A Home Equity Line of Credit is commonly referred to as a HELOC [hee-lock]. It is very much like a personal Line of Credit except that a HELOC is secured by the established equity in your home. Since a HELOC is secured, it will have a lower rate of interest than a personal Line of Credit that is not secured by any asset. However, HELOCs will always carry a higher interest rate than a standard first mortgage.

It is important to note that generally, HELOCs are limited to 65% of the total equity in a home (there are lenders who will go as high as 80%). Unfortunately, HELOCs are not available to borrowers with less than 20% established equity in their home.

With interest rates so low, all of the major banks have moved towards combining a HELOC with a standard mortgage as this is more profitable for them than a customer only taking out a standard mortgage. The unfortunate part to this is these lenders don’t care if a HELOC makes financial sense for you, because in all situations, it always makes cents for them (pun intended)!

However, there are strong reasons for borrowers to take out a HELOC. The major benefit to having a HELOC is flexibility. Of all of the different financial borrowing products, a HELOC offers the most flexibility in terms of accessing funds, payment amount, and credit limit, all with one of the lowest interest rates available when compared to competing products. Once approved, a borrower can access funds as they require them. Quite commonly, HELOCs are excellent for funding, for example, home renovations, education, business start-ups, or vacations.

Another strong reason for a borrower to consider a HELOC is to consolidate their higher interest-rate debt. Since HELOCs will always carry a lower interest rate than credit cards and unsecured loans, it’s to the advantage of a borrower to consolidate their existing debt into a HELOC, thereby, saving them not only interest costs, but in most cases, improving their monthly cash flow. However, prior to considering a HELOC for debt consolidation, it may be beneficial to consider refinancing of their existing mortgage as the interest rate will be always be lower than that of a HELOC.

Finally, not all lenders offer Home Equity Lines of Credit but for the ones that do, qualifying for a HELOC entails the same qualifying requirements as a standard mortgage. Income, credit scores, and property type will all be taken into account on the application.

We invite you to contact us or schedule a complimentary consultation with a Sleep Easy Financial Mortgage Solutionist to see how we can make your homeowner’s equity work for you!


Sleep Easy Financial has access to 90+ mortgage lenders including the big banks. We beat the banks’ mortgages and our services are at no cost to you as we get paid by the lenders. Whether it's for your next home purchase, mortgage renewal or refinance, our licensed mortgage professionals are committed to getting you your lowest rate so you save as much money as possible. We help you at every stage of the journey and are with you for the life of your mortgage. Be mortgage savvy and let us shop your next mortgage for you. Contact us or schedule your complimentary consultation today.


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