Q. 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 as long as the amount does not exceed 65% of the value of your home. TD Canada Trust’s HELOC is called the TD Home Equity FlexLine.
Q. What is the TD Home Equity FlexLine interest rate?
You can lock the entire balance or a portion of it with a fixed closed term of between one and five years or you can get a one-year fixed open term. The revolving portion is attached to the prime rate (currently 3.2%). As of Nov. 27, 2017, the fixed rates available range from 3.04% for a one-year term to 4.99% for a five-year term.
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Q. What are the details of the HELOC?
Once you qualify for the TD Home Equity FlexLine, you can borrow up to 65% of the value of your home. Also, note that your total home debt (mortgage + HELOC) can’t exceed 80% of the value of your home.
Q. What features does the TD Home Equity FlexLine have?
These are the features of the TD Home Equity FlexLine:
- You can access the funds anytime without having to reapply;
- You can get a variable rate lower than any personal line of credit;
- The repayment frequency is flexible on the revolving portion, with the option to pay as little as the monthly interest charge; and
- You can also opt for a fixed repayment plan at any time.
Q. How much can I borrow?
Let’s do a sample calculation:
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 can access $100,000 through a HELOC, which amounts to 20% of your home’s value.
The bottom line
The TD Home Equity FlexLine is a mortgage product that can help you access money to pay for a renovation, purchase a second property, or invest in your education. A HELOC can also be used to pay off high-interest debt, such as credit card balances or car loans. Before deciding to leverage your home, you should speak with a mortgage broker and decide what works best for your financial situation.
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