A home equity line of credit (HELOC) is a secured form of credit. The lender uses your home as a guarantee that you’ll pay back the money you borrow.
Home equity lines of credit are revolving credit. You can borrow money, pay it back, and borrow it again, up to a maximum credit limit.
There are typically two types of HELOC available:
1. Home Equity LOC combined with a Mortgage
This type of HELOC has a 65% Loan to Value and the amount of credit available in the home equity lOC will go up to that credit limit as you pay down the principal on your mortgage.
2. Stand alone Home Equity LOC
This type of LOC will allow you to borrow up to 65% of your home’s purchase price and it won’t increase as you pay down your mortgage principal.
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You can set up a HELOC at any point in time as long as there is adequate equity available to do so. Most people set up their HELOC when they are either purchasing a new home or refinancing their existing home. In order to set up your HELOC, you must agree to the terms and services that the lender provides and pay the interest rate that is agreed upon in your contract. Typically, HELOC rates are higher than typical mortgage rates but lower than credit card rates or traditional
Not all lenders offer HELOC products so it is important to speak with your SafeBridge mortgage agent to discuss your options.
Our Clients Sam & Jenny recently used their Line of Credit to put a deposit down on an investment condo. They came across the condo opportunity rather quickly and didn’t have time to sell some of their stock portfolio so they simply pulled the $50K deposit from their Line of Credit. The benefit of having a HELOC gave them immediate access to capital without hassles, crazy fees and allowed them to repay the capital on their own timeline.
***Most lenders who provide LOC products will also need to assess your credit score, proof of sufficient and stable income and an acceptable level of debt compared to your income.
The good news is that you can add a HELOC at any time after your mortgage is secured providing two factors:
1. Your lender offers a Line of Credit product
2. You have enough equity available in your property to access via a LOC
If you put down a substantial down payment and think you may want access to your equity setting up a HELOC is a smart move. Without the HELOC you would need to break your existing mortgage contract to access the equity in the home which would trigger a financial penalty. See fixed rates & variable rates for additional information on breaking your mortgage and the associated penalties.
While there are many reasons people opt for a Line of Credit, below are the top two reasons we see people select Line of Credit products along with their mortgage.
Access to Equity: Most people choose a Line of Credit because they want to be able to access some of the equity in their home without breaking their mortgage contact which would result in a penalty. Given the high prices of homes in Canada today, a large number of people are putting substantial down payments on their properties and by doing so they are tying up large amounts of their personal capital. A Line of Credit gives you the opportunity to access your own equity and use it for capital for other investments etc.
Flexibility: A Line of Credit gives you the option to pay monthly interest payments, pay down the Line of Credit or pay if off completely. Its almost like you have your own personal bank.
We have 20+ years in the Canadian Mortgage Industry
We have access to all the traditional banks as well as discount lenders to find you the best HELOC options available. Based on our relationships with the lenders we can negotiate a better deal on your behalf.
Because we are not “tied” to any one lender we can provide more options to meet your specific needs.
Having a Line of Credit is of great value especially if you have a large amount of equity sitting in your home. Contact us to speak with one of our mortgage agents who can help answer and questions regarding a Line of Credit and how you can use it.
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Your Line of Credit limit is based upon the LTV (loan to value) qualification. With most lending institutions, you can borrow up to 65% LTV or ‘loan to value’ of your home minus the outstanding balance of your mortgage. Typically you cannot borrow more than 80% of the value of your home + HELOC. This is to ensure you have at least 20% equity remaining in your home at all times.
Technically you can set up a Line of Credit after your mortgage closes, but there may be additional fees and other transaction costs. It’s best to speak with a SafeBridge mortgage agent to discuss your options.
Typically you are responsible for paying the interest rate on the Line of Credit. Most lenders offer prime +1 as the Line of Credit interest rate, but this can vary from lender to lender.
There may be a few additional fees as well depending on the lender such as home appraisal fees, legal fees, title search fees, administration fees etc.
No- not all lenders provide Line of Credit products. Currently all the most Canadian banking institutions offer LOC products as well as a number of other lenders. It’s best to speak with a SafeBridge mortgage agent to discuss your options.
Chris is a Co-Founder and Financial Advisor at SafeBridge Financial Group, the originators of Mortgage Centered Financial Planning, and is passionate about serving his clients and empowering the incredible team to “Be Better. Be Inspiring.” Prior to co-founding SafeBridge, Chris started his career as a Financial Advisor with Sun Life Financial, formerly Clarica Financial Services, and had the privilege of serving many clients financial needs for over a decade.
Chris Karram,
Over the last 20 years we’ve been successful in attracting over 60 various lenders that our clients can benefit from. SafeBridge has evolved over the years and has become a very successful company…. The education, that comes along with not just the mortgage agent side of things, but also on the insurance and the investments and the financial planning all comes together in one holistic approach.
Elisseos,
Dena is a seasoned Mortgage Broker with 24 years experience in the financial industry. She started her career at Canada Trust as a part-time Teller while attending York University. During her 15 years with TD Canada Trust, Dena held various positions of increasing seniority. As a Senior Financial Advisor she gained knowledge in many disciplines in the banking and investment arena.
Dena Kakaletris,
For several years Andre has worked in the Financial Planning and Mortgage Solutions field with Scotiabank. After experiencing success, and gaining a wide knowledge base in the banking world, he decided to leave the bank to join a Boutique Mortgage Brokerage, Safebridge Financial Group. Andre made the change so that he could offer clients a wider variety of mortgage options and lenders.
Andre Persaud,
At SafeBridge we believe in experiencing growth together. We want to ensure that each of our agents is successful and feels a part of the SafeBridge team. We offer customized training, lender previews, team events and even team trips to build the strong culture of inclusion and support that so many of our agents enjoy.
We believe it is essential to hire and Partner with the right people. We are looking for the best and brightest in the Industry to join our Exclusive Group of Professionals. Our team consists of loyal top producing Agents that have demonstrated exceptional care for their clients and passion for the industry in which they serve. Our Mortgage Centered Financial Planning approach helps our team foster long lasting relationships, which brings a unique process to the mortgage business.
With over 20+ years in the Mortgage Industry, SafeBridge has built a solid reputation in the industry and is well respected by all major lending partners. SafeBridge has partnerships with over 10 insurance providers in Canada and has access to hundreds of mortgage products.
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