Do you need some extra cash for a worthwhile project? Maybe you want to renovate your house or pay off some high-interest credit card debts. Or, perhaps you’d like to start a college fund for the children. For property owners in Toronto, the GTA or anywhere else in Ontario, a HELOC (also called a home equity line of credit, home equity loan or second mortgage) is the easiest way to tap into your property’s value.
Since Citadel Mortgages is one of Toronto’s leading mortgage brokerages, each week we are contacted by an increasing number of people looking for a way to borrow money based on their house’s value, without selling the property. I usually recommend a HELOC because it’s an affordable way to get quick cash.
As mortgage brokers here at Citadel Mortgages, our team help people take advantage of home loan programs. We’re receiving the biggest volume of inquiries from the following communities –
- Richmond Hill
- Thunder Bay
HELOC can be a lifesaver for Toronto home owners
Why are these loans so popular in the Toronto area? I think it’s because our HELOC program is such an easy and affordable way to get fast cash. As real estate values continue to grow in the GTA and throughout Ontario, owners are discovering it’s the best way to leverage their equity.
Benefits of a home equity line of credit
✔ You can take out up to 65% of your house’s appraisal value
✔ Repayment options are adjusted to meet your needs
✔ A home equity loan is flexible – You can take out as much or as little cash as you want, if and when you need it
✔ There’s generally no expiration date – Once you’re approved, you can access available credit anytime you need it
What is a HELOC?
A home equity line of credit is like a personal line of credit based on your property’s net value or equity. It’s like a mortgage refinancing because it gives you access to a pool of cash. It’s also like a second mortgage or debt consolidation loan because it can allow you to pay off other burdens such as credit card bills and car loans.
When we meet with someone who wants a HELOC, we explain that when you own a house in the Toronto area, you’re building up “equity,” which is accumulated property value. As you continue to make mortgage payments, and as the appreciation value of the property continues to rise, your equity grows fatter daily.
That equity is available in the form of a home equity loan or mortgage refinancing. Here at Citadel Mortgages, our team are experts at helping you use real estate equity to achieve your goals.
How much equity is in your house?
When you want a home equity loan, first we look at the outstanding balance on your mortgage to see how much is owed. Next we check the current value of the property, then subtract the owed mortgage balance from your house’s current value.
Your house’s current value minus mortgage balance = your house’s equity value
A HELOC uses the equity as collateral to secure the loan, which you receive as a line of credit. You can spend cash from this home equity line of credit, or you can use it to pay off other debts such as credit cards, car loans, school expenses, or other personal debts.
Since the loan is secured by the value of your house, lenders are confident you’ll repay the money you take out. Most important, it means you can borrow money at much lower interests rates than you could get from unsecured loans such as credit cards. That’s why a home equity line of credit is the most popular type of mortgage refinancing here at Citadel Mortgages.
Take as much cash – or as little – as you want out of your Toronto property
Using a HELOC is easy. When you choose Citadel Mortgages, we can usually put the loan behind your first mortgage, so you don’t need to have a complete home mortgage refinancing. Since your new home loan is in the form of a revolving line of credit, it feels like having a “new mortgage pre approval” anytime you need extra cash for something important. Also you can replace your current first mortgage with a HELOC product as well in most cases long as the LTV is 65% or lower.
The revolving nature of a HELOC means that each month you’ll receive a statement showing the minimum amount to be paid, and you can choose to pay more if you wish. This home equity line of credit is also like a credit card because you’ll only pay interest on the amount of money that you actually spend.
Most important, you’ll have peace of mind because you can pay off the outstanding balance anytime. And, you can still sell your house whenever you wish.
Of course, as you pay down the balance your available credit limit will increase, which means you’ll have access to even more cash. The HELOC is linked to a chequing account, so you can write cheques and use a debit card for purchases, or withdraw cash.
Your home equity is a powerful tool for success
Here’s a good example of how a home equity line of credit can be a powerful financial tool. A property owner here in the Toronto area has a property valued at $375,000 and needs cash to repair a leaky roof. He also wants to use some money to invest in the stock market and cryptocurrencies. His current mortgage balance is about $150,000.
First we calculate the maximum amount for loan-to-value (LTV) of 80% as allowed by the government:
$375,000 current house value x 80% maximum LTV = $300,000 maximum possible loan amount
This is the largest possible loan amount allowed by financial regulators according to their 80% max LTV rule. Next I calculate the maximum possible loan amount:
$300,000 maximum possible loan amount – $150,000 current loan balance = $150,000 maximum possible HELOC amount
Finally, as the last step we must check to make sure that the calculated $150,000 maximum possible loan amount doesn’t exceed the government-mandated maximum 65% of the house’s current value:
$150,000 maximum possible loan amount ÷ $375,000 current house value = 40%
The $150,000 maximum loan amount equals only 40% of the house’s current value, which is less than the government-allowed maximum of 65%. So, this property owner is qualified for the desired maximum loan amount of $150,000.
In this case the owner will use part of the money to buy roofing materials and pay a contractor to fix his roof. At the same time, he can use the rest to invest in his favorite stocks and cryptocurrencies.
How to lock in the best rate for a HELOC in Toronto
Our mortgage agents and mortgage brokers here at Citadel Mortgages in Toronto, greatest personal satisfaction and professional accomplishment is in helping people achieve financial goals. Since property values in the Toronto area continue to grow, we are meeting with an increasing number of property owners who wish to take advantage of the cash available through our HELOC programs.
Our team specialize in making dreams come true, and we can help you access Toronto’s best home loans and HELOCs. Whether you’re seeking mortgage refinancing, or you’re thinking about remodeling your current house, sending a child to college, or planning for retirement, we can help.
By using a mortgage agent or mortgage broker from Citadel Mortgages, you will be able to ask all the questions you have and be ensured you get the best advice and mortgage product for your mortgage needs. Contact us here at Citadel Mortgages to become mortgage free sooner !
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