Thinking
and talking about opening a line of credit can be rather bland, a subject one
regularly avoids. With the amount of options available as well as the
constantly changing public opinion on borrowing money, navigating the financial
world can be tough. But don’t worry, Toronto property owners. Keep reading to
learn about the benefits of opening a home equity line of credit (HELOC) and
how such an action differs from applying for a mortgage.
Does Your
Home Have Equity?
First of
all, it is wise to determine if your home actually has equity or not. The
process of seeking a financial professional and discussing opening a HELOC
before doing such a thing would be rather pointless. If you have made
significant advances in your repayment of a first mortgage, your home probably
has equity. Equity is the amount that has been paid off, the portion of the
property that the owner has rights to, without question. When opening a home
equity line of credit in Toronto, the equity that has been incurred on the real
estate is used as collateral.
Refinancing
and opening a HELOC is opportune during low interest rates and fluctuating
real-estate markets. An easy-to-use online mortgage calculator can help you get
started with understanding how much equity you have and the amount that would
be open to you with the successful application of a HELOC.
Benefits
of a HELOC
Once you
have determined you have equity and are therefore eligible for a HELOC, a
financial professional can help you to better understand the benefits of
opening this kind of line of credit. Here are a couple basic reasons a home
equity line of credit is an extremely attractive type of loan:
- Independence. Borrowers can choose when and how
much they would like to contribute to the loan repayment. There are no fixed
term rates with a HELOC and a homeowner can opt out of a payment if times or
tough. On the other hand, a large sum of money can be paid off if the owner is
able to. Repayment decisions are left entirely up to you, giving you more financial freedom and less pressure to meet deadlines
and due dates.
- Tax
benefits. The amount of interest paid onto a HELOC can be filed as a tax
deductible. If portions of the credit line go toward home repairs and upgrades,
an even higher amount can be deduced at tax time, so long as the owner files correctly
and with proof of purchase.
2015
Mortgage Rates
The first
step in receiving a home equity line of credit is establishing a solid interest
in a mortgage. For first-time buyers who are looking toward
opening a HELOC in the future, remaining consistent and continual on mortgage
repayments is key to successful application. Financial institutions hesitate to
do business with you if you have a history of bad credit or late payments.
Staying on top of finances now means more freedom in the future.
Mortgage
rates continue to be lower than average going in the year 2015. The five-year
fixed rate in Canada sits around 2.79%, whereas variable is 2.35%. This means
that one could potentially enjoy even lower interest on a HELOC in the future,
as this type of credit usually carries a lower interest when compared to a
mortgage. Clearly, the time to buy property is now.
So, what
are you waiting for? Contact a Toronto financial specialist today to get
started. Reaping the benefits of low interest rates and more monetary
freedom is in sight!