This Is How A Line Of Credit Works. 

When homeowners need access to cash quickly, a home equity line of credit may be the best option. A type of second mortgage, these lines of credit allow homeowners to obtain a loan using the existing equity in their home. In return, they receive a revolving line of credit that allows them to withdraw as much money as they need over a long period of time. But how do home equity lines of credit work, and what do homeowners do when it's time to apply? Typically, a home equity line of credit allows homeowners to borrow up to 80 percent of the equity they have built in their home. That is, the amount of your mortgage that you have already paid off or the amount that has increased the value of your home. So, let's say a homeowner has her $200,000 first mortgage on her home, but through the down payment and monthly mortgage payments, she has accumulated 50% of the equity in the home, or her $100,000. This means that you have built Her 80% of that amount would be $80,000. This is the total amount that a homeowner can borrow when they apply for a home equity line of credit. In larger cities and urban centers, lenders are often more generous and may offer up to 90% of the equity in your home. In the above scenario, the loan amount would increase to $90,000. Once approved for a home equity line of credit, homeowners have access to a revolving line of credit limited to the total loan amount. The homeowner can withdraw money from the line of credit at any time, usually through something like her ATM card.

Home equity lines of credit are based solely on variable interest rates, making them an especially attractive option for homeowners when federal interest rates are low. Interest is the only payment you have to make each month until the end of the loan. And in many cases, this is an indefinite period of time. Homeowners do not have to repay the principal over the life of the loan, but it is a good idea to do so, especially if you want to avoid paying a large amount at the end of the loan. Lenders also often have the ability to terminate home equity lines of credit at any time, leaving borrowers by surprise with large sums of money that must be repaid in a very short period of time.

If you're a homeowner and think a home equity line of credit is the best way to leverage your home equity and get extra cash for unexpected expenses, contact a mortgage broker who can help. Please contact. They have access to the best interest rates and can tell you more about Canadian home equity lines of credit.

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