If you find that you have a lot of expenses lately, you may be tempted to use a credit card to pay for them. And while this can be a good and convenient option at times, there may be other times when a home equity line of credit is a better option.
What is a home equity line of credit?
A home equity line of credit or HELOC is a revolving line of credit. It works in a way that is similar to a credit card in that you have a limit that you are preapproved for and that you can borrow as often as you want as long as you have “room” in your account.
It differs from a credit card due mainly to the fact that a HELOC is a “secured” line of credit whereas a credit card is an “unsecured” line of credit. A HELOC is secured using your home equity – and the advantage of this is that the interest rate that you have to pay on a HELOC tends to be much lower than that of a credit card.
How much money can I borrow with a home equity line of credit?
The amount of credit that you can get approved for with a HELOC is based on how much equity that you have in your home – that is the value of your home minus what you owe on it. Most lenders will allow you to borrow up to 80% of your home equity.
That means if you have a home that is valued at $500,000 and you still owe $200,000 on your mortgage you have $300,000 in home equity. At 80%, that means you’d be able to get a HELOC limit of $240,000.
How do I go about getting a home equity line of credit?
Of course, you can go directly to a lender like a bank or credit union in order to get a HELOC however the best way to get a HELOC is to work with your mortgage broker.
This is true for a number of reasons.
For starters, mortgage brokers work with a wide range of lenders which means that they can shop around on your behalf to help ensure that you get the lowest possible interest rate. Remember – even though a HELOC tends to be a much better deal than a credit card, you still don’t want to have to pay more in interest than you absolutely have to.
Additionally, your mortgage broker is there to answer any questions you may have and to walk your through the application process. This helps to avoid any problems or delays in getting your approval.
Contact Akal Mortgages today!
If you are interested in getting a home equity line of credit or in learning more, contact one of our brokers today.
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