There are many advantages of getting a home equity line of credit. However, before even considering it, it pays to know exactly what you are getting into first. There are two main types of home equity lines of credit. One is combined with a mortgage, and another one is a standalone product. This blog post will shed light on these two types of home equity lines of credit, or HELOC, and how they may come in handy for you.
Getting a Home Equity Line of Credit: What You Should Know
Home equity lines of credit may be used in a variety of different ways. These two types of HELOC are designed to meet different needs and financial goals. This blog post will help you understand the specifics that go into each type of HELOC. This way, you will be able to make a more informed decision about which one may work more effectively for your specific needs.
Home Equity Line of Credit Combined with a Mortgage
This type of HELOC is also often referred to as a readvanceable mortgage. Most lenders offer this type of product combined with a mortgage under their own specific brand name. This type of HELOC combines a revolving home equity line of credit and a fixed-term mortgage.
With this type of HELOC, you will be able to use a portion of your home equity line of credit and your fixed-term mortgage to finance the purchase of your home. Depending on your lender, you may be able to gain access to other banking products such as personal loans, car loans, and credit cards that all fall under a single line of credit.
Standalone Home Equity Line of Credit
On the other hand, a standalone HELOC is a line of credit that is backed by the equity of your home. Unlike a home equity line of credit combined with a mortgage, it has nothing to do with your mortgage. It is treated as a separate product altogether.
The total amount that can be loaned under a standalone HELOC can go up to 65% of your home’s market value or purchase price. This type of HELOC may be used in place of a mortgage to buy a home. However, certain terms may apply to buying a home using a home equity line of credit instead of a traditional mortgage. Higher down payments may be required for this type of home buying method. However, you may also achieve more flexibility in contrast to a traditional mortgage scheme. It is best to inquire with your lender as to these terms before agreeing to push through with the HELOC.
There are many ways by which you may be able to take full advantage of your HELOC. It pays to know the specifics of how to use these mortgage products, especially if you are thinking about using them to purchase a home. If you have additional inquiries, it is best to take them up with an experienced mortgage agent. These professionals will be able to accurately provide answers and tell you if taking out a HELOC will be a good idea for you or not.
Should you need the assistance of a skilled mortgage professional or have questions on home equity line of credit, come to Ottawa Mortgage Services. We make it a point to provide mortgage agent services for first-time homebuyers in Ottawa, self-employed individuals, and commercial clients. We also help with refinancing, pre-approvals, and debt consolidation.