Natasha Shaw

A Home Equity Line of Credit, also known as a HELOC, is a line of credit that uses your home as security for the loan.  A HELOC provides instantly available funds that can be attractive to investors or self-employed individuals as the monthly payment required is very low (interest only).

Clients that have a HELOC also have the added benefit of a fully open mortgage that can be paid down at any time with no penalties.  Also, you are able to re-draw the funds from the line of credit at any time up to the credit limit.  It is the same concept as a credit card, but with a much better rate!

You are able to borrow up to 80% of the value of your home.  You can keep the line of credit for as long as you own the home.

HELOCs can be useful in the following situations:

• Investing: If you want to build an investment portfolio, and don’t have the cash sitting on hand but do have some equity in your home, you can get a HELOC and use the funds from it to purchase investments.

• Purchasing a Revenue Property: If you’d like to purchase a second property to rent out, but don’t have the funds in pocket to do so, you can set up a HELOC on your principal residence to finance the down payment of the revenue property.

• Finance Renovations: You can use the money from your home equity loan to finance renovations you’d like to complete on your home. Many HELOC products will allow you to write cheques directly to your HELOC account, so you don’t have to draw the funds to your bank account before writing the cheque.

• Implementing The Smith Manoeuvre: The HELOC/traditional mortgage combination is the instrument used to administer The Smith Manoeuvre, a creative investment and tax strategy that could help you toward mortgage freedom faster.  Feel free to ask how this works!

Overall, a Home Equity Line of Credit can be a powerful tool for you if you have more than 20% equity in your home and are looking to do anything from investing to financing home renovations.