What is a HELOC
& when is it right for you?
HELOC stands for Home Equity Line of Credit - it is secured against you home and allows you to tap into the equity of your home without breaking your mortgage.
There are different types of HELOCs and not all lenders offer them, so it is important to discuss your goals with us as your Mortgage Broker to figure out which type of product would be best for you
Potential uses for HELOCS
You want your interest to be tax deductible, and tracked properly
Using funds off your HELOC for investment purposes (into non-registered investments) allows you to deduct the interest charged on the borrowed funds. Using a HELOC allows for easier tracking of tax deductible interest than a refinance would
Rennovations or Additions
If you have a large amount of rennovations that would likely be done in multiple stages, it can be advantageous to use a HELOC instead of refinacing the full cost of renos out of your mortgage up front.
This allows you to access funds off the HELOC increments and likely reducing the overall interest paid on the funds
Future Rental Property Purchase
If you are wanting to take steps in advance to prepare for a future rental property purchase, adding a HELOC at the time of obtaining your intial mortgage may be a good idea. This allows you to ensure you have access to the equity in your home to use as a downpayment whenever it becomes neccessary. without having to break your mortgage in the future.
A team of Financial professionals such as an Accountant, Financial Advisor, & Real Estate Lawyer are integral to successful use of a HELOC for investing!
A common use of home equity we see is to purchase a rental property
If you have the intention of growing your Real Estate Portfolio, lender selection and application structure becomes strategic, as different lenders have different qualification criteria and differently limits on # of properties of units allowed.
As your Mortgage Broker that specializes in Rental Properties, I help assess if the property makes sense from a cash flow perspective, and if it fits into your overall real estate investing plan
Some Questions to Ask yourself before buying a Rental Property
Are you Ready to be a Landlord?
Owning a Rental Property and being a Landlord comes with added responsibility and costs.
Are you ready for the additional costs of Rental Property Ownership?
Prospective landlords should plan to be able to cover the costs of the additional mortgage yourself if a tenant doesn't pay rent on time, or replace appliances/perform maintence as necessary
Are you aware of Government regulations (Municipal, Provinical, & Federal) that would impact you?
There are multiple layers of regulations associated with home ownership, particularly when it comes to rental properties on all level of government such as Municipal bylaws, Speculation & Vacancy Tax, taxes on rental income, CCA, and Capital Gains to name a few.