LOC Waiting in the Wings

October 11, 2018 | Posted by: Kelleway Mortgage Architects

 LOC Waiting in the Wings

Here’s a new twist on accessing your home equity without having to break your existing first mortgage with your current lender.

Suppose you have a 1st mortgage in place for your home that still has a significant amount of term left on it (e.g., more than 3 years).  You may not want to break that mortgage and incur a hefty penalty.  However, there are some good reasons why you may want to access your home equity (i.e., a large amount of cash) prior to end of term on your 1st mortgage.  Those good reasons may include:

Home improvements that will add value such as kitchen/bathroom remodeling, exterior siding and energy-efficient upgrades.  Ask your trusted realtor what improvements will likely add the most value to your home.  Be aware that even good improvements may not give you an equal dollar value per dollar cost outcome.

Emergency expenses due to “life-happens” situations such as medical expenses, job loss, divorce, births, etc., your savings may not be enough to cover unexpected costs.  Having a credit reserve already in place, without having to qualify for a new loan during stressful times, can give you some peace of mind.

Consolidating high-interest debt by paying off double-digit high interest consumer debt with a single-digit low interest home equity loan, could help you pay down your total household debt faster at less cost.  And, even though purchasing luxury items such as cars, vacations and expensive clothing is fun in the moment, your financial happiness often depends on developing and practising budgeting habits that avoid burdensome debt over the long term.

Funding investment properties when the cashflow (e.g., rent) and appreciated value combined are expected to cover the costs of purchasing and maintaining that property, borrowing from your home equity may make sense.  In short, you win when your investment income and equity are positive compared to your property’s financing and upkeep costs.

Often, accessing your home equity is handled through a Line of Credit (LOC) secured by a property.

But what if you don’t already have that LOC option as a part of your first mortgage?

Call me (604-476-0053) to arrange an LOC behind your first mortgage that is independent of your current lender and still secured by your property. I can arrange financing that will get you to the end of term on your 1st mortgage without penalty.  Then at the end of your mortgage term, I will explain how to consolidate two mortgages into one that includes an advanceable line of credit.

One of the best things about an LOC is that you have access to credit that you don’t have to use, and you only pay interest on the portion that you do use.  Handled prudently, you can create more options to increase your wealth.

Back to Main Blog Page