Second Mortgage vs.
Home Equity Line of Credit Waterloo
We could all use some extra money,
whether it’s for a new car, post-secondary education, a much needed vacation,
etc. the list goes on and on. Instead of charging your credit card and getting
stuck in a debt with over 20% interest, homeowners can use their hard assets as
equity with a home equity line of credit (HELOC) or take out a second mortgage.
Before applying for either, make sure you do your research and shop around for
the best available options. Beyond research, consult with accredited
industry professionals to help you find out which option is most financially
secure for you.
Get Some Credit
A home equity line of credit is
basically like having a platinum credit card that has a low interest rate and a
secured loan, and is flexible. Your credit limit is derived from a set
percentage (usually 75%) based off a monetary evaluation of your house. Home
equity line of credit terms usually last somewhere between 3–10 years, making
the HELOC great for short-term monetary needs or investments. You can deposit
or withdraw money from your home equity loan at your convenience until the end
of your term. Once the term is up, you have to pay back the balance in its
On Second Thought...
While a home equity line of credit may
seem like a quick fix in the short term, it may not be the right move for you.
If you need money for the long term for an investment, acquiring hard assets,
etc., then second mortgages become more useful than a home equity line of
credit. A second mortgage can give you a percentage of the mortgage principal
in cash up front, to be paid back as a second mortgage alongside your first
mortgage. Second mortgages usually come with higher interest rates than your
And Now For Something
Sometimes you don't actually need a home
equity line of credit or second mortgage, and your best bet is to refinance
your mortgage. This allows you to renegotiate your mortgage for a more flexible
plan that doesn't eat up your monthly paycheque in one go. Often lowering your
monthly payments means extending your mortgage plan in the long term, which can
help you with your expenses.
Make sure you stay well informed
throughout the whole process and read all you can about the plan you are
taking. Many loans come with additional closing fees that can set you back. Be
sure to find out any extra costs, budget yourself accordingly, and avoid
feeling short-changed. All in all, if you need a short-term fix, you are better
off going with a home equity line of credit in Waterloo. If you need a better
plan for the long term, take out a second mortgage; and if you need flexibility,
consider refinancing your mortgage. Consult with industry professionals such as mortgage brokers, financial advisors,
and loan specialists to ensure you are making the right decision for your