Toronto Mortgage Professionals

Secure Line of Credit

Many Vaughan and Toronto home owners have experienced moments when it would help to have access to a little extra income to be able to meet all of our financial needs.

Perhaps you’re about to have an unexpected baby, for example, or maybe the time has finally arrived for your children to head off to college and you don’t quite have the savings you had hoped to pay for all the costs.

This is where having access to a secure line of credit can be a godsend to enable you to meet your expenses and spread the costs of paying it back over a longer time frame so that you can comfortably make the monthly payments.

A secure line of credit is a particularly appropriate way to borrow money when you may need to access varying sums of money at different moments over a period of time. This is because a secure line of credit is a bit like having a credit card in that you can take out funds as and when you need them up to a certain set limit.

The great advantage of a secure home equity line of credit over a credit card is that:

  • The interest rate is usually much lower since you are putting your home up as collateral against defaulting.
  • The limit on the amount you are borrowing is usually higher than that offered by credit cards.
  • Often you only have to pay interest on the amount that you actually use, not on the whole sum as you do with the traditional type of lump sum loan.
  • And, unlike with a traditional loan, your re-payments start when you make your first withdrawal, not necessarily the same day that the loan becomes active. This gives you more control over how and when you use your credit so that you can organize your re-payments to minimize the interest.

In a home equity secured line of credit (sometimes called a heloc) you agree to use your Toronto or

Vaughan house as security against the possibility that you might default on the mortgage loan.

What do Vaughan and Toronto mortgage lenders want to know before agreeing to a secure line of credit?

The actual amount that any individual lender will be willing to loan you varies between the different banks, trusts, credit unions, private investors and other financial institutions, but all calculate this amount using a similar type of formula based, for the most part, on your credit score.

Your credit score (aka FICO score after the company that first devised the formula for calculating it) is a number between 300 and 850 which ranks how likely it is that you will be able to pay back the money loaned.

The higher the number the better since this reflects that you have a steady history of paying back any past debts in a timely manner – meaning you are a low credit risk so more lenders will be willing to invest in you.

A high credit score in turn also affects how much interest you will have to pay on your loan – but generally speaking, the lower the risk you are, the lower the interest payments will be.

Another factor that Toronto and Vaughan mortgage lenders will take into account is your debt to credit ratio (ie, how much you actually owe at the time of applying for the loan, compared with the amount of credit that is currently available to you).

This is where it can help to have an old, unused credit card still on your history since this will lower the ratio and so improve your rating – which is why it is a good idea never to cancel your old credit cards completely – just put them away or destroy them if you don’t want to use them, but leave the credit on the books for that moment when, like now, you want to boost your credit rating.

Vaughan and Toronto mortgage lenders will also want to know how much equity you actually own in the home you are putting up as collateral, whether you are in steady employment, how long you have held  your current and past jobs, the type of lifestyle you have and other pertinent questions.

At RMA Mortgages of Toronto our experienced brokers are knowledgeable about the wide variety of different secure lines of credit that the various lending agents have on offer, and will be more than happy to assist you in finding a financial institution or private lender who is able to assist in your specific circumstances.

To find out more about how we can be of help in arranging secure lines of credit and other mortgage lending mechanisms, please come and talk to us at our Vaughan location at #77-9100 Jane St. Vaughan, Ontario, or:

Our Toronto mortgage brokers and agents are available from Monday-Friday from 9am-7pm and Saturdays from 10am-4pm. Or, if you need an appointment outside normal business hours, please just call ahead and we will be pleased to meet with you at your convenience.

RMA Mortgages Brokers of Toronto and Vaughan: offering access to secure lines of credit, traditional mortgage loans and other financial mechanisms so that you can live your life to the full.

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