If you have a home equity line of credit or are thinking of applying for one, pay close attention to its flexible terms and features. These can help you use credit wisely and plan a repayment strategy that works for you.
Use it as you need it. A home equity line of credit makes it easy to finance renovations, pay for large purchases or consolidate other debts at a more affordable interest rate. Since you pay interest only on the amount you actually use, it leaves you the flexibility of having a ready source of financing when you need it, whatever you need it for, subject to the terms of the Line of Credit Agreement.
Credit-wise tip: Borrow only what you really need right now. Avoid over-spending just because you have ongoing access to credit up to your available credit limit.
Pay at your own pace. Your home equity line of credit gives you the flexibility to pay as little as interest only, if that’s necessary for you. How and when you choose to repay your balance is up to you. As you pay off your outstanding balance, your available credit increases. It’s always important, though, to increase your payments when you can to ensure that you are paying down your balance responsibly.
Credit-wise tip: Pay more than just your minimum payment – any extra payment will go towards your outstanding principal balance. Whether it’s a one-time payment or increased monthly payments, you will save on interest costs.
Reduce your exposure to possible interest rate increases. With the TD Canada Trust Home Equity Line of Credit you can use the Fixed Rate Advantage Option to convert part of your balance to a fixed interest rate, if you are concerned about potentially rising variable interest rates.
You can opt to lock in all or a portion of your outstanding balance to a fixed interest rate, subject to a minimum amount of $10,000. You may choose a term of 1 to 5 years, amortized over any period of up to 25 years, and the applicable mortgage interest rate will apply. Once you’ve set up the Fixed Rate Advantage Option, you simply make regular payments of principal and interest and you may be given the option to renew it when the term ends.
Credit-wise tip: This option is great if you are working towards paying off your balance in a specific timeframe or simply trying to manage your budget!