When you choose a mortgage that allows you to borrow and re-borrow against your home, we call this a HELOC mortgage (Home Equity Line of Credit). This type of mortgage must not exceed 65% of the overall value of your home. In some cases, the HELOC may be a second mortgage which is a part of a combination type mortgage which has multiple components.

It's possible to have a combined limit of 80% of the value for a fixed term given the HELOC does not exceed 65%. This is particularly appealing to homeowners who are looking to renovate their home and they want to stay away from high interest loans. If responsibly used, this option can provide multiple benefits but can also bring a long some disadvantages which we will discuss.

The More Equity, The More you can Borrow

This option is beneficial if you’ve been paying down your mortgage for quite a long time. If you have a large amount paid off, you will have access to a much larger borrowing amount. This is often used by homeowners who are interested in large home renovations, funding their child’s educations, unexpected health costs or emergency situations amongst other unexpected life events.

Low Interest Rates

It is common for HELOC mortgages to include a higher interest rate than a typical mortgage loan.  However, it will always be much lower than credit cards, lines of credit or unsecured loans.  When you choose HELOC you will only be required to make interest payments on the borrowed amount.

Tax Deductions

Often you will be able to receive a tax break on the interest you pay when utilizing a HELOC mortgage. Talk to your mortgage expert, Laurence, to go over what this looks like in your situation.

Flexibility

The entire amount you have paid off on your HELOC mortgage will be available for you to borrow at any time. It's up to you how and when you will withdraw the money and you may re-borrow as often as you want without a re-qualifying process. This is by far the most flexible way of borrowing money when it comes to mortgage financing. It is important to keep in mind that your home is used as collateral so failure to keep up with the payments could result in a foreclosure. Talk to your mortgage expert who will review your situation to see if a HELOC may be a good decision for you and your future.

Contact us for more information about the HELOC mortgage and how it can help you achieve your goals.