Home Equity Line Of Credit Kitchener
A home equity line of credit in Kitchener, or HELOC, is a loan in which the lender agrees to lend a maximum amount without an agreed repayment period. The loan is offered where there is collateral or equity in the borrower’s home. Because a home often is a consumer’s most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, business investments, or for debt consolidation. While useful in case of emergencies, they should not be used for day-to-day expenses.
Combining your mortgage with a home equity line of credit:
You’ve undoubtedly heard about both mortgages and lines of credit. You may also know that, like a mortgage, a line of credit can be registered against your home, allowing you receive a lower interest rate. What you may not be aware of is that these two financial products can actually be combined into one. There are several versions of this available from a variety of lenders, but they all function in essentially the same way.
Normally, you might have both a mortgage and a home equity line of credit in Kitchener registered separately against your property. There are, however, some advantages to combining the two into one charge. Lenders that offer this will approve you for a “global limit” that you can borrow, and this amount will be noted on your home’s title as one item. They can then split the amount into a mortgage portion that will come with the regular interest rate, terms, and payments and a HELOC portion. You can withdraw additional funds from the line of credit as needed, and repay the required interest only minimum or the entire amount. As the mortgage is paid down, some lenders allow the line of credit limit to increase in proportion.
LTV – Loan To Value:
A loan to value (LTV) ratio is a number that describes the size of a loan compared to the value of the property securing the loan. Lenders and others use this ratio to understand how risky a loan is, and it can be used for approving loans, or assessing mortgage insurance. A higher LTV ratio suggests more risk because the assets behind the loan are less likely to pay off the loan as the LTV ratio increases. Put another way, the LTV ratio tells you how much equity you truly own in the property compared with how much you owe.
Lenders will evaluate your loan-to-value ratio while they are underwriting your loan. In general, borrowers with lower LTV ratios can qualify for lower mortgage rates than borrowers with higher loan-to-value ratios. Borrowers who have a lower loan-to-value ratio are considered less risky to lenders because they have more equity in their homes.
Access Mortgage can assist you with getting a home equity line of credit in Kitchener based on your individual circumstances. For more information about a home equity line of credit, please feel free to continue browsing through our website. Click here to find our contact information and to fill out our contact form.