If you are a homeowner in Brampton and are wondering what your options are for borrowing money, you may want to consider something called a HELOC. HELOC stands for home equity line of credit, and this financial tool can be incredibly handy when you need to finance a large purchase or expense but don’t want to be stuck with huge interest payments from other forms of loans such as your credit cards or unsecured loans.
What is a HELOC and how does it work?
A HELOC is referred to a revolving line of credit that is secured using your home’s equity. In most cases, you can get approval for a HELOC worth up to 80% of your home’s equity. A HELOC works in a way that is similar to a personal line of credit or a credit card. Once you are approved for a set amount, you can borrow as much or as little as you want but you are only required to pay interest on the money that you take out and use and not the whole entire amount of the home equity line of credit.
Unlike a regular loan that you borrow and pay back once, with a HELOC you can borrow and repay the money as often as you wish as long as you do not go over your approved limit you have in place.
So for example, you have a HELOC of $100,000 and you use $10,000 of that amount, then you will be required to only pay back the interest on $10,000. Your available limit will be $90,000 remaining until you bring the balance back to full with a payment of $10,000. Then at that point you will have an available limit of $100,000 to use.
What are the advantages of getting a HELOC?
Getting a HELOC has many advantages over other types of loans. For starters, because it is a secure loan the interest rate tends to be much lower. This can save you a lot of money if you need a larger loan – say for renovating your home, or paying off high interest debts like credit cards, car loans, etc.
Another advantage is that you don’t have to have perfect credit in order to qualify. As long as you have enough equity in your home to cover the amount that you are applying for, it is usually a simple matter to get approved. However, it is important to note that your credit score will determine the rate of interest you will receive for your home equity line of credit
And finally, because it is a revolving line of credit, you don’t have to keep re-applying. This makes a HELOC an especially useful tool for someone who needs to borrow money on a regular basis, as you will not be required to re-apply each time you pay it back.
Are the any drawbacks to getting a HELOC?
Perhaps the main drawback to getting a HELOC is that you are guaranteeing the money that you borrow using your home. Therefore, if you fail to keep up with the payments on the HELOC, the lender could recall the HELOC and ask for the total amount to be paid in a prompt manner. Just like any loan, it is important to assess your financial situation and make sure that you can handle the payments on the amount you are looking to borrow.
How do I get a HELOC?
The best way to get a HELOC is to do it through your mortgage broker. Your mortgage broker works with many different lenders and they will compare rates to help ensure you get the best possible deal. Your mortgage broker will also inform you of any financial documentation you may need and ensure that your application is complete and will be approved by a lender.
Depending on how high you want the limit to be on your HELOC, the lender may request that you get a home appraisal. If this is the case, your mortgage broker can help you with this as well. Home appraisals generally cost a few hundred dollars and an appraiser will have to visit your home in order to determine its value.
Contact me today
Getting a home equity line of credit can be a great way to ensure that you’ll have cash available any time that you need it. It’s also a great way to borrow at a low interest rate. If you are interested in applying for a HELOC, I am here to help. Contact me today to schedule an appointment so we can help get your application started.