A home equity line of credit is a smart solution to managing
your debt if you live in Kitchener, Ontario. Often, people do not want to admit
that they are having difficulty with money. The conversation is often
embarrassing and unfavourable. However, many options are available to you to
deal with debts and unforeseen expenses.
A home equity line of credit (or HELOC) is a great way to
borrow the equity that has built up in your home at low interest rates. Using
credit cards or high-interest loans to get out of debt can lead you down a
slippery slope of never ending borrowing and repaying, plus the high interest
rates make is quite difficult to quickly pay off these debts. A home equity
line of credit can be beneficial to you as they are a low-interest loan with
flexible terms that work with you and your repayment schedule goals.
What Is a Home Equity
Line of Credit?
A HELOC is a
type of loan with an agreed upon fixed repayment term and interest rate that
uses the buyers equity of their home as collateral. Often HELOCs are used for:
- Home Improvements
- Medical Bills
HELOCs are designed more like a credit card but without the
disadvantages. A set credit limit is established with the borrower and the
lender. Depending on the institution , the interest rate might vary. The rate is
often based on the Canadian prime
rate plus the lender’s own extra rate. This can mean that the interest rate
may change over time (if the lending period is for an extended amount) and
should be discussed with your lender.
A HELOC tends to be more flexible than other types of equity
loans, because it allows the homeowner to spend the equity of their home at any
time. Some or all of the funds may be pulled, and the interest is calculated
based on the amount used instead of the whole amount that the home owner has
been approved for.
Benefits of a HELOC Over
a Fixed-Rate Loan
spending limit –
- Predetermined spending limit
- Flexible spending
- Zero time-based limitations
It is important to discuss with your financial adviser
about what you intend to use your HELOC for. Whether you are looking to remodel
your kitchen or help pay your child’s tuition for medical school, these goals
will determine the best length of time to have your HELOC for.
Flexible spending –This can be incredibly important if your expenses are not all simultaneous. It
gives you the ability to draw funds on an ongoing basis. You use your funds as
you need them, and repay the interest based on what has been used – not the
entire pre-approved amount.
limitations – A HELOC is fully open and can be paid off at any time . Your
needs might be a one-time only renovation lasting a year or could be more than
ten years of college for your child. The flexible time limits enable you to
also repay using the pre-set minimums or make large lump-sums at your leisure.
For homeowners in Kitchener, a home equity line of credit is
an ideal choice when continuous access to the equity of their home is
important. The advantage of having access to immediate funds, and an interest
rate lower than regular credit cards give homeowners the flexibility to take
care of their most important debt needs.