A line of Credit is a type of mortgage that allows your client to use the loan as a personal cheque account. They can draw down and repay the loan when they want to. The line of credit can be used for home renovations, to repay bills, or to invest. It is very similar to a credit card because an individual can withdraw funds up to a preset limit. In general, the interest rates and fees offered on a line of credits will vary depending on the lender. However, most will offer the same features, such as ATM access, cheque books, and online banking capabilities.
Benefits of a line of credit
Your client may be interested in a line of credit because of the following benefits:
- They can withdraw any amount of money up to their credit limit without having to seek their lender’s approval.
- The credit limits are usually large, meaning they can make larger purchases.
- Interest rates on lines of credit are lower than those on credit cards.
- They will have easy access to their funds.
- They can consolidate their debts.
- They can reduce the balance on their home loan, saving on interest, by sending all their income into the mortgage account.
- They can make monthly repayments, or, depending on the lender, may not have to make repayments until they hit the limit.
If your client’s income fluctuates, they may benefit from a line of credit home loan. When their income is low, they can borrow money. When they have more income, they can make repayments.
If your client is interested in applying for a line of credits home loan, consult with Mortgage Street. Most banks have stricter lending requirements for line credit home loans because their profit margin is thinner. However, we are a non-bank lender, meaning we can approve your client for a credit line that fits their financial situation without worrying about our profit margin because there is no middleman.