Secured Line Of Credit
Using the equity in your property can help grow your wealth and save thousands of dollars in interest over the life of your mortgage. At the end of the day, we all want to pay off our mortgages faster and if all goes to plan, maybe leave our home or properties to our kids without a mortgage balance owing (lucky for them). What if there was a mortgage strategy in place that can help you build a real estate portfolio, pay off debts and still pay off your mortgage at a faster pace? By doing this you can potentially leave the property/properties to your child/ren free and clear? Read More.
Secured lines of credit are available up to 65% of the value of the home. If combined with a mortgage, the loan to value can go up to 80% with line of credit portion being no more than 65%. Borrowers can tap into the equity in their home to put a secured line of credit in place with NO extra cost. That is right at no cost! Let us look a scenario;
A client has a property with a mortgage balance of $200,000.00 owing on a property valued at $500,000.00. The client can add on a line of credit up to a maximum of 80% of their property value including the current mortgage. So line of credit would be $200,000.00. The $200,000.00 line of credit can be used to purchase another property, invest in other securities, pay for a child’s education or just to have accessible to be used in the near or far future when the need arises. If the line of credit is used to invest in real estate or other investment securities, the interest on this line of credit is a tax write-off. Remember, if you are purchasing a rental property the tenant pays off your mortgage and the interest is tax deductible. Not a bad way of growing your wealth.
Now what if I do not need a secured line of credit right now as I have no current need for it?
Ok, so you have no current need to access funds at the present time, so why set up a secured line of credit? Let us look at it this way, right now property values are high (get more access to funds from your home), your job is stable and your credit is in good standing. What happens in the future if you or your partner loses their job and as a result cash flow gets tight and your credit score also suffers? You may suddenly need access to funds then and have to qualify for a secured line of credit or some other borrowing to take equity out of your home. Based on income or credit score you may not qualify. Why wait until you actual need access to funds when you can set it up now at NO cost and therefore be prepared. It is a win, win situation.
Secured lines of credit are very flexible. You only pay on the amount in use at any time. The minimum payment is interest only (if preferred) and you also have the benefit of rolling the amount used into a mortgage or your existing mortgage if this makes sense. Once you have the secured line of credit in place it cannot be taken away from you. So regardless of what happens in the future, the lender cannot take it away. Once it is in place, it stays with you until canceled by request. If you do have a current mortgage in place, as you pay down the mortgage balance the equity then rolls over to your line of credit increasing the amount available so the limit continues to grow.