What can I do with a Secured Home Equity Line of Credit vs Home Equity Loan?

home equity line of credit

Hopefully, you’ve been reading (our site) about what a home equity line of credit (HELOC) is and how it compares to a home equity loan. Just in case you haven’t, here is a quick refresher on what it is, and we’ll share more about why you may want to consider one as part of your overall financial strategy.

A home equity line of credit, or as it’s more commonly referred to as a HELOC, is a secured line of credit that lets you leverage your home’s value to borrow money. You will be able to access the equity, as needed, in a form of a revolving line of credit. A home equity loan also lets you access the equity in your home but is more like a typical installment loan. This means you will receive the money in one lump sum and will be required to pay back a set amount on a specific date. The HELOC interest rate is usually lower, does fluctuate based on the Bank of Canada’s prime rate, which means you will need to monitor the HELOC on a monthly basis for repayment amounts.

One of the main reasons home equity lines of credit are attractive is because the cost of borrowing, or interest rate, tends to be lower.

In today’s low-interest-rate environment, with soaring home property values, we get a lot of questions about what a HELOC can be used for in financial planning. One of the main reasons home equity lines of credit are attractive is because the cost of borrowing, or interest rate, tends to be lower. This is because the line of credit is secured against your home. Another great benefit is the flexibility of HELOCs as you can access cash quickly when you need it and pay it back like you would a credit card. Speaking of credit cards, HELOCs are often a good option to pay off higher-interest debt like credit cards. Credit cards, department store cards, and gas station cards tend to charge around a 20%* interest rate compared to a secured line of credit that may charge the banks’ prime rate plus a few basis points.

The benefit of a home equity loan is that it can be more predictable. The interest rate is fixed versus floating on a HELOC. It may be the preferential financial product for homeowners that want to know what their monthly payments are for budgeting purposes. It’s also helpful to control spending, especially when you may already be dealing with higher interest rate debt like car loans and credit cards. One of the most common uses of a home equity loan is for emergency purposes. Life happens and tapping into your asset provides a lower rate alternative with a home equity loan.

Other great ways to leverage your home’s equity for:

  • Home renovations, repairs, and improvement
  • Buying a second home
  • Self-employed to start or expand a new business
  • Payoff a second or third mortgage
  • Purchase a vacation home
  • Consolidate high-interest debt
  • Leverage for investment purposes

Homeowners should contact a Square Capital Mortgage Broker or Agent to discuss home equity loans or secured line of credit options.  


Checkout Square Capital Website for more information: Home Equity Line of Credit (HELOC)


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