COVID-19 hit many homeowners in Mississauga hard financially. Some lost jobs and others lost significant revenue from their businesses. More than ever, we realized the importance of having a source from which we could draw cash in the event a financial emergency. This had many people considering getting a home equity line of credit.
What is a home equity line of credit?
A home equity line of credit (HELOC) is a revolving loan that works in a way that is similar to a personal line of credit or a credit card. The lender approves you for a certain amount of credit that you can borrow from as often as you like as long as you don’t exceed the limit and you continue to make the minimum repayments.
The difference between a home equity line of credit and a personal line of credit, is that a HELOC is secured using the equity in your home. This has two big advantages. The first advantage is that you are going to pay less in interest on a HELOC than you would on a secured loan. The second advantage, is that you will not need to have perfect credit in order to qualify – only sufficient equity in your home.
Most lenders will let you borrow up to 80% of the value of your home equity with a HELOC.
Why should you consider a home equity line of credit?
Homeowners across Mississauga turn to HELOCs for a number of reasons including consolidating debt, financing home renovation projects, and even using as start-up capital for their business ventures.
Even if you don’t think that you’ll need the cash right away though, a HELOC can be used as a sort of “emergency reserve”. For example, if you had already been approved for a HELOC when the COVID-19 lockdown happened, you would have had immediate access to cash.
Are there any drawbacks to getting a home equity line of credit?
Generally speaking, HELOCs are a smart and safe way to borrow money. But like any kind of loan, it can damage your credit if you fail to make the payments on time. Also because you are using your home as security, you are putting it in jeopardy if you borrow money that you are unable to repay.
Thinking of getting a home equity loan? Contact Akal Mortgages today.
If you are considering getting a home equity loan, we can help. Contact Akal Mortgages today to speak to one of our agents in Mississauga.
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