As you pay down the mortgage balance on your home or other real estate asset your equity balance begins to go higher and higher until you are mortgage free and have 100% equity on your property(s).
A popular credit product amongst Canadian real estate owners is the Home Equity Line of Credit. This is similar to a personal line of credit, but it is secured against real property and normally charges lower interest. You also have the advantage of making interest only payments compared to interest and principal payments normally made with unsecure personal line of credits.
It can be advantageous to have a home equity line of credit. There are many use case scenarios for it such as taking out money from the home equity line of credit to pay off high interest loans, buying things such as home appliances, furniture and related at lower rates or even using it towards a down payment for purchasing another property for investment purposes or vacation getaway such as a cottage.
The more down payment you provide at the start, when you are buying your home, the more equity you have to start with once you’ve moved in. If your mortgage balance is higher than 65% of the appraised value of the property you would not have enough equity to get a home equity line of credit. In todays regulatory framework the maximum that financial institutions will approve a home equity line of credit is up to 65% of the appraise value of the property.
Interest rates for home equity line of credit’s typically range from Prime rate +.50% to Prime rate +1%.
Trusterra Mortgage has access to lenders that offer home equity line of credits. Contact us to learn more about how you could get approved for one and for any general questions about lines of credits or mortgages that you have. We would be happy to answer your questions and to help you with your real estate financing needs.