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Draw and Repayment Periods with Home Equity Lines of Credit in Canada
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Posted On :
Jan-30-2012
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Article Word Count :
507
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When it’s time to take out a home equity line of credit, it’s important for homeowners to know about the two different time periods that will take place. These are the draw and the repayment periods, and they play a major role in how home equity lines of credit in Canada work.
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When it’s time to take out a home equity line of credit, it’s important for homeowners to know about the two different time periods that will take place. These are the draw and the repayment periods, and they play a major role in how home equity lines of credit in Canada work.
The first period, known as the draw period, is what is so attractive to homeowners at first. During this time the homeowner can borrow against the equity in their home, up to a certain amount that the lender determines. The homeowner can use the line of credit to take out however much money they want at any time; and each month they only need to pay back the interest based on the amount they’ve withdrawn up to that point.
The homeowner can also choose to pay back all or a portion of the principal during this time and unlike a traditional mortgage, there will be no penalties for overpaying. The draw period can be as long as 5 – 15 years, depending on the lender.
Once the draw period is over, home equity lines of credit in Canada then go into the repayment period. At this time the lender will ask the homeowner to repay the loan in full, but that doesn’t mean that the homeowner must come up with it all in one lump sum. The lender will generally give the owner two options; the first is to refinance.
With this option the homeowner can enter into a refinanced mortgage with the lender that will include the principal amount of the HELOC along with the first mortgage on the home, if there is one. This repayment period can also last anywhere from 5 – 15 years, depending on the terms of the refinanced mortgage.
The second option the lender might give the homeowner during the repayment period is to simply continue making payments to their HELOC as they were before. The difference is however, that the lender will also determine a certain amount of the loan’s principal amount that also must now be included with the payment, along with any interest that has collected so far.
Home equity lines of credit in Canada are usually recommended for homeowners that don’t need a huge amount of money at one time but rather, small amounts on a regular basis. Because they work like a bank card, they are highly convenient and can be just the answer for many people. Because home equity lines of credit are also always based on an adjustable rate, they are also most affordable for homeowners when the interest rates are at their lowest.
The interest rates do vastly differ from credit cards, being as much as 15 – 20% lower than the interest on most major cards. This makes lines of credit an especially good option for homeowners when they want to consolidate their credit debt and save money by paying it back at a lower rate.
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Article Source :
http://www.articleseen.com/Article_Draw and Repayment Periods with Home Equity Lines of Credit in Canada_141067.aspx
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Author Resource :
Bryan J is the author of this article. For more information about home equity line of credit canada and Heloc please visit canadianmortgagesinc.ca.
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Keywords :
home equity line of credit Canada, Heloc,
Category :
Finance
:
Finance
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