Home equity line of credit

A limit at your disposal against your home’s value, from which you draw only what you need. Interest runs only on the amount withdrawn.

It’s flexible, and that’s where the trap sits: the minimum payment often covers interest alone. Without a repayment schedule, the balance can sit untouched for ten years while the interest keeps adding up.

Compare a line of credit and refinancing with Mathieu

I compare the flexibility against what it costs

Before putting a limit in place, I price the same amount as a line of credit and as fixed-term refinancing. Over ten years the difference in total cost can be substantial, not because of the rate, but because a minimum payment that repays nothing leaves the whole debt standing.

A home equity line sells well at the counter: it’s flexible, it’s available, and the minimum payment looks light. What rarely gets explained is the total cost over ten years when the balance never moves. I compare products from several lenders on limit, rate, fees, and the option to convert part into a fixed term, then tell you if ordinary refinancing would cost you less.

How it works

We define the actual need
The amount, how it’s staged over time, and the reason. That determines whether a line of credit is the right tool.
I establish the available limit
Property value, existing mortgage balance, and the percentage the lender allows, to arrive at a realistic limit.
I compare it with refinancing
Same amount, two structures, over the period that concerns you. You see the total cost of each before choosing.
We set a repayment schedule
A voluntary amount above the minimum, decided from the start, so the balance comes down.

What a line of credit changes about repayment

The minimum payment doesn’t repay the debt

It usually covers interest only. A balance of tens of thousands can therefore sit at exactly the same level for years while you pay every month. It’s the point that surprises people most.

The rate is variable, so the payment moves

A home equity line follows the prime rate. When rates rise, your payment rises too, with no notice and no renewal to negotiate. I test your budget against an increase before the limit is set up.

What it costs you

For arranging it, the lender pays me. You will, however, have third-party costs to plan for: the property appraisal and the legal fees to register the security, which some lenders partly absorb. What it costs, in detail

Run the numbers before opening a limit

A line of credit and a refinance don’t cost the same on the same amount; the gap shows over the full period, not on the first payment.

Frame a refinancingWhat a lender accepts as value, what gets subtracted, and what reaches your hands.Estimate refinancing potentialTest the accessible amount, the fees, and the new payment before choosing a structure.

Frequently asked questions

What is the difference between a line of credit and refinancing?

A line of credit places a limit at your disposal and you draw only what you need, at a variable rate. Refinancing hands you a fixed amount repaid on a set schedule. The line suits a staged or uncertain need; refinancing suits a known amount.

What limit can I get?

It is capped at a percentage of the property value set by the lender, and the revolving portion is itself limited within that total. Your existing mortgage balance is subtracted from that limit. The value used is the one the lender accepts, not your estimate.

Can I convert part of it into a fixed-term loan?

Many products allow that, giving a fixed payment and repayment schedule on part of the balance. It is often a good way to impose discipline on money used for a specific project. Terms vary between lenders.

Are there fees to set up a line of credit?

You should generally expect a property appraisal and the legal fees to register the security. Some lenders absorb part of these. Those costs are incurred even if you never draw on the limit, which is worth weighing.

What happens if I sell the property?

The line must be repaid and discharged at the sale, like the mortgage. Include it when calculating net sale proceeds: forgetting an outstanding line balance is a common mistake when estimating what a sale will leave.

Compare mortgage terms from different lenders.

Major banks, credit unions, and specialized lenders each apply their own criteria, products, and terms. A logo does not mean that a mortgage will be offered or approved.