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Is A HELOC The Right Financial Move For You?

If you’re facing big, ongoing expenses like home renovations or college education, a home equity line of credit Surrey could be a solid option for you.

HELOCs offer the flexibility to draw cash as you need it, rather than taking out a lump sum, and you only pay interest on what you borrow. Plus, they allow you to tap into your home’s value without going through the hassle of refinancing your primary mortgage. Just keep in mind that your home serves as collateral, so it’s essential to manage the loan responsibly.

In this post, we will look at what home equity means and why it is popular nowadays. Also, we’ll consider how much one can borrow with a HELOC.

What is a HELOC?

A home equity line of credit, or HELOC, is like a credit card that’s backed by the value of your home. Think of it as a financial safety net that allows you to tap into your home’s equity whenever you need extra cash, be it for home improvements, emergency expenses, or other big-ticket items.

During the initial phase, you can borrow money up to a certain limit and only pay interest on the amount you’ve borrowed. It provides flexibility and easy access to funds without the need to refinance your existing mortgage, but keep in mind that your home is the collateral, so borrow wisely.


Why Are HELOCs So Popular These Days?

The rise in popularity of HELOCs can be attributed to a change in the financial landscape. While the pandemic caused historically low mortgage rates, making cash-out refinancing an appealing option, rates have risen in 2023.

Because the majority of homeowners have already secured lower rates and do not want to disrupt those by refinancing at the current higher rates. This makes cash-out refinancing less appealing as an option to access home equity. HELOCs offer a more flexible alternative, allowing homeowners to tap into their home’s equity without affecting their first mortgage rate.


How Much Can I Borrow With A HELOC?

The amount you can borrow with a HELOC largely depends on the value of your home and your existing mortgage balance.

Generally, lenders look at what’s called the combined loan-to-value ratio (CLTV), which often ranges between 80% and 90%. Your CLTV is basically how much you owe on your home relative to its current value. To figure out how much you can borrow with a home equity line of credit Surrey, you can follow these steps:

  • Find out the current market value of your home.
  • Determine the loan-to-value ratio that the lender is willing to offer. This is usually a percentage, like 80%.
  • Multiply the market value of your home by the LTV percentage. This will give you the maximum amount the lender is willing to let you borrow against your home.
  • Subtract any amount you still owe on your mortgage from this number.
  • The result will be the maximum amount you can borrow using a HELOC.

Wrap Up

The benefits of a home equity line of credit Surrey are many. You have to make a well-informed decision and keep on the right track. If you are finding mortgage brokers in Abbotsford for your HELOC needs, look no further than Sandhu & Sran Mortgages! We’ll provide you with the best rates and help you make a win-win situation with the best prices available.