Canadian Home Equity Line of Credit: Know More

Those thinking about borrowing a Canadian home equity line of credit have come to the right place. You can easily learn more about these home equity lines of credit.

A home equity line of credit is a form of credit that is secured through the use of your home. The lender holds your home as assurance that you will pay back the money you borrow against the value of your home.

These lines of credit are revolving credit. You can borrow this money, pay it back, and borrow the money again to get more from the cost of the home. There is a lot that goes into these home equity lines of credit though. It is important to learn more when choosing this type of home loan to go with.

The Types of Home Equity Lines of Credit

Those who are thinking about borrowing a HELOC should consider what type or kind of equity line of credit they need to have. Here are the two most common types of lines of credit.

Line of Credit Combined with a Mortgage

This is the one single biggest types of lines of credit that you can get against your home. There are generally no fixed repayment amounts for this type of credit. You will have a fixed term monthly amount added to the cost of your mortgage, so this is how you pay the money back.

The amount will vary depending on the specific home you have, as well as the interest rate on the mortgage. You can finance a home with this type of credit line, as well as a mortgage.

A Stand-Alone Home Equity Line of Credit

This is a great substitute for a homebuyer to use when purchasing a home. However, this type of equity can be used for any type of payment that you need to make, regardless. This is sometimes used in place of a mortgage because it is a flexible option to go with.

These lines of credit do not come with a lot of prepayment penalties, or other specific benefits that only come from these types of lines of credit.

Home Equity Loans are Not the Same as a Line of Credit

Home equity loans are not the same as lines of credit, so they should not be confused with each other. This is a one time lump sum that is given to the person, rather than revolving payments made. This is usually up to 80% of the value of your home that you can borrow. You will pay interest on the amount you borrow.

You have to repay the loan back in fixed monthly payments. You also have to cover the principal and interest, rather than just the interest.

How to Qualify for a Home Equity Line of Credit

Those interested in these types of lines of credit should know more about what you need to have to qualify for this type of credit. You just need to be approved once and once you are, you can then use this credit however much you would like, whenever you would like.

You will need to make sure to have a down payment or equity of at least 20% in your home. If you are using the credit as a mortgage, then you will need to have up to 35% in equity to do this with.

You will need to have an acceptable credit score, which is generally at least a 680. You will also need to show proof of your income and that it is stable and regular, as well as an acceptable debt-to-income ratio.

You will have to show proof that you own your home and supply the mortgage details if you are using a bank that is other than the one holding the mortgage.

Being able to show proof that you can afford the extra money on top of the other debt and bills you have is something that has to be done. You can ensure that you get the best from the use of these lines of credit and all that comes with them.

Whether you opt to refinance your home, borrow a prepaid amount or open a home equity line of credit (HELOC), the right lender is out there for you. Weigh your decision, and once you find a lender you like, click “Apply Now” next to their listing to go directly to the application on their website.

Tips for Choosing a Home Equity Line of Credit

You want to keep some things in mind when you are looking to get that home equity line of credit because you want to make the best decision. Here are some tips you want to have on hand.

  • Consider the flexibility and fees that are associate with this line of credit over other forms of credit or loans 
  • Create a repayment schedule and stick to paying it back on time, every time
  • Shop around for the best interest rate and negotiate with the lenders for the best outcome  
  • Be realistic about the budget you are using and how you are going to use the money with a clear plan and path to follow 
  • Determine the right amount of credit that you need for the project you’re looking to do 

If you’re thinking about a home equity line of credit in Canada, then speak with your mortgage lender. You might find that borrowing money is the best thing you can do to protect yourself and get the best loan or line of credit that works with the needs you have. Fill out the application for the home equity line of credit today.

Frequently Asked Questions About Canadian Home Equity Line of Credit

What questions should I ask the lender?

  1. What is required to qualify?
  2. How much notice before the interest rate changes to lock it in place?
  3. What fees apply when I borrow from you?
  4. What is the best interest rate that I can get given my credit history?

Are fees always something that is included when borrowing a home equity line of credit?

Yes. You will have to pay fees for everything that you decide to borrow from the bank. The lender will let you know these fees ahead of time so you can make the most informed decision on whether to use their bank for the line of credit or go with another one.

The are several advantages to having a home equity line of credit to take care of emergency needs, or fund other endeavours in life. Learn more!

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 1

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.