HELOC = Home equity line of credit (aka secure line of credit)

There are many ways to say it – and most do not fully understand what a heloc is.

A home equity line of credit is a secure line of credit, registered against your home.  This can be up to 80% of the value of your home (assuming there is a mortgage portion for at least 15% of that 80% total)

If you want to have a stand-alone home line of credit the max you can have = 65% (loan to value)

For example: 

$1,000,000 home (or appraised value) = $800,000 max 

$150,000 mortgage term (anything you like ie: fixed/variable/3yr/5yr with 25-30yr am etc) 

$650,000 home line of credit 

= $800,000 total 

or 

$650,000 home line of credit (this is a revolving line of credit) – meaning you can borrow as much as you like when you want – *assuming it’s available) – and pay as little as just interest on that outstanding balance or pay the full amount off at any time 

This product provides clients with the most flexibility possible when it comes to a secured mortgage product…and do not get it twisted – a home line of credit is a mortgage. 

In these times where a lot of clients are in the middle of a great fixed rate (say 2.49%) or lower and they do not want to break that mortgage term – but they would like to access equity in their home….the best way to do this from a cost perspective is usually the second position home line of credit – or adding a home line of credit with that same bank or lender (if they offer the home line product) – some do not. 

Notes:

  1. If you are thinking of retiring anytime in the future – we recommend set up a home line of credit well before you make your final decision
  2. If you are thinking of becoming self employed – we highly recommend to set up a home line of credit to give yourself a buffer in the event you need access to funds (and you may or may not qualify later) this can add a lot of peace of mind as you focus on your new endeavor.
  3. A home line of credit itself is always a variable product (typically an open rate of prime + 0 to prime + 1.00% (fully open)  
  4. As you pay off your outstanding mortgage balance (closed mortgage portion) your available line of credit will grow (*in most cases) 

Starting in 2023 – the rules for all Helocs in Canada is changing – for more info on this check these references: 

https://www.nbc.ca/content/dam/bnc/particuliers/pdf/faq-credit-all-in-one.pdf