Are you interested in learning more about conventional mortgages and how to get a Home Equity Line of Credit (HELOC)? It can seem pretty daunting if you don’t have experience with real estate, or have friends and family who have gone through the process themselves.
There are so many things to know, terms to understand and financials to consider. Thankfully, the process of getting a HELOC is a lot simpler than many people think it is!
In this blog post, we’ll go through the conventional mortgage process, what you’ll need to qualify for a HELOC and why you should speak with a mortgage broker over a bank. Let’s dive in!
Understanding conventional mortgages and HELOCs
When you understand the conventional mortgage process, it allows you to come to the table better prepared. This will make the home buying process or refinancing a much better experience for you. The first step in understanding the mortgage process when it comes to getting a HELOC is getting serious about a down payment.
You will need to either have 20% equity in your home or have a 20% down payment minimum when purchasing a home. This will allow you to enter into a conventional mortgage allowing you to not have to pay CMHC fees.
Whether you have 20% equity built into your home or an actual 20% down payment, up to 65% of your mortgage can become a line of credit (HELOC) and the other 15% (or whatever percentage is leftover) can be a fixed or variable rate mortgage.
A real-life example.
Say that you are buying a house for $400,000 and you have 20% to put down. Your total mortgage would be $320,000. Of this amount, $260,000 could be a line of credit and the other $60,000 can be fixed or variable. If you prefer, you can have a larger amount of this be fixed/variable.
The benefit of a home equity line of credit (HELOC).
A HELOC offers a line of credit that you can borrow against when you need to. With a HELOC, you’re typically given a max amount that you can borrow based on the equity you have in the home. When you choose to use any or all of your line of credit, you are then charged interest based on the amount you borrow. So, if you don’t borrow any, you don’t pay anything.
My job as a mortgage broker.
My job as a mortgage broker is to make this whole mortgage process as simple and easy as possible. In doing this, let’s chat about why you should consider working with a mortgage broker instead of just going into your bank and seeing what they offer.
The main difference is that at a bank you’d be working with a mortgage specialist. This person doesn’t have to have a mortgage licence. They also only represent the products that their financial institution offers.
When you work with a broker, like me, you’d be working with a certified mortgage broker. A broker has to receive their licence and renew it every two years. In addition to being licensed, a broker has access to several of the main financial institutions plus many other broker-specific lenders. This means that I am able to shop around the different banks to find the best rate possible for you.
If you were to use a mortgage specialist at a bank, they only have access to their institution’s rates and are not able to shop around for the best rates coming from other banks. For more information on this topic, be sure to check out my “Mortgage Broker VS Bank – Who to Choose” post.
Interested in a conventional mortgage with a HELOC?
If this blog post answered your questions about a conventional mortgage with a HELOC and you’re ready to start the process, get pre-approved on my website today. If you still have questions, fill out the form below or give me a call at 250-826-3111. I’d be more than happy to dive into this topic with you and help explain everything!
I look forward to hearing from you and helping you make your dream home a reality.