Home Equity Line of Credit (Heloc)
What is a Home Equity line of credit (HELOC)?
Home equity loan works similarly to Home equity line of credit in the sense that it allows the individual to borrow against the equity in his/her home. This is also considered a type of a second mortgage.
This type of loan is similar to getting a line of Credit but it allows you to borrow a specific amount based on the equity in your home at a much lower interest rate. Home Equity Line of Credits generally allow you to borrow 65% to 80% of your home equity depending on the bank and the product.
Because your home equity loan is secured by your home, instead of receiving an unsecured loan rate (about 6-8 % rate) you will get a secured loan rate which is usually 0.5% higher than the Bank of Canada prime rate.
How can you take a line of credit based on your home equity?
A line of credit for up to 80% of the value of the home can be arranged for any expenses that may come your way. Whether it is to finance home renovations, purchase a car, or even for investment a line of credit with low interest rates can be arranged. The funds are easily accessible and you can use it when you need it. Since it is a secured product, it comes with certain legal fees that some lenders may cover from time to time as a promotion. Use this product to benefit your finances in a responsible way.
Frequently asked questions
What does HELOC stand for?
Heloc is short form for Home Equity Line Of Credit.
Who offers HELOCS?
In Ontario, the 5 big banks, TD Bank, Scotia Bank, BMO, RBC, and CIBC all offer home equity line of credit. Also, some credit unions such as Meridian and B2B also do offer Home Equity Lines of credit.
Am I eligible for a HELOC?
You must be a homeowner to apply for a HELOC since it is secured by the equity in your house. Your income, work position, credit history, and the amount you would want to borrow—typically up to 80% of the value of your house minus the balance of your current mortgage—are other application evaluation considerations.
What credit score must I have to be eligible for a HELOC?
A home equity line of credit needs a minimum credit score of 650 and a six-year history of good credit to be eligible. More HELOC alternatives are available to you if your credit score is better.
How much would my HELOC interest rate be?
HELOC rates are usually Bank of Canada's Prime rate plus 0.50%.
How can I use the money from my HELOC?
When the line of credit is approved, it becomes a separate account in your online banking, where you may quickly start a free same-day transfer to your checking account.
