When you borrow home equity, it comes at a very low interest rate, making it one of the cheapest loans available. Common uses include:
Renovations
Car/truck purchase
Debt consolidation
Down payment on a second home
Investing
You can borrow up to 80% LTV
You can access that equity in two ways:
A home equity loan is a lump sum payment instead of a revolving line of credit.
If you’re borrowing $100,000 in equity, the lender will deposit that money into your bank account. VEGAS HERE WE COME!
Just kidding, don’t go to Vegas, that place is evil!
The loan will be added to your existing mortgage amount or be a separate mortgage segment attached to your original mortgage. Either way, your monthly mortgage payment will increase.
On a home equity loan, you start paying interest on the entire amount as soon as it is advanced to you- whether you use it or not.
Yes, just like the HELOC there will be costs associated with setting this up. You can discuss this with your mortgage broker or bank to determine the exact amount.
Contact your mortgage broker or bank to start the process.
A home equity line of credit (HELOC) is a revolving line of credit that can be used and paid back whenever you like.
If you have available equity in your home, the lender will set you up with a line of credit that is attached to your mortgage.
It can be set up so that every time you make a mortgage payment, you have more money available to you in your HELOC. You only pay interest on the funds that you borrow- but at a much lower interest rate than a credit card.
It’s quite typical for the interest rate on a HELOC to be about 1% higher than mortgage rates. The interest rate on your HELOC, just like any line of credit, will be a variable interest rate.
Lenders use your home as security. Just so you know, since the HELOC is attached to your mortgage - if you default on your home equity line of credit, the lender may force you to sell your home to satisfy this debt.
Yes, at the very least, your lender will charge you for the cost of the appraisal of your home. Depending on your current mortgage product and where you are in your mortgage term, there could be other costs associated with setting it up as well. Your mortgage broker or bank will be able to help you determine the actual cost.
Use our home equity calculator to determine how much equity you have.
Speak to your mortgage broker or lender to discuss your options. You’ll have to supply documents and go through the application process.
