What is a HELOC?

General Harvir Mann 23 Oct

In its simplest form, a HELOC works something like a credit card. You can borrow money up to a certain credit limit set by your lender and then pay back the borrowed amount with interest. This option can offer great flexibility as you can withdraw and make payments on a daily, or weekly basis if necessary.

What Determines a HELOC’s credit limit?
A HELOC’s credit limit depends on a number of factors, including your credit and unpaid debts, but it is determined largely by the market value of your home and the amount you owe on your mortgage.For instance, if you own a home valued at $700,000 and still owe $480,000 on your first mortgage, then your home equity stands at $220,000. Lenders typically limit the amount you can borrow to no more than 80% of the appraised value of your home minus what you still owe on your mortgage.

In this case, the maximum amount you’d be able to borrow is $80,000.

Home’s market value: $700,000

80% of home’s value: $560,000

Minus mortgage balance: $560,000-$480,000

Potential Home Equity Line of Credit: $80,000

Benefits of a HELOC?

A HELOC is an open mortgage and can be paid back at any time with no pre-payment penalty. There is no cost to use a HELOC unless you have a balance on it. The minimum payments each month are interest only.

What is the length of a HELOC term?

the length is tied into your mortgage term. If you renew with your lender then the HELOC can be renewed as well. If you change lenders at any time, you can look to have another HELOC attached to your property.

What does it Cost to set up a HELOC?

The costs on setting up your HELOC will depend on your individual situation as there may be an appraisal and legal component that come into play, other mortgages are set up for HELOC’s already so there may not be a cost.

How to use a HELOC?

  • Debt consolidation, HELOC’s offer as much lower interest rate than unsecured debt such as credit cards, personal loans, etc. so applying these funds to wipe out high interest debt can save you thousands in the long run.
  • Repairs or maintenance on your home.
  • Emergency funds for loss of job, health etc.
  • Purchasing investment property


Whats next?

Before you decide to take out a HELOC consider what you will actually need it for. As in some cases it might make more sense to do an actual refinance considering the low rate environment we are in today. As always, when it comes to mortgage financing there is no one size fits all solution. If you find yourself interested in finding out more about your options give me a call at 604-832-2849 or email anytime at harvir.mann@cleartrust.ca

5 Mistakes to Avoid as a First Time Homebuyer

General Harvir Mann 5 Oct

Buying your first home is arguably the biggest purchase you will make. Without a plan in place it can be easy to overlook some important details that can lead to a stressful home buying experience. Below is a list of just a few of the common mistakes you can avoid before making an offer on your dream home.

1. Not Getting Pre-Approved

Before the excitement of getting out to look at homes it is important to know how much home you can afford. Getting pre-approved with a mortgage broker takes into account your income, debts and credit to give you a snapshot of how much you can you can qualify for so that you can feel confident that you will have no issues getting the keys to your dream home. It is never a fun process to spend days looking for homes and think you have finally found the one only to find out you may not qualify for a mortgage for that amount. Plan ahead and have a pre-approval in place!

2. Overlooking the True Cost of Buying a Home

Fees and more fees, one commonly overlooked part of becoming a home owner are all the fees and closing costs involved in the process. These include but are not limited to:

-Legal Fees
-Property Insurance
-Property Taxes
-Appraisal Fees
-Inspection Fees
-Strata Fees
-Move in expenses
-Cable/Internet Fees

3. Buying a Home Solely Based on Looks

It can be easy to think you may have found the one when you see the home you like, but be sure to ask the right questions so you know what you are buying. Some questions to ask include:

-When was the furnace replaced?
-Has the roof been replaced?
-How old is the house itself? Are there any issues with electrical/plumbing?

This is why getting a home inspection done is critical in the home buying process. This will give you peace of mind as well as uncover any issues such as cracks in the foundation, water damage and many more issues that may lie beneath the physical properties of the home. A small investment which can save you thousands in the long run!

4. Not Working With a Realtor

It is easy to look up properties online and feel in control of all aspects of the home buying process but in reality there are many nuances and details that you may be unaware of. Working with the right realtor can help make sure you are paying a fair price for the home you want, as well as giving you access to properties that may be off market giving you more choices.

5. Not Working With a Mortgage Broker

Lastly and most importantly, working with a mortgage broker can give you the benefit of having access to multiple lenders as we shop for the best rates and products for you. Relying solely on your bank for your mortgage may mean you are missing out on the best product and rate for your lifestyle. You are not limited to banking hours and you always have direct access to any questions you may need answered. You are not alone when we work together for your mortgage needs, in fact our relationship only begins when you get the keys to your home!

To get started on your mortgage pre-approval or simply put together a plan to help you get into home ownership give me a call at 604-832-2849 or email Harvir.Mann@cleartrust.ca