Unlock the Financial Potential of Your Home with a HELOC

A Home Equity Line of Credit (HELOC) is a type of loan that allows homeowners to borrow money against the equity in their home. Similar to a line of credit, you may borrow up to a certain amount and are only expected to pay interest on the amount you borrow.

HELOCs can be a great way to access the equity in your home and use it for a variety of purposes, such as home renovations, debt consolidation, or even a large purchase.

There are several benefits to a HELOC:

• Low-interest rates: HELOC mortgages typically have lower interest rates than unsecured loans, such as credit cards or personal loans, making them a cost-effective way to borrow money.
• Flexibility: You can use a HELOC mortgage for a variety of purposes, such as home renovations, debt consolidation, or even a large purchase.
• Tax benefits: The interest paid on a HELOC mortgage may be tax-deductible, which can save you money on your taxes.
• Easy access to funds: With a HELOC mortgage, you can easily access funds as you need them, making it a convenient option for unexpected expenses or emergencies.
• Line of credit and mortgage combined: You have the option to combine your line of credit and your mortgage, which can make it easier to manage your payments.

At Powerhaus Mortgages, we offer a variety of HELOC mortgage options to meet your specific needs. Our team of licensed mortgage professionals will work with you to find the best solution for you, all while taking into consideration your current financial situation and future goals.

We understand that the process of getting a HELOC mortgage can be confusing and overwhelming, that’s why our team will guide you through the process, answering any questions you may have and making sure you understand all the terms of your loan. Learn more about secured lines of credit here.

Financing Solution – Home Equity Line Of Credit

The Home Equity Line of Credit (HELOC) lets you split up your mortgage debt and borrow against your equity at low rates.

The unique feature of this mortgage product is that you can slice the pie (the mortgage balance) into various segments. All of it is registered against the subject property title as just one charge. This gives you the ability to diversify your risk in the marketplace.

If you had a $480,000 outstanding mortgage against a property (with 20% equity or a value of $600,000) you could divide it up into different segments. For example, you might place $200,000 in a variable-rate mortgage, $200,000 as fixed term and $80,000 line of credit.

Spreading the risk across different markets helps you plan for the future, as there are different governing bodies controlling different aspects of the marketplace.

Variable-rate mortgages and lines of credit (LOCs) are based on the prime lending rate and controlled by the Bank of Canada. Fixed rates are based on bond yields and dictated by the lenders themselves. Most other lenders follow the trends of the major chartered banks in Canada.

There are two types of line of credit in Canada: secured (registered against real estate) and unsecured (guaranteed by one’s promise to repay). I can only assist with secured LOCs. The secured LOC means less risk for the lender as it is based on the market value of the home to a maximum of 80% loan-to-value. Therefore the rate is lower and the borrowing ceiling is higher. On secured LOCs the rate is Prime (2.70%) +0.50% which is 3.20%. This means that if you had a primary residence with a market value of $500,000 free and clear of any other type of mortgage then you could secure a $400,000 HELOC against it at 3.20%.

Unsecured LOC rates vary depending on the lender, but a safe starting range is 5-7%. And on unsecured LOCs, lenders tend to forward much less than secured LOCs; they range from $5,000-$40,000.

Here is an example of a client I recently assisted. We were able to obtain a HELOC mortgage product from a Canadian charter bank.

• Current residence (located in the Greater Vancouver area) appraised at $1.15MM.
• Current mortgage balance, $445,000.
  Maximum loan limit, $920,000 (80% of market value: 1,150,000 x 80%).
  They opted to secure the current outstanding balance of $445,000 into a variable-rate mortgage at Prime-0.45% or 2.25%.
  The additional equity of $475,000 was set up for access across 3 different LOCs; one at $159,000 and two at $158,000.
  These clients now have access to $475,000 for any future needs: renos, emergency, investment opportunities, post-secondary education for their children.

But while a HELOC allows for product diversification and long-term planning, it is not for everyone. It can be a bad idea if it’s just used as access to easy cash. One needs to possess high self-discipline, as the funds are extremely accessible. Using the home as a piggybank can backfire disastrously.

A HELOC is also not available to all homeowners. There must be enough equity in the home before a lender will consider it.