A home equity line of credit is a cross between a personal line of credit and a second mortgage. Your home is collateral for the loan. You do not have to draw the money until you need it. You can draw all or part of it at any time, and pay some or all of it back as you wish. Think of it as low-cost revolving credit.
A home equity loan is similar to a conventional mortgage. Lenders set a limit on the loan amount, usually from two-thirds to three-quarters of your home’s value, minus whatever mortgage remains on your house. Say your home is worth $500,000 and you have $100,000 left on your mortgage. The difference between your mortgage and 80% of your home’s value ($400,000) is $300,000. You should be able to obtain a line of credit of $300,000, provided you meet the lender’s requirements.
The interest rate on a home equity line of credit usually floats at a fixed amount at or over the prime rate. A typical rate would be at prime plus half a percentage point. Lenders usually only collect interest only payments on secured lines of credit whereas mortgages are based on principal and interest payments. Remember too that lines of credit are demand loans, so your lender can demand repayment in full at any time, but likely won’t.
Fees for setting up a HELOC in Canada are about the same as for a mortgage loan. You will have to pay appraisal fees and legal fees, disbursements, and GST. Mortgage for Less can often scout out the lowest set up fee option or special promotions where the lender will absorb these costs.
A home equity line of credit can be a useful financial tool in many situations. For example:
A home equity line of credit can be an excellent financial resource, particularly if you set it up at the same time you are arranging your mortgage, which keeps administrative fees to a minimum.
Just because you can get a home equity line of credit doesn’t mean you should. If you have a hard time spending within your means and often carry a big balance on your credit cards, you might want to avoid further temptation. After all, there’s nothing to stop you from using your entire line of credit on new clothes and restaurant meals and after your spending spree is over, you have to pay back what you borrowed. You’ll basically have added several thousands of dollars to your mortgage, with little to show for it.
If you are a disciplined spender, though, a home equity line of credit can be an excellent financial resource. A specialist from Mortgage for Less can help you figure out whether a home equity loan is right for you.
Identification is used to verify your identity. While it’s a measure for preventing fraud, it’s essential for us to properly fill out your mortgage application.
It’s also a requirement so a lender can provide you with funding.
Income verification is required for your application so a lender can verify your ability to manage your mortgage payments.
Also provides essential information for us to assess your situation. Most of all helpful information to determine which mortgage product is appropriate for you.
It’s fraud if you falsify and/or exaggerate your income. Fraud for shelter is the most common form of mortgage fraud in Canada. Therefore we won’t tolerate this irresponsible and harmful behaviour.
It is important to be honest and precise with your income so that you aren’t getting a mortgage you can’t manage to afford.
A mortgage statement is simply a document prepared by your current lender and provided to you upon request. This document will detail your current mortgage.
Your mortgage statement will show:
This document is essential for the lender you apply to. As a document it allows a lender to assess your current mortgage and review your management of that mortgage.
Must show your name, property address, balance or original mortgage amount, and payment
A property appraisal is an estimated value of a home, in this case for one you wish to purchase.
Most noteworthy the appraisal is not a document that you will provide but rather pay for, as a requirement from your lender. Appraisals ordered by a lender are not shared with you as it’s their document.
This document is a cost surrounding your mortgage. While the cost can vary depending upon the location and size of the property.
The cost of an appraisal starts around $350 and can go over $500 (plus tax).
An appraisal is a requirement by a lender so they have a reasonable idea of your home’s current market value.
They use this value to assess the home before they are willing to lend against your home.
A void cheque is simply an unusable cheque that details your transit number and account number. It’s essential for a lender to deposit and withdraw funds from your account.
It’s an essential document that allows a lender to fund your mortgage. Also confirms the funds are in fact deposited to you, the mortgagor.
Getting a Home Equity Line of Credit is one way to tap into your home's equity. Have you considered a Home Equity Take-Out? Rather than a line of credit you receive a chunk of your home equity at once.
Feel free to send us an email with any questions you may have about the required documents for a HELOC.
We'd be happy to help!
We have a variety of useful guides that are essential and helpful for all your mortgage needs and questions. We cover everything from basic mortgage concepts to the functions and components of a mortgage to in-depth mortgage guides and strategies.
We have a variety of informative and useful pages. Take advantage of the free resources we offer with convenient bookmarks for all your mortgage information needs.
We have a few excellent options to determine what you can afford to borrow. We offer an easy to use Mortgage Qualifier Calculator. Simply input the required information and let our calculator give you an idea of how much you can afford to borrow.
If you want to get the most accurate idea of how much you can afford to borrow, contact us or fill out our online mortgage assessment form.
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There are a variety of mortgage types and purposes. Deciding on the best mortgage for you is essential to getting the most logical loan for your financial needs, goals and future.
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Nick and his staff were very efficient and helpful. Nick in my opinion went above and beyond what was required in arranging my new mortgage. This has been my experience over the past 25 years when dealing with Mortgage for Less and Nick specifically.
Nick Mitskopoulos was professional, trustworthy, efficient and proactive. His expertise as a broker was evident from the moment we met him. We had encountered 2 other brokers before but we decided to go with Nick because of his professionalism and sense of ethics. He was also patient and answered our numerous questions. We definitely recommend him as a mortgage broker. Keep up the good work Nick!
At no cost to you, we work on your behalf with your best interests in mind, until the mortgage transaction is closed and you are funded.
We asses your situation, advise on a mortgage product, find your best rate and provide you with options to customize your mortgage.
Nick was great to deal with. Professional, knowledgeable, polite and quick to answer any questions we had. Throughout the process from mortgage pre approval all the way through to closing day he stayed in touch making sure we had all the information necessary.
Would highly recommend Nick.
I have used Mortage For Less for all my mortgages since purchasing my first home nearly 15 years ago. From our first experience Nick has always been amazing at providing advice and negotiating great deals, and we have been a loyal customers ever since. Nick also jumped in quickly to help us work out a line of credit through our mortgage when we inquired a few years ago, and he provides interesting updates on the market. I plan on sticking with Nick for as long as I own a home.
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What a pleasure it is to do business with Nick. I have used Nick as my mortgage broker several times now and wouldn't think of using anyone else. He is knowledgeable, professional and always timely on any questions or inquires I have. He makes you feel like you are a special customer through the entire process. Nick thanks again for all you expertise and making this a smooth transaction.
Much appreciated !
It's always been a pleasure to work with you. Everything was made very easy for us even though you are in a different province. I believe I always got a great rate without me having to negotiate with several different banks. All the work was done for me. Thank you.
We provide a continued service of advice to strategically save tens of thousands over the life of a mortgage.
Our mortgage application and pre-approval are simple, straightforward and don't require much information to begin consultation.
We've been advising on mortgages for 30 years and we've helped thousands of Canadians get approved for their mortgage financing needs. We'd be happy to help you with your home equity line of credit.