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Home Equity Line of Credit: The Right Move for You?

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Home Equity Line of Credit: The Right Move for You?

Mike De Sousa


When purchasing or refinancing your home, you may also qualify for borrowing extra funds. This is great news if you need some extra cash to help with life’s bigger expenses. If you are planning to renovate, for example, a purchase-plus improvements program (PPIP) can provide you with the extra money that you need, and you may qualify to borrow up to 95% of the improved value of the home. 

If you have equity in your home, however, a line of credit may be a better option for you. Lines of Credit are a very popular Canadian financial product, and they have many different advantages that make them beneficial for many of our clients. Even though you can only borrow up to 80% of the home’s current value, one of the benefits of a home equity line of credit (HELOC) is that you don’t need to borrow the funds for a specific purpose. It can be registered at any point in time and used at any time for any reason. 

Our clients choose a HELOC to offer them flexibility with their financial situations. Some of the common reasons for using a HELOC might be to: 

  • Finance a renovation
  • Consolidate credit card or other debt
  • Help your child with the cost of university
  • Finance a start-up business or growing an existing business
  • Plan for a large life event, like a wedding
  • Use a HELOC on a rental property for investment purposes
  • Pay off your principal residence

Home Equity Line of Credits often feature the ability to pay only the interest of the amount borrowed (or the interest plus a small percentage of the amount borrowed), which offers more flexibility when it comes to making payments. Along the same lines, if you are a small business with fluctuating cash flow, HELOCs can be paid down in large amounts—or paid off completely—at any point in time. 

One thing to keep in mind with a Home Equity Line of Credit is that some home owners can get into financial trouble if they do not have the discipline or the ability to pay down the principal on a regular basis. Similarly, if a HELOC is used simply as a spending account, it can be easy to borrow away the equity in your home. HELOCs can act similar to a chequing account. This is one of the main advantages of going with a renovation loan instead, because the money is used for a specific purpose and has regular payments to ensure that the balance is being steadily reduced. For some borrowers, HELOCs can prove to be an easy way to spend a lot of money.

When it comes to qualifying for a HELOC, they tend to require a good credit score and a solid amount of equity in your property. HELOCs can be a great financial product, but they aren’t ideal for everyone. If you’re looking to use the equity in your home or are wondering if there are better options for your specific situation than a home equity line of credit, feel free to give us a call or book an appointment to sit down in person so we can discuss your options. We are more than happy to provide you with no-cost, no-obligation advice…and help you shop for the best available rates once you’re confident that you’ve found the best way to leverage your home equity. 

Thanks for reading!

Mike De Sousa and Mindy Small

Your London, Ontario Mortgage Brokers