Many homeowners need to access the equity of their home to pay for things such as education for their children, renovations, or paying off debt. A home equity line of credit (HELOC) lets you do so with ease. Compared to a traditional home equity loan, a HELOC lets you access up to 65% of your home’s value in a line of credit. HELOCs are a flexible and low cost solution to borrow against your home equity.
Different mortgage products and lenders allow you to do different things with a HELOC. Certain lenders allow you to add a HELOC at any time while others require you to do it at signing. Advanced Mortgage and Lending Solutions can help you find a lender that will meet your HELOC needs.
In order to qualify for a HELOC, you need at least 20% equity in your home. Here are some pros and cons of HELOCs:
Pros:
• If you get a HELOC when signing or renewing your mortgage, it will save you the trouble and cost of refinancing to access home equity.
• A HELOC only costs you if you use it. Simply having a HELOC does not cost you any money* (Some lenders charge a monthly fee while others do not – call us for details).
• The funds become available through a revolving line of credit – this means that you can use as much or as little as you need. You don’t have to take a lump sum up front as you would with a home equity loan.
• You can access the money when you need it rather than trying to refinance when you require the extra credit.
Cons:
• Although HELOC’s typically follow the prime rate, banks can change the interest rate at any time on a HELOC.
• The bank or lender can also alter the amount of equity provided on the HELOC whenever they want.
• Since you are making interest-only payments, it may take a long time to pay off a HELOC unless you are disciplined.
• Some lenders will require you to refinance to get a HELOC if you are in the middle of your mortgage contract.
When considering a HELOC, make sure that you have specific goals in mind for how to use the money and when it will be paid off.
If you require access to your home equity, Advanced Mortgage & Lending Solutions can help you decide if a HELOC is the best solution for you. We have mortgage experts who will offer free advice on how to reach your mortgage and financial goals. The best time to get a HELOC is when renewing your mortgage so visit our website at www.advancedmls.ca or give us a call at (403) 466-6654.
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