Navigating
the world of financial forecasting and borrowing is daunting and rather
complicated for those who are new to the game or have relied on others to do
the dirty work. Understanding the benefits of opening a home equity line of
credit could potentially save a Richmond Hill homeowner a substantial amount of
money. Keep reading to learn about such a line of credit and the benefits of
enrolling when compared to a mortgage.
What Is a Home Equity Line of
Credit?
A home
equity line of credit (HELOC) can be defined as a second loan that is granted
to a homeowner once a certain amount of pre-existing debt has been consistently
repaid. One can only be eligible if they had a mortgage in the first place. The
value of the home that has been paid off during the loan period is used as
collateral when opening a HELOC.
One
must consult a financial professional prior to applying in order to ensure they
will be approved. A first-time buyer cannot enjoy the benefits of a HELOC, as
it is reserved for trustworthy and organized owners who have shown that they
can manage and repay debt appropriately.
Benefits of Enrolling
Here
are few of the reasons opening a home equity line of credit is extremely
economical as well as beneficial to homeowners with owing debt:
- Improved
credit score. Payments are made easy with a HELOC. If homeowners can pay
debt off more consistently, their credit scores will naturally improve.
- Tax
deduction opportunity. In some cases, the interest you pay on a HELOC can
be tax deductible. Be sure to keep track of how much you have given over in
order to ensure a potential break when filing time hits in the spring.
- Freedom. A mortgage can only be used
to pay off property debt. A HELOC, on the other hand, gives the borrower more
financial freedom. One can access the loan for any type of purchase, as it is
not strictly reserved for property. Making a large purchase becomes easy and
accessible as debt is consolidated.
Staying on Top of Rates and
Financial Forecasts
It is
extremely important to stay up to date on interest rates and trend fluctuations
if one wishes to maintain an optimal payment schedule. If you leave it all up
to the professionals, you could easily be paying much more than necessary
without even understanding the options available. The Internet makes this task
extremely easy; one can even program immediate smartphone alerts that will show
and compare major financial institutions rates. Online mortgage rate
calculators are also widely available and easy to use.
Currently,
the best five-year fixed mortgage rate in Canada sits around
2.69%. Variable interest is lower, approximately 2.10%. A home equity line of
credit almost always has a lower interest rate when compared to a mortgage. One
can also opt to solely make interest payments on a line of credit if cash flow
is taking a hit. A mortgage, on the other hand, requires consistent and
substantial payments without any exceptions.
Open a Line Today
So,
what is stopping you? Contact a reputable and trusted financial
professional in
Richmond Hill and kick-start the processing of opening a home equity line of
credit now.