Because both a home equity loan and a HELOC use your home as collateral, you end up being able to enjoy much better interest rates than you would if you used personal loans, credit cards from a financial institution, or other forms of debt. Both home equity lines of credit and home equity loans have their own advantages, and your John Antle Mortgage Specialist will help you decide which option is best for your particular situation.
If you have questions about home equity loans, you’ve come to the right place. Here at John Antle Mortgage, we’re dedicated to helping our clients find the best loan options to fit their unique needs. Our FAQ section provides answers to some of the most common questions we receive about home equity loans, so you can make informed decisions about your financial future.
Generally, you can access 65% – 80% of the value of your home. It is important to remember that most lenders will consider your credit score and any mortgages you currently have when approving your Home Equity Line of Credit application. For Example; If your home is valued at $400,000 and your existing mortgage balance is $200,000, the maximum Home Equity Line of Credit limit from most financial institutions will be set at $120,000 ($400,000 x 80% = $320,000 less your mortgage balance of $200,000).
Normally access to your HELOC funds is provided in cash or through a bank transfer into your account. Some lenders may provide cheques. Remember, you only will pay interest on the amount borrowed, not monthly payments on the entire lump sum like you would with a home equity loan with either a fixed interest rate or variable interest rate.
HELOCs offer flexibility when it comes to repayments since they allow for interest-only payments. This means that when you borrow money, your minimum monthly payment will only be the interest charged on the borrowed amount. For this reason, HELOCs great option if you need to borrow money but want to keep your monthly payments low. They also provide you with the freedom to pay as much as you want in addition to your minimum monthly payment.
The interest rate is generally set at the Bank Prime rate plus a percentage (e.g. the prime rate plus 0.50%), depending on the client and lender. The amount may be adjusted on a monthly basis, if applicable. Some lenders or credit unions will offer a “locked-In” option, allowing you to have a fixed rate that will not change for your selected term, which is generally between one and five years. For example, if you have a limit on your Home Equity Line of Credit of $100,000, you could choose to have $50,000 locked-in at the current 5-year rate (principle and monthly interest payments) and $50,000 at the bank prime rate (floating interest-only payment).
Yes, when your traditional mortgage is renewed this is a good time to consider a HELOC option, as you will not be charged a prepayment penalty on your mortgage payments from your existing lender to break your existing term. Remember, this is also an option if you currently have an existing mortgage and wish to access equity from your home, as the Home Equity Line of Credit can be registered as a second charge on the title of the property.
Yes, using a Home Equity Line of Credit (HELOC) to finance a new home purchase may be a viable option for buyers who have a larger down payment. Some lenders may accept a 20% down payment amount for a new home purchase. That being said, it is recommended you discuss your financial situation and goals with one of our professionals to determine if this is the right course of action for you.
At John Antle Mortgages, our team is committed to assisting you in achieving your long-term goals. We believe that there are many options and possibilities available beyond traditional banking products. Whether your goal is paying down your mortgage faster or generating rental income to make progress on your amortization, we are ready to discuss all of your options with you.
As your Kelowna Mortgage Broker, we can help you with your first mortgage or renegotiate the terms on an existing property. Don’t hesitate to contact us today and let us help you get started on your financial journey. We are dedicated to providing you with personalized advice that takes all the details of your financial situation into account, making the mortgage process easy and straightforward for you.