A secured line of credit or secured operating line is available through banks and other institutional lenders. Private mortgage lenders do not provide secured lines of credit as they don’t have the administrative set up to deal with them.
Money drawn against a secured line is charged at variable interest rate pegged to prime. The rate will vary from prime minus one half to prime plus 2 according to the strength of the applicant’s credit and overall financial profile. There are no fixed interest rates available for a secured line of credit.
Before April of 2011, lines of credit could be acquired under programs for insured mortgages whereby the maximum amount available to borrow on the line could exceed 80% of the market value of the property.
The regulations governing institutional mortgage lending changed in April, 2011 to remove the option of getting mortgage insurance for lines of credit.
On a go forward basis, the maximum potential secured line of credit anyone can receive on a give property is 80% loan to value. The actual amount you are approved for may be less than 80% depending on the lender and your qualifying assessment.
When assessing the repayment ability of an applicant for a Toronto secured line of line, the lender will need to determine if the applicant has sufficient financial means to repay the debt responsibilities, assuming the line was fully drawn, at an interest rate equal to their 5 year fixed interest rate.
The main benefits of a secured line of credit is that once approved, the funds are available to you to use at any time, provided you are keeping up to date with the requirements of your financing commitment with the lender. And because secured lines of credit are charged out at a variable rate, they are completely open to repayment at any time without penalties. In most cases, the monthly debt servicing requirements for a Toronto secured line of credit is repayment of the interest incurred only.
If you would like to know more about a Toronto secured line of credit and all the many benefits and options this form of residential home mortgage provides, we suggest that you give us a call so you can book a time to speak with a member of our team and get all your questions answered.