A home equity line of credit allows you to borrow by taking advantage of funds you have already invested in your home. The Home Line of Credit works like a regular line of credit, so you can choose when and how much you want to receive.
What is a home equity line of credit?
The maximum amount of credit is determined by a loan-to-value ratio. Good Direct is one of the last lenders in Canada to offer home equity lines of credit with a loan-to-value ratio of 80 per cent. However, Good Direct plans to reduce its loan-to-value ratio by up to 65% by December 2012 to meet Canadian financial regulations.
Characteristics :
- No monthly fees
- The amount of the Home Equity Line of Credit is $ 15,000
- Your minimum monthly payment is interest only
- The line of credit can be refunded at any time. Good Direct has a repayment plan that allows you to arrange regular fixed payments to speed up the repayment of your debt.
- 24/7 access to your account online
- You can reduce your limit online
- The line of credit can be attached to a foreign check bank account (an account that is not an Good Direct account)
- You can transfer your home equity line of credit to a free property
- ING covers most of the valuation costs
- If you and your partner are both owners, the home equity line of credit can be in both your names
- The property must be your main residence
Simple Mortgage Calculation
The value of your home = $ 400,000
The amount still owing on your house = $ 250,000
The maximum available credit value is calculated using a loan-to-value ratio of 80%:
$ 400,000 x 80% = $ 320,000
However, you must also subtract the amount of your mortgage that remains to pay:
$ 320,000 – $ 250,000 = $ 70,000
The maximum amount of financing you can have on your home using an Good Direct Home Line of Credit is $ 70,000.
The final word
The Good Direct Home Line of Credit can be a useful source of funds
- Pay your high-rate debts, like your credit card or your loan on your car
- Finance renovation projects for your home
- Invest in an investment fund
The best is to discuss whether the Home Line of Credit is the best form of financing for you when talking with a mortgage broker who has experience. Remember, a home equity line of credit is always a debt that must be treated with discipline, including a plan to repay your debt entirely.