There are very subtle differences between a home equity loan and a home equity line of credit. In both cases, your home is used as collateral. Neither a home equity loan or a HELOC will impact your first mortgage. In fact, most home equity products are placed behind your existing mortgage, unless you have no mortgage of course.

Both products offer homeowners a way to access their homes equity quickly and cost-effectively. They can be a great tool to improve your cash flow, remedy financial hardships, or act as a financial safety net.

Home equity loans are slightly different in that they are almost exclusively approved based on the amount of equity in your home and not on your credit or source of income.

In most cases, homeowners can borrow up to 85% of their available equity. To evaluate how much equity you have in your home, you need to subtract any existing liens or mortgages from your property’s estimated value. For example, if your home is worth $350,000 and you owe $200,000 on it, you have built up $150,000 in equity.

Using the previous example, this homeowner may be able to borrow as much as $97,500.00. To demonstrate, take the homes value $350,000.00 x 85% = $297,500.00 and subtract their existing mortgage $297,500.00 (85% of the homes value) – less $200,000.00 (existing mortgage) = $97,500.00. This amount is given to you in a lump sum and is repaid in monthly payments. To make things easier, we’ve created a helpful home equity loans calculator to help you see how much equity you may be able to leverage from your home.

A home equity line of credit, or HELOC as they are often called, offers even more flexibility. HELOC’s work just like a credit card in that you can use it again and again as you pay down your balance. As an added benefit, you only pay on the amount you advance, just like a credit card. HELOC’s however, are slightly more difficult to qualify for as they do take your credit score and income into consideration. That being said, the team at HomeEquityLoans.ca has a whole host of HELOC solutions despite your financial challenges. Check our our home equity line of credit calculator to see how much you may be eligible to borrow.

Regardless of the home equity product you choose or are eligible for, they are both incredible tools. They provide homeowners with fast access to their home’s equity and can be used for just about anything. Give us a call today to see which product is right for you!