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Written by Lisa Rennie
Best HELOC Mississauga (Online) January 2021
Owning a home in Mississauga comes with all sorts of perks. For starters, it’s a great investment that allows you to build wealth over time as a result of appreciation. But it also gives you a financial resource to tap into whenever the need for extra money arises.
More specifically, a HELOC – or a home equity line of credit – is a handy financial tool that homeowners in Mississauga can use to borrow money against to be used for whatever pressing need creeps up.
Here is everything you need to know about HELOCs to help you decide if this loan type is right for you.
What is a HELOC and How Does it Work in Mississauga?
A HELOC works similar to the way a credit card works and is technically considered a type of revolving credit. With a HELOC, you would apply to have a certain credit limit provided to you which you can borrow against. Like a credit card, you can borrow as much or as little as you like, as long as no more than the credit limit is withdrawn.
When you repay the amount withdrawn from your HELOC, you can continue to borrow over and over. You’re only charged interest on the portion that you take out and use rather than the full loan amount.
In order to qualify for a HELOC in Mississauga, you’ll likely need to have at least 20% equity in your home (equity simply refers to the current market value of the home minus any outstanding loan balance still owed).
Learn how to build equity in Mississauga, here.
What’s the Difference Between a HELOC and a Home Equity Loan?
As already mentioned, a HELOC works more like a credit card than a traditional loan. A home equity loan, on the other hand, works more like a traditional loan whereby a certain loan amount is given, after which you would have to repay it all by its maturity date in installments.
Unlike a HELOC, a home equity loan – also referred to as a second mortgage – will be charged interest on the full loan amount, whereas a HELOC is only charged interest on the portion that is withdrawn.
That said a HELOC doesn’t always have to be a second mortgage. A “first” or “second” mortgage is used to refer to the claim position of the loan. A HELOC is often in second position because there is typically another mortgage on the property when the loan is taken out. That said, a HELOC can sometimes be in first position.
HELOCs typically have higher interest rates than mortgages in first position because they are riskier to the lender. If you default on the second mortgage, the lender in Mississauga holding that loan will not be repaid until the first position lender is.
Interested in the cost of buying a house in other major Canadian cities? Check this out.
What Can I Use a HELOC For in Mississauga?
HELOCs can be used for any number of things, including the following:
- Home renovations
- Car repairs
- Post-secondary education tuition
- Starting or expanding a business
- Consolidating debt
Learn how to borrow using your home equity. Take a look at this article.
Are HELOCs Good Loan Options in Mississauga?
The answer to this question depends on what the money is being used for and what your financial situation currently is in Mississauga (for more information about tapping into your equity, click here).
For instance, if you’re using the money for something that will hold some value, then taking out a HELOC in Mississauga may be a good idea. Home renovations are usually the best way to use a HELOC because they can increase property value, making them a good investment in Mississauga.
Other expenditures, on the other hand, are more frivolous in nature and are not necessarily considered good investments, such as an expensive vacation. Make sure that you are putting the money to good use before taking out a HELOC or any other type of loan.
Your finances are also part of the equation. If your finances will allow you to comfortably repay your outstanding balance, then taking out a HELOC may be a sound idea. However, if you’ll be strapped for cash after taking out this loan, you could put yourself in a difficult position and even risk losing your home if you default on your payments.
In Need of a HELOC in Mississauga?
If you’re looking for an affordable way to pay for a big expense and own a house in Mississauga. A HELOC could be the solution you’ve been looking for. Loans Canada can match you with the right HELOC product based on your unique needs!