One of the greatest benefits of home ownership is the growth in value of the home over time.  The difference between your mortgage amount and the value of your house is called equity.  That equity can be leveraged in many ways, including for things like investments, home improvements, tuition, major life events, travel, or perhaps a new car.  Mortgage rates are usually less than a car loan, so why not take advantage of that lower interest rate?

A Home Equity Line of Credit, or HELOC for short, is a great way to leverage this equity.  This product uses the equity built into your house as collateral for a revolving line of credit.  Because it’s “revolving”, you have the flexibility to use all of it now, some of it now, or not utilize it at all but have the option in the future to use the funds (Need a new roof – no worries).  Payments are also flexible, and you can repay it at your own pace.  Once repaid, it’s available again for the next time you need it.

Scotiabank has a great product they call the Scotia Total Equity Plan, or STEP.  It has a mortgage component accompanied by a revolving line of credit, and you can even connect a credit card to the product.  With the STEP solution, you can have up to 3 different mortgage components, and each component can have different terms.  For example:

Current mortgage is $400,000 at a 5-year fixed rate.  You could choose the same type of mortgage, or you could have $200,000 in a 5-year fixed rate mortgage, and $200,000 in a 3-year variable rate mortgage.

So, continuing with the above example of a $400,000 mortgage, let’s say your house is worth $1,000,000.  You are allowed to have your STEP product utilize 80% of the value of your home, provided you qualify.  You can have up to $800,000 in secured debt based on this example.  So that would leave you with $400,000 in equity remaining that you can utilize in a revolving line of credit (HELOC), or perhaps a credit card, or a car loan.

To discuss this, or any other mortgage information, or if you have any questions please feel free to contact me at jgraszat@dominonlending.ca, or 705-730-8557.