When analyzing your finances with a financial professional, they may bring up the option of a line of credit to help with your financial needs. Most people, with no previous knowledge of a line of credit, have never learned how to use one or how to get the maximum value out of a line of credit.  The line of credit, secured or unsecured, will provide you with many financial options to help you to minimize on your interest paid, and maximize on your borrowing ability.

What is a Line of Credit

A line of credit is similar to a bank account; however, instead of depositing money into the account, you can ‘borrow’ money from the account. A lender will discuss with you the terms of this account including a credit limit, an interest rate, and a repayment schedule. A line of credit is usual a revolving lending facility. This means that you can borrow from it over and over again without having to renegotiate the terms. If you have enough equity available in your house, then you can use the equity to have to get a lower interest rate, a higher credit limit, and lower debt repayments. If you have the ability to get a secured line of credit, then it is always a good idea to get one. Even if you do not plan on using it ever, there are still some advantages to having one. In Canada, you must have at least 20% of your house paid off in order to apply for a secured line of credit.

Maximizing the Leverage on your Secured Line of Credit

Once you have made arrangements with your bank to get a secured line of credit, then they will conduct an appraisal on your property. The lender will need to determine what the value is of your property in order for the bank to set a certain limit to what they can lend to you. If house prices are  going down, then you should get a secured line of credit as soon as you can to make sure that you ‘lock in’ the equity of your property. By locking in the equity of your property, it confirms that if your property goes down in value, then you will still be able to get the money out of your property that you could of when you originally made a secured line of credit.

The second major detail of having a secured line of credit is that it puts a lien on your property. Once you have a lien on your property, then it is much more difficult for someone to attempt to conduct identity fraud in regards to the property, and cause you a serious headache if anything happens.

Once you have a secured line of credit in place, you can use it for many of the following things:

• Home Renovations
• Down payment on a new or additional property
• Debt Consolidation
• Income Subsidy
• Retirement Security
• Reverse Mortgage
• Day to day use
• Business Investing
• Direct Investing
• Retirement Savings

The list of activities that you can use the line of credit to help you to enrich your life is endless. Also, in many districts, if you use your line of credit to invest, then the interest may tax deductible. By using your property to invest, it allows you to leverage your property to be able to invest more and achieve a much higher return on your investment then with your own savings alone. The reverse mortgage and retirement savings is also a great way to live your retirement sensibly.

An excellent strategy used by many financial professionals involves leveraging your property for living comfortably in retirement, and purchasing sufficient life insurance, so that when you pass away, your property and estate will be paid in full for your heirs.

In the process of owning a house, it is not uncommon that you will have to do major repairs and purchase new furniture. It may not happen this year or not for a few years; however, the truth is that you will have to make major repairs sometime while in a property. You may not always have the thousands of dollars to replace a roof or to fix a damaged foundation; however, by keeping a secured line of credit at your disposal, then you will have the funds required when you need them.

You may not need a secured line of credit at this moment in time; however, it is always a good idea to have one available. You never know when something is going to happen and you will need the funds to be available to pay for the emergency. You do not know when things will change in the banking industry that could potentially limit your ability to even get a secured line of credit. The best time to get a secured line of credit is today, even if you do not need it.

Save your Mortgage from the Bank. Simply Mortgages can Help!

Welcome back!