Home Equity Line of Credit Mortgages in Richmond Hill

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Many homeowners are discovering that their home is their most powerful financial asset. Homeowners can use their home equity to borrow, helping to finance large expenses, home renovations, or even your child’s education. Refinancing mortgages gives Richmond Hill homeowners the financial flexibility to fund any number of large-scale expenses. There are two types of home equity loans: fixed-rate loans, and home equity lines of credit. A home equity line of credit is a variable-rate loan, meaning that the interest rate will fluctuate over time. It works much like a credit card, with a predetermined spending limit based on the amount of equity you have in your home.

Choosing a Home Equity Line of Credit

One of the main reasons homeowners choose a home equity line of credit over another financing option, such as a credit card, is that the interest rate payments are generally lower and tax deductible as well. This also makes it a great option for consolidating debt as well, meaning you can lower your interest rate and have only one payment to worry about at the end of each month.
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How Does a Home Equity Line of Credit Differ from a Credit Card?

 
Both a HELOC (home equity line of credit) and a credit card give the borrower a variable-rate loan with a predetermined, limited amount. However, it is important to note that home equity lines of credit involve taking out a loan against the equity of your home, serving as second mortgages. Richmond Hill homeowners should understand that this means their home is being used as collateral and failure to make your payments could result in foreclosure. A home equity line of credit may also be more difficult to qualify for in comparison to a credit card.
 

Interest Rates

 
Interest rates when borrowing via credit card can be upwards of twenty percent. A home equity line of credit will usually have a much lower interest rate. The interest you pay on your home equity line of credit is also tax deductible. If the interest rate on your home equity line of credit is around 6% and the interest payments are tax deductible, a lot of times it makes sense to consolidate your debt using a home equity line of credit.  

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