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How a Home-Equity Line of Credit Can Help Barrie Homeowners

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What Is a Home Equity Line of Credit?

Barrie homeowners can have fast and easy access to large funds by taking advantage of their home equity with a home equity line of credit. A home-equity line of credit (HELOC) is commonly used to consolidate debts, lower monthly mortgage payments, and even for life purchases, such as home renovations or school tuition. Much like a line of credit or credit card, Barrie homeowners have to apply to a lender such as a bank or other financial institution that provides mortgage refinancing and home equity services to be approved for a home equity line of credit. A home-equity line of credit is often preferred because they essentially provide the most money for the lowest cost, or low interest rate, compared to other loan options.
HELOCs in Canada cannot exceed 80% of the current home value. At the same time, homeowners should remember that their HELOC plus your current mortgage balance cannot exceed 80% of the appraisal of the home.
For example:
  • Barry, a Barrie homeowner, purchases a home in 2013 for $100,000 with a $20,000 down payment and an $80,000 mortgage from the bank.
  • In 2014, Barry’s home is appraised for $200,000 but still owes $75,000 on the mortgage.
  • Barry can tap into $85,000 from his home equity (80% of $200,000 = $160,000 minus the outstanding mortgage balance of $75,000).

Home Equity Line of Credit vs. Fixed-Rate Loans

A home-equity line of credit is very similar to a credit card or line of credit because, like a credit card or line of credit, a certain spending limit is pre-approved by a lender or financial institution, and monthly payments are made to pay the interest of what was spent, which is variable interest rate that can change over the term of the loan. Homeowners have more flexibility with HELOCs as they can choose to pay at their own pace, making maximum repayments on money borrowed or just enough to cover the interest. For convenience, most banks also provide homeowners with a credit card for their home equity line of credit
A fixed-rate loan differs in its structure compared to a home equity line of credit, though both are considered home-equity loans and have fixed terms. With a fixed-rate home equity loan, homeowners borrow a lump sum loan and must pay back the entire principal plus a fixed interest rate that has been agreed upon by the bank and homeowner over a given term. The interest rate and monthly payments remain the same over the entire term of the loan.

How a Home Equity Line of Credit Can Benefit Barrie Homeowners

A home-equity line of credit can benefit Barrie homeowners greatly in times of financial need compared to other borrowing options, such as credit cards or fixed-rate loan. A home-equity line of credit provides a quick and easy source of cash for homeowners with a much lower interest rate than credit cards and other loans. For this reason, many homeowners choose to borrow against the equity of their home to pay off credit card balances since the interest rates are much lower than their credit card’s interest rate. With a home-equity line of credit, Barrie homeowners only borrow as much as they need for the things they need when they need it most with a home equity line of credit.


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