There are a few disadvantages to a HELOC. Being aware of these disadvantages before applying will help set your expectations. Keep in mind that even if you have qualified for a HELOC, the lender may reconsider their decision if you have a life-altering event that will affect your income. Also, they may have strict requirements for eligibility, so it is best to confirm this with your mortgage agent in advance before applying. There may be additional fees that may apply in your case.
If you are looking to apply for a home equity line of credit, come to Ottawa Mortgage Services. We specialize in setting our clients up with the loan or mortgage that fits you needs. Let us help you get what you need today!