Line of Credit

Line of Credit

A line of credit is a flexible agreement for borrowing money. The money can be borrowed through a bank, financial institution, or another type of lender. You can secure credit lines with collateral, too. This is property or a home or even with unsecured collateral as well.

Secured credit lines tend to have lower interest rates. An unsecured credit line, meanwhile, tends to have much higher interest rates. This will cost you more money in the long-term than a secured credit line would.

The most common lines of credit are:

  • Credit Cards
  • Signature lines of credit
  • Revolving lines of credit
  • Home Equity Lines of Credit (HELOC)

Line of Credit Need-to-Knows

The interest paid on lines of credit is only charged on the number of funds drawn, not the number of funds made accessible. For example, if you were to qualify for a $20,000 credit line but only have a draw of $5,000, the interest would be charged on that $5,000.

Amounts can be drawn, paid back, and re-drawn as many times as the borrower wishes. It also carries no penalties for re-payment under most circumstances but read the fine print before signing anything.

Home equity lines of credit (HELOC) is a secured credit line where the collateral is in the form of a home or property. When a homeowner has a 20 percent or greater equity in their home, they can apply for a HELOC or a home line of credit mortgage. This allows the homeowner to access their equity funds to use however they want.

Credit line mortgages can even be drawn toward a second property purchase. These types of mortgages are available from $10,000 to $500,000. The amount depends on the value of the home or the property that is used to secure the loan. Through this type of mortgage, up to 80 percent loan to value (LTV) can be made available, too.

Credit lines can also be used to consolidate debts. Interest rates applied to these lines of credit tend to be lower than those for standard credit. Interest rates for credit cards generally run in the 18-21 percent range. The interest rates on HELOC, meanwhile, floats accordingly based on the Bank of Canada prime rate.

Call Super Brokers for More

Super Brokers provides access to knowledgeable mortgage brokers that can help find the right financing for you. There are set-up fees involved, like the appraisal, mortgage loan insurance, and closing or legal fees.

Super Brokers can help you throughout the process and make it easier to understand. Call us today with any questions or to begin the search for a valuable mortgage broker to assist you throughout.