Making The Best Use Of A HELOC With Dion Beg
There comes a time in every home owner’s life when they need to consider home repairs or would like to make improvements to their property (like add a swimming pool, renovate their kitchen, basement, or attic). However, these needs and dreams cost money, and if you’re still paying off the mortgage on your home, saving what little remains of your income for these expenses becomes a challenge. Moreover, you lose out on today’s low service charges as you are forced to delay your home renovation plans.
At times like this, you could consider refinancing your home for funds, however, this method takes time and includes certain expenses, that may add significantly to your debt. Alternatively, you could choose a mortgage and home equity line of credit (HELOC) product.
What is Home Equity?
In mortgage terms, home equity refers to the difference of what you owe on your mortgage. For example, the value of your house is $100,000, your mortgage is $80,000, and you’ve paid $20,000 as a downpayment. Based on these figures you own 20% of the house which translates to the home equity you possess. Your equity will automatically increase as the mortgage principal is paid down. Home equity also increases when you introduce home improvements or the market value of your house rises.
Knowing your home equity is essential because it is part of your net worth and determines how much home equity you can encash through a HELOC to finance things like renovations, house repairs, and even medical bills, or college loans.
HELOC combined with a mortgage!
A home equity line of credit or HELOC is a debt instrument similar to a second mortgage, which is usually provided by the same lender. However, with a HELOC, the borrower does not receive the entire equity amount in lump sum. They can withdraw the amount required for their expenses, and after the advance period (say, five to ten years), interest will be charged on only the money utilized, like how credit cards work.
Many financial institutions offer a HELOC combined with a mortgage to help clients who want to access their equity to invest in future needs and urgent requirements. Besides, it’s much easier to obtain finances through your home equity. There is no significant cost differential between this and a regular mortgage, but rates depend on lender offerings at the time of product establishment.
For HELOC products you need to communicate with your brokerage to understand their terms and conditions related to borrowing limits, interest rates, and credit periods. Failure to pay back this loan amount can lead to loss of your property, as it stands as collateral in the event of default. However, as you have the opportunity to liquidate as much equity as you require and you are charged only for what you utilize, you can control your debt from going out of hand.
With over fifteen years of experience in the mortgage industry, I have handled over a hundred property investments and gained a deep understanding of mortgage products during this time. I specialize in guiding first-time home buyers and clients looking for refinancing, consolidated debt, and a variety of other mortgage products that will allow them to fulfill their long-term goals and meet their immediate needs.
For more details on my services, please click here, or click here to connect with me, Dion Beg, your premiere award winning mortgage agent in the Durham region Servicing Pickering, Ajax, Whitby, Toronto and the GTA.