When you get a mortgage and you use your home as your collateral, your house must be free from any encumbrances and the amount you can borrow will depend on the prevailing market value. If your house is worth a million dollars and with no strings attached, a home equity line of credit is for you.

Why Increase the Value of Your Home

Your home is your biggest asset, money-wise. View it as your ticket to future loans just in case you will need one in the future. The loan you can get from your home equity line of credit will be sufficient for big ticket items – medical bills, education of your children and/or, more home improvements. What’s more, you get the maximum loan amount.

Even if you are still paying your first mortgage, do make home improvements by upgrading your home with the latest in bath and toilet accessories and installing solar panels to increase your home’s value in the real estate market. As you work on improving your home, indoors and outdoors, you actually increase its value in the thousands of dollars.

When you apply for this type of loan, lenders set a cap on the loan amount by taking a percentage of the home’s appraised value. To determine the loan amount you can borrow, lenders will subtract the percentage which can be as high as 75% from the balance you still owe on your existing mortgage. If your house has increased its value through the years, you can still get a substantial amount even with the 75% percentage from your home equity line of credit.

How it Works

Apart from making home improvements, do not neglect to keep your credit score on an even keel. Pay your monthly bills on the dot. If you have a good credit score, lenders will likely give you a lower interest rate for your home equity line of credit. Although you can still qualify for this type of loan with a spotted credit record, you have to bear with the higher interest rates the lender will charge.

This type of loan is usually payable within ten years. On the tenth year, or the ‘draw period’ you can renew your credit line. You must be alert to the fact that if you fail to renew your credit line during this period, you cannot borrow additional money. Some plans require the full payment of the loan on the tenth year or allow a repayment over an agreed period OR require that you keep a minimum balance every time you draw a new credit line.

But if you have no plans to borrow again and you are able to pay the monthly bills on time for ten years, you increase your credit rating. A home equity line of credit will definitely work for you. Hence, look over your home and assess its future value with the improvements you have made on it. A well-maintained house installed with home must-haves, will not only get a fast credit approval, but also a higher loan amount. If you plan to sell it in the future, you can sell for a tidy profit too.

Making home improvements need not be a major makeover. You can slowly make improvements by phases. Start with the bedrooms and baths and these are big ticket expenses. You can move on to the kitchen and lastly the living room. Before you know it, your house will be worth its weight in a home equity line of credit.

Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
(416) 987-0008

Author Bio: Is your home ready for home equity line of credit? Check out the mortgages Markham lenders can offer. The mortgages Toronto lenders offer are reasonable plans. Visit AMortgages.ca today.

Category: Finances
Keywords: home equity line of credit