Line Of Credit For A Mortgage In Canada – An Overview

If you’re not a financial expert in the mortgage industry, it’s easy to get confused about all of the dozens of different terms out there when it comes to homeownership. Along the way, you might have heard about getting a line of credit for a mortgage. What you might not have heard is that you can use that mortgage line of credit towards your home. What this can avail to you is reduced interest rates. In addition, each of these things can be combined into the same product that will be able to help you even further. Many different lenders will offer their own distinct version of these things, but most of them all work in similar ways.

In many cases, people will separately get a mortgage and a home equity line of credit (HELOC) for their home. What people might not know is that there can be advantages in getting both of these things combined together. If you choose to go with a mortgage and a HELOC on one charge, a lender might provide you with a limit that you’ll be able to borrow. That limit will then be seen as a single line on the title of your home.

If you want, the total amount can then be divided into different items for the mortgage such as the interest rate, the payments, the HELOC, and other terms. You can feel free to take out any money from the line of credit as you see fit, ensuring that all of the minimum amounts are paid off in each installment. Throughout the process, there are some mortgage lenders that will let the line of credit grow larger over time.

What Are The Benefits?

A benefit to going with this route is that it usually results in some cost savings because you’re only having to deal with costs of only one charge. Another nice thing about a decently sized line of credit is that you have good access to a lot of money if you’re ever planning on doing future renovations on the house you’re purchasing. You’ll always want to keep a keen eye on your line of credit so that you don’t end up spending more than you’re comfortable with.

The third benefit to combining the mortgage and the HELOC is that you can easily access additional funds without worrying about the hassle of registering another charge towards the property. This streamlined ability to access cash is a convenience that will save you a headache in the future.

What Are The Downsides To A Line Of Credit Or Mortgage In Canada?

As with everything in life that has benefits, there are also downsides. One major downside is that the government has set a limit on HELOCs at 65% of the entire value of the home, but if that’s combined with the mortgage, the amount increases to 80%. You’ll also have to deal with the legal fees involved, such as having to register the charge with another lawyer. The third disadvantage is that having a big line of credit can usually lead people to temptation, and that can result in turning into more debt that one might be comfortable with.

In the big picture, the benefits of the combination between the mortgage and the line of credit usually far outweigh the disadvantages. If you have any questions regarding what method might work best for you, it’s always good to consult with your mortgage broker for more information. It’s their job to ensure that you’re fully informed on what can benefit you in the homeownership process. Getting a mortgage or line of credit shouldn’t have to be a frustrating process.


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