A Broker’s Guide to Flexible Financing with a Home Equity Line of Credit (HELOC)
This guide provides an in-depth look at Home Equity Line of Credit (HELOC), explaining how they function, and how they differ from other mortgage solutions at PHL*. Whether you’re considering home renovations, debt consolidation, or other financial needs, understanding HELOCs can empower you to make informed decisions about your financial future.
Home Equity Line of Credit (HELOC): The Basics
A Home Equity Line of Credit, referred to as a HELOC, is a type of credit product that allows homeowners to borrow against the available equity in their home. Equity is the difference between the value of your home and the amount you still owe on your mortgage.
A HELOC functions like a credit card in certain respects, generally giving you a revolving credit line from which you can borrow, repay, and then borrow again. The amount of available credit is determined by the lender based on factors such as your credit history, the value of your home, and your existing mortgage balance. It differs from a traditional loan in its flexibility, acting more like a credit card where there is a set limit you can draw from as needed, using your home as collateral. As of the first quarter of 2024, total non-mortgage loans in Canada surpassed their pre-pandemic levels, reaching $553.1 billion. This trend reflects a growing need for flexible financing to manage household expenses and other investments.
How HELOCs Work
The amount you can borrow with a HELOC is based on the equity in your home. Equity is the difference between your home’s current market value and the outstanding balance of your mortgage. Once you’re approved, you can draw funds from the line of credit whenever you need them during the Draw Period (see below), up to your approved limit.
With the HELOC product offered at PHL, you can make up to two draws per month, with the first being free and the second costing $150. The minimum draw amount is just $5,000. A key feature of a HELOC is that you only pay interest on the portion of the credit you actually use, not on the full approved amount.
How is a HELOC Paid Back?
HELOCs typically have two phases: the draw period and the repayment period.
- Draw Period: During this phase, you can borrow and repay funds as you wish, as long as you make the minimum interest-only payments on the outstanding balance. With the HELOC product offered at PHL, you can generally make up to two draws and one partial paydown per month.
- Repayment Period: After the draw period ends, you enter the repayment phase. You are no longer able to borrow additional funds, and must repay the outstanding credit balance, along with interest over a set period of time.
One of the key considerations for a HELOC is that the interest rate is typically variable and fluctuates with your lender’s prime rate. This means your payments can change based on market conditions, so it is integral to understand how the repayment period works to better manage your finances.
HELOC Versus Home Equity Loans
When considering borrowing against your home’s equity, you have two main options: a Home Equity Line of Credit (HELOC) and a home equity loan. While both use your home as collateral, they function in fundamentally different ways.
Home equity loans provide a single lump sum of money upfront, with a fixed interest rate and set repayment schedule, offering predictability for large, one-time expenses.
HELOC on the other hand, is a revolving line of credit that allows you to borrow as needed, and you only pay interest on the amount you use.
| Feature | Home Equity Line of Credit (HELOC) | Home Equity Loan |
| Loan Structure | Revolving line of credit | One-time lump sum |
| Interest Rate | Typically variable | Typically fixed |
| Access to Funds | As needed, up to a credit limit | All at once |
| Payment Structure | Interest-only during the draw period; principal and interest during repayment | Principal and interest from the start |
| Ideal Use | Ongoing or unpredictable expenses | Large, one-time expenses |
Why HELOC?
The flexible nature of a HELOC makes it suitable for a wide range of financial needs. According to a Bank of Canada survey, Canadians most commonly use HELOCs for the following reasons:
- Debt Consolidation: Consolidating high-interest debt, such as credit card balances, into a single payment with a lower interest rate can simplify finances and save money.
- Home Renovations: A HELOC is ideal for large-scale, ongoing renovation projects, as you can draw funds as costs arise instead of taking out a lump-sum loan.
Other Financial Goals: A HELOC can also be used to fund major life events, such as educational expenses or to provide a financial cushion for emergencies.
HELOC Products at PHL
Our new HELOC product is designed to provide you with the flexibility and control you need to manage your projects and goals. While traditional lenders generally have stricter requirements, our HELOC product is designed with a common-sense approach to help you unlock your home’s equity. We prioritize:
- Fast access: generally get your funds with a 24-hour turnaround on draws, allowing you to react quickly to opportunities.
- Flexible terms: our HELOC product is available for residential properties with term lengths of 1-2 years, with loan amounts starting from $50,000.
- Competitive rates: We offer competitive starting rates in British Columbia, Alberta, and Ontario, with options for both first and second-position HELOCs.
Our HELOC product can be a powerful tool to put in the equity in your home to work for you.
Click here to access the info sheet.
Connect With Us
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Reach out to our team directly:
| 👤 BC & Alberta – Contact Kevin Cheng: | 👤 Ontario – Contact Julia Li: |
| 📧 [email protected]📞 604-579-0846 | 📧 [email protected]📞 416-649-8275 |
*”PHL” in this guide refers collectively to PHL Capital Corp., and its affiliates, including but not limited to MortEq Lending Corp., and Oakhill Lending Corp., as applicable. The applicable lender for the HELOC product may be MortEq Lending Corp. and/or Oakhill Lending Corp., and may be ultimately managed, operated, and administered by PHL Capital Corp.
Disclaimer:
The information provided in this article is for informational and educational purposes only and is not intended to be, nor should it be construed as, financial, legal, or tax advice. The content is aimed at licensed mortgage professionals who are expected to use their own expertise and judgment when advising clients. We strongly recommend that individuals consult with independent professional advisors before making any financial decisions.
Approvals are not guaranteed and are subject to lender approval. Qualification for any mortgage product depends on individual circumstances, including but not limited to, property value, equity, and credit history. Rates are subject to borrower eligibility. Additional fees may be applicable, and additional terms and conditions may apply. The PHL HELOC product offering may change, be limited, or be canceled at any time and without notice. Draw times are not guaranteed. Please contact us for more information on this product.
PHL Capital Corp. is a mortgage brokerage and administrator, and manages and operates affiliate mortgage investment corporations, and does not provide financial planning services. PHL Capital Corp. is a licensed mortgage brokerage in British Columbia, Alberta, and Ontario (Ontario licenses #13546 & #13570).
