What you need to know about home equity lines of credit
Matrix Mortgage Global – What you need to know about home equity lines of credit
Home equity lines of credit are a popular way for Canadians to borrow the cash they need – and for good reason. A home equity line of credit is relatively easy to get and inexpensive. Using this type of loan to make home improvements before you sell your house, for example, can even help you make money.
But before you apply, it is important that you understand how this type of loan works and the pros and cons of getting one.
What is a home equity line of credit?
Simply put, it is a loan that uses the equity in your home as collateral. With a home equity line of credit, you can borrow up to 65% of your home’s value but you can also combine it with your mortgage to get up to 80%. Just like credit cards, you do not have to pay off the full balance, but you do have to make the minimum monthly payments.
Advantages of a home equity line of credit
The main advantage of a home equity line of credit over other types of loans is that it is easy to get and tends to have much lower interest rates. Once you have negotiated the terms, you can borrow as often as you like up to a certain limit. As long as you are making your payments, you don’t have to worry about the availability of the money.
Disadvantages of a home equity line of credit
Having a home equity line of credit requires a good amount of self-control and discipline. For some people, having such easy access to so much cash can be addictive and it can be easy to run up your debt. For this reason, it is advised that you borrow from your home equity line of credit for short-term needs with the goal of paying it off as quickly as possible.
Another thing you need to be aware of is that your bank can change the terms of the line of credit without notice. For example, they may change your borrowing limit or the interest rate.
Should you get a home equity line of credit?
Before you apply for a home equity line of credit, you need to know both the advantages and disadvantages. As far as loans go, it can be one of your better options. You should, however, have a plan for paying it off. At Matrix Mortgage Global, we can help you find the right lender for your home equity line of credit and help you determine if it is the right choice for you. Call us at 1-877-371-5293.