Real Estate

Your home – A hidden source of financing

(NC)—Your home is more than just a place to hang your hat. In addition to being a source of pride and protection, it can be a valuable source of equity.

With interest rates still near record lows, now may be a good time to consider a renovation, purchasing a new car or making some investments. The equity in your home may help you secure the necessary funds to achieve your goals

One way to access the equity in your home is to refinance your existing mortgage. While this increases the size of your existing mortgage, it may yield a lower interest rate and lower monthly payments than a traditional loan. One caution, however; increasing the size of your mortgage means it will take longer to pay it off. As a consequence, you will be paying more interest.

Another way to access the equity in your home is to open a line of credit that is secured against your home. Just as with refinancing, a line of credit may be available at an interest rate that is lower than a regular loan..

A line of credit gives you payment flexibility that is not available with a conventional mortgage. Not only do you have control over the length of the loan and how you repay it, you also have the flexibility to pay off the debt at anytime without penalty and you can control the amount of payment you make each month — the minimum, as little as interest only, or as much as you can afford. The larger your monthly payment, the quicker you will pay off the line of credit and the lower your overall interest costs.

If minimizing the amount of interest you pay over the lifetime of the debt is important, then a secured line of credit may work for you. To qualify, you generally require 25 per cent equity built up in your home. Legal fees or registry fees may apply.

“If you are considering leveraging your home equity, you should meet with a qualified lending expert,” says Gail Kassie, Director, Mortgages and Home Financing Products, BMO Bank of Montreal. “A lending expert will explain your options, offer a variety of solutions, and help you make the best decision to suit your needs and your budget.”

Information provided by BMO Bank of Montreal. For more information visit

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