All About Home Equity Lines of Credit
April 24, 2018 | Posted by: Allison Kurys & Kim Owen
A home equity line of credit better known as a HELOC is a secured line of credit which is secured against your home.
Some clients prefer to only have a HELOC and not have a fixed mortgage portion while others have a regular first mortgage secured against their home and get a HELOC as a second mortgage. Many clients use the equity in their home in the form of a HELOC so they have access to funds anytime they need it for home repairs, future investments and anything else they may need funds for.
You can get a HELOC up to 65% loan to value which is 65% of the equity in your home as a first mortgage charge. If you are combining the HELOC with a first mortgage you can borrow up to 80% split between the mortgage portion and HELOC portion. As of today the interest rates on most HELOC products is Prime +.50% but some lenders may have higher or lower rates. HELOC's have interest only payments and must be paid on a monthly basis.
We also see clients who prefer an all in one product specially the Manulife One which allows clients to have a mortgage, HELOC and bank account all in one.
HELOC's or any mortgage product which includes a HELOC is considered a collateral charge and once you sell your home or want to refinance your home both the mortgage portion and HELOC portion must be paid out in full at the time of closing. If you have a mortgage plus HELOC products some lenders will renew your mortgage and allow you to keep your your HELOC in place while only transferring over your mortgage portion to a new lender. You must check with your current lender to make sure they will allow your HELOC to stay in second position.
HELOC's can be very beneficial for many clients but its not a one size fits all product so make sure to speak to us before you sign up for a HELOC.
The RateHero Team