Contingency Planning: Home Equity Line of Credit in Pickering

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Financial adversity can strike when we least expect it. A home equity line of credit in Pickering is a great way to have a backup fund and keep you afloat.

A home equity line of credit is available to Pickering homeowners who have at least 20 per cent equity. A home equity line of credit is a cross between a personal line of credit and a second mortgage – your home is collateral for the loan in both scenarios. With a home equity line of credit, you do not have to draw the money until you need it. You can draw all or part of it at any time, and pay some or all of it back as you wish. A home equity line of credit can be viewed as low-cost revolving credit.

An excellent financial resource, a home equity line of credit for Pickering homeowners is a convenient and low-cost way to borrow money especially for an emergency.
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Funds for a Rainy Day: Home Equity Line of Credit

 
A home equity line of credit (HELOC) in Pickering is a revolving line of credit that allows you to borrow the equity in your home at a much lower interest rate than a traditional line of credit. The HELOC is secured by your home and cannot exceed 80 per cent of your home's value. There are many ways to use a HELOC, and one common ways is to use it as a contingency fund.
 
If you are interested in a home equity line of credit in Pickering, you will need to consider the following:
  • Your credit score – If your score is too low, you may not qualify for a loan at all. But credit scores don’t weigh as heavily with a home equity line of credit because you’re putting up your home as collateral.
  • Current equity – Most lenders will lend you up to 80 per cent or possibly more of your home’s current market value, minus the amount you owe on your mortgage.
  • The tax perk – If you itemize your taxes, you may be able to deduct the interest paid on a home equity line of credit if the loan amount is limited to $100,000. It doesn’t matter what you used the money for.

When to Use a HELOC instead of an Emergency Fund

 
A home equity line of credit can offer some benefits over a regular contingency fund like a tax-free savings account. They provide a backup funding source if times go bad, and are a solid choice in the following situations:
  • You want to funnel all available cash toward paying off higher-interest debt;
  • You’re risk tolerant and have a long time horizon until retirement;
  • You want to use your cash to make a mortgage repayment;
  • You have a stable job and other investments that you can tap in a worst-case scenario.
A home equity line of credit definitely has its advantages. When used responsibly, an untapped home equity line of credit for Pickering homeowners can make for a good safety net in case of emergency.

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