A Home equity line of credit Canada is a very powerful home mortgage financing tool that all Canadians should think about utilizing if they have any short term expenditures that aren’t going to get cleared off their credit card soon or are expending to incur expenditures in the coming months and/or years that don’t fit within the net monthly cash flow available to them.
A home equity loan in the form of a line of credit is offered through banks and other institutional lenders across Canada, with many of the same national programs available to individuals all across the country.
In most cases, a home equity line of credit is registered as second mortgage financing behind the primary residential home mortgage already in place.
The idea is to create a ready supply of capital that can be drawn on at any time and when utilized, incur a very low cost of capital. Any outstanding principal can be paid back at any time without penalty as well.
If you don’t have an immediate need for a secured line of credit, then here are a few things to do to optimize your application.
First, only apply when your financing profile looks the best. This is not to say that you need to have perfect credit and be debt free outside of your home mortgage already in place. What it does refer to is making an application when your credit score is above 700 if possible and your short term sources of credit like credit cards and lines of credit are paid off or being paid off monthly as expenditures are incurred.
Second, do not look for the maximum line of credit that may be available to you, which in most cases will be up to 80% of the property value. By being under the maximum potential financing amount, there will be more lenders interested in your applicant. More lenders means more competition for your business, which in many cases will lead to lower interest rates.
Applying at a moment when things are looking the best is more likely to produce the best result.
Regardless if you need a Home equity line of credit in Canada right away or in the near future, the best way to approach the process in order to secure the best rates and terms is to work through an experienced mortgage broker who understands the market and the current lender offerings and requirements.