Home Equity Lines of Credit (HELOC)
Easy & Flexible Access to Funds: Draw only what you need, when you need it.
Cost Friendly: Pay a low interest monthly payment only on what you use
Competitive Rates: Access lower interest rates compared to credit cards or personal loans.
Access upto $1.5M in available funds: Your personal wallet connected to your home's equity
No Renewal Hassles: Enjoy ongoing access to funds without renewal restrictions or costs.
Home Equity Line of Credit: Unlock Your Home’s Potential
Insured Mortgage Program Overview
Home Equity Loan:
A fixed lump-sum loan using your home as collateral.
Fixed interest rate and predictable monthly payments.
Best for large, one-time expenses like home renovations or debt consolidation.
HELOC:
A revolving line of credit where you can borrow and repay as needed.
Variable interest rates tied to the prime rate.
Ideal for ongoing or unpredictable expenses.
Home Equity Loans vs. HELOCs in Canada
In Canada, HELOCs typically require a Loan-to-Value (LTV) ratio of 65% to 80%, depending on the lender and other factors. This means that you can borrow up to 65-80% of your home's appraised value, minus any existing mortgage balances. For instance, if your home is valued at $500,000 and you owe $200,000 on your mortgage, you could be eligible for a HELOC worth up to $300,000—depending on your lender’s policies.
The exact LTV you can access will depend on factors like your home equity, financial situation, and credit score. Higher LTV ratios are typically available to those who have substantial equity in their home.
HELOC Rates vs. Traditional Mortgage Rates
5 Year - Fixed Term from
4.29%
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It is our job to get your lowest possible rate. Your rate qualification depends on certain factors, such as credit score and home equity as per regulations.
*Advertised rates may not be offered by this lender. Mortgage lender offers are aggregated by RateShop & its Brokerage Network subject to change without notice. Speak with our mortgage broker about APR and qualification requirements.
The interest rates for HELOCs are typically variable and tied to the prime lending rate. As of recent trends, HELOC rates in Canada generally range between 4% and 7%, which can be higher than fixed mortgage rates, which range from 3% to 5% for a typical 5-year term.
While HELOCs tend to have higher rates compared to traditional fixed-rate mortgages, they offer greater flexibility and are often used for short-term financial needs. Traditional mortgages, on the other hand, offer stability with fixed rates and predictable monthly payments, making them suitable for long-term homeownership.
Qualification Criteria
One of the primary benefits of a HELOC is the flexibility it offers. Unlike traditional loans, you are only required to make interest payments each month, with the option to make additional principal payments when desired. The key benefits of HELOC repayment options include:
Interest-Only Payments: During the draw period, you can make interest-only payments, which reduces your monthly out-of-pocket expenses.
Repay as You Go: You can pay down the balance at any time without penalties, which can save you interest costs over the life of the loan.
Revolving Credit: Once you repay part of the balance, you can borrow again, offering ongoing access to cash.
This flexibility is ideal for homeowners who need to access funds periodically without committing to fixed loan terms or large monthly payments.
Using a HELOC for Renovations, Investments, or Emergencies
A HELOC can be an excellent tool for homeowners looking to finance various expenses:
Renovations: Many homeowners use a HELOC to fund home improvements, which can increase the value of the property. This is a smart use of equity, as the increased property value can offset the loan taken out.
Investments: You can also use the funds from a HELOC for investments, such as purchasing additional property or investing in the stock market. While this carries some risk, it offers potential for significant returns.
Emergencies: A HELOC provides a financial cushion for unexpected expenses like medical bills or car repairs. With a revolving credit line, you can tap into funds when needed without applying for a new loan.
How Credit Scores Affect HELOC Approval
Choose a HELOC if: You need flexible, ongoing access to funds with variable payments.
Choose a home equity loan if: You prefer a one-time lump sum with fixed payments and interest rates.
Steps to Apply for a HELOC
Your credit score plays a significant role in securing a HELOC. Lenders use your credit score to evaluate your risk as a borrower. Higher credit scores (generally 680 or above) make it easier to qualify for a HELOC and can help you secure lower interest rates.
If your credit score is lower, it could affect your approval chances or lead to higher interest rates. However, even with a less-than-perfect score, you may still qualify for a HELOC if you have substantial equity in your home and a stable income
Combining HELOCs with First Mortgages for Financial Flexibility
Some homeowners choose to combine a HELOC with their first mortgage to increase financial flexibility. This strategy allows you to benefit from both a fixed-rate mortgage and a revolving credit line. For example, you can secure a low-interest rate for the mortgage portion and use the HELOC to cover short-term expenses, home improvements, or investments.
This combination can provide significant financial flexibility while keeping your payments manageable. Many banks and credit unions offer HELOCs alongside traditional mortgages to accommodate homeowners with varied needs.
RateShop Brokers' Partnerships with Banks and Credit Unions for HELOCs
At RateShop Mortgages, we work closely with a network of leading banks and credit unions across Canada to help you secure the best HELOC rates. Our brokers provide expert guidance, comparing multiple lenders to ensure you get competitive terms that align with your financial situation.
Whether you are looking for flexible repayment options, the best HELOC rates, or assistance with the approval process, RateShop brokers can help you access the HELOC that fits your needs.
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Local: 416-827-2626
Toll: 800-725-9946
RateShop Inc. is a Mortgage Brokerage offering lowest mortgage rates to Canadians. We are provincially licensed in the following provinces: Mortgage Brokerage Ontario FSRA #12733, British Columbia BCFSA #MB600776, Alberta RECA #00523056P, Saskatchewan FCAA #00511126, PEI #160622, New Brunswick FCNB #88426, Newfoundland/Labrador. Our Quebec Mortgage Transactions are serviced by Orbis Mortgage Group AMF# 181136.
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