What is a home equity of line of credit?
A home equity line of credit (HELOC) is a revolving line of credit that leverages the equity in your home. With a HELOC, you can choose when and how much money to withdraw, so long as the amount does not exceed 65% of the value of your home.
What is the TD Canada Trust Home Equity Line of Credit interest rate?
At TD, the standard HELOC is variable, however, you can opt to have a portion of it be fixed for a closed term of 1-5 years to protect yourself from increases and establish regular fixed payments. TD does not disclose the variable rate for their home equity line of credit, but it is attached to Prime (currently 3.00%) and the relationship to Prime can be changed anytime at TD’s discretion. The fixed rates available range from 3.09% for a 1-year term to 3.79% for a 5-year term.*
*Rates as of September 30, 2013.
Once you qualify for the TD Canada Trust Home Equity Line of Credit, you can borrow anywhere from $10,000 up to 65% of the value of your home. Also note that your total home debt (mortgage + HELOC) cannot exceed 80% of the value of your home.
- You can access the funds anytime without having to reapply.
- You can get a variable rate lower than any personal line of credit.
- Your interest is calculated on the daily balance, so you will only pay interest on the amount you use.
- The repayment frequency is flexible, with the option to pay as little as the monthly interest charge.
- You can also opt-in to a fixed repayment plan at anytime.
The value of your home = $500,000
Your outstanding mortgage balance = $300,000
The maximum allowable total home debt would be calculated as:
$500,000 x 80% loan-to-value ratio = $400,000
Then, you must subtract the outstanding balance on your mortgage to get the total allowable line of credit amount:
$400,000 – $300,000 = $100,000
Now, you still need to make sure that $100,000 doesn’t exceed 65% of your home’s value. To be sure, simply divide the HELOC amount by the value of your home:
$100,000 / $500,000 = 20%
In this example, you could access $100,000 through a HELOC, which only amounts to 20% of your home’s value.
The Final Word
The TD Canada Trust Home Equity Line of Credit is a mortgage product that can help you access money to finance a renovation project, invest in your future or even purchase a second property. A HELOC can also be used to pay off high interest rate debts, such as credit cards or car loans. Before deciding to leverage your home, you should speak with an experienced mortgage broker and come up with an option that will work best with your financial situation.