Suit your desires at a far lower cost than moving.
You’re probably here because you’ve worked out the advantages of home improvement in place of selling and buying a new home.
Why deal with the stress, paying costly fees, and adjusting to a brand-new neighborhood, while you could renovate your present home to fit your desires at a much lower cost than moving?
Check out our guide below to learn how you take the following step in succeeding with home improvements.
Home Improving Guide
What is a HELOC?
HELOC stands for Home Equity Line of Credit, also commonly called a secure line of credit.
This credit facility operates withinside the equal manner as any existing unsecured line of credit you may have. The difference is by providing collateral of your home equity, the rate premium applied above prime drops from 2-5% right all the way down to 0.5%, giving you a lower cost of borrowing.
At present, the Bank of Canada prime is 2.45%, charged at interest only.
HELOC’s can be obtained up to 80% of the value of your house (LTV), less any existing mortgages owing. For example, if your house is worth $500,000, the allowable equity at 80% max is $400,000. If you currently owe $300,000 on your mortgage, the available equity in your home that you can provide in seeking a secure line of credit is $100,000.
What’s better HELOC or mortgage?
It can vary. Each credit product solves a need. The benefit of a HELOC is you are only charged and pay interest as you use or advance the funds. This flexibility comes at the cost of a higher rate, usually above prime.
With a mortgage, you pay a lower rate with a discount below prime. However, you’ll be paying interest and principal on the complete amount immediately, even if only a part of the funds is required in the short term.
The solution depends on the size, length, type, and scope of the project you’re undertaking. We will outline and optimize the best credit method for your needs, to mitigate the interest you will pay.
Can I refinance as soon as renovations are complete?
Generally, the strategy or process we recommend is refinancing to have the funds available earlier than commencing any project or large credit utilization.
It’s a common mistake to use (and max out) credit cards and unsecured lines of credit. This utilization is unfavorable to your credit score and will lessen your ability to qualify for refinancing with the best lenders.
Keep in mind and create a buffer of at the least 20-40% Of to be had funds above your expected project budget. The only certainty in life is uncertainty.
To help mitigate interest payable, we can utilize a secure line of credit throughout the duration of the project. At completion, with no additional spending to be done, we can seek to convert the secured line into a mortgage at a decreased rate.
Can you have multiple lines of credit?
We’ll make certain that the lenders we review and evaluate, offer flexible credit products and solutions. Most permit for a structured combination of as many as five unique mortgage segments that we can utilize for tax efficiency, credit diversification, and easy organizational purposes (which we’re going to evaluate with you). They also allow for up to 3 secured lines of credit.
Contact us for any further questions.