HELOC loan considerations
You can use the equity in your home to obtain a line of credit. This type of equity loan is known as a HELOC (Home Equity Line Of Credit). My Mortgage Broker (Verico) can help you with a HELOC in Alberta or Calgary. A home equity line of credit is a type of revolving credit secured by your home. It is a type of second mortgage.
If you have enough equity in your home a HELOC can be used to obtain low interest financing. This means you have access to a revolving source of funds during the draw periods. You can draw and payback as many times as you want. In some case the interest on your equity loan may be tax deductible. The interest rate is usually variable unless you negotiate a fixed rate advance. If you have a variable rate, you can also negotiate rate caps.
The normal draw period for a HELOC loan is 10 years. At the end of the draw period you will no longer be able to access available funds in your line of credit account. Repayments if any continue normally after the close of the draw period. Your monthly repayments on a HELOC will include principal and interest. If you have a variable rate loan, repayments will change if interest rates change.
There are several benefits to a HELOC. There are also potential risks. The benefits include access to liquid funds that you can use as you please. You can use them for home improvements, to pay off another loan, to pay for college education or whatever you want. Since HELOC loans are secured loans you will get a lower rate of interest. The interest is often tax deductible. The potential risk is that if you fail to make repayments problems will start to build.