Mortgage loan or line of credit?
Some people say that the mortgage line of credit is practically a miraculous product. Others denounce a mechanism that encourages over-indebtedness and financial distress. Who to believe?
What is the mortgage line of credit?
A mortgage line of credit gives you access to financing that can represent up to 65% of the market value of your property. In return, we re q uire that you put it as collateral.
Once the margin is granted, you use it as you wish. There is no restriction on the type of expense. You can just pay off the interest or the margin all at once. There is no due date, no amortization, no full repayment penalty. The margin is available as long as you keep your property.
Just like a traditional mortgage, you have to go to the notary to contract a margin, but you don’t have to go back to increase the amount if you want to do renovations. Save up to $ 1,000.
Significantly, it generally offers a more advantageous interest rate than that of margins and personal loans.
The mortgage margin also allows you to consolidate your debts yourself by using it to pay off credit card balances and other financing. You can even buy an automobile. You can negotiate a price reduction or re q uest more options.
On the other hand, if you expect to receive a large sum, you can use it to reimburse the margin at once without paying a penalty.
The mortgage line of credit re q uires a lot of discipline. Since the margin does not impose constraints on capital, the nature of the purchases or the maturity, many use their property as an ATM and go into debt up to their necks. Many bankruptcy trustees deplore the phenomenon.
If you’re having trouble restricting your credit card purchases or having trouble keeping up with your personal finances, use a traditional mortgage. Ditto for those who are nervous about the evolution of the economy and interest rates, because the mortgage line of credit always displays a variable rate.
Finally, if you just pay off interest over a long period of time, the margin will end up costing you more than a mortgage, even if the mortgage rate is higher. It always pays to pay off your mortgage the q uickly the possible.
Finally, note that a lender grants a loan more easily than a mortgage margin.
- With a mortgage line, you have access to credit that can represent up to 65% of the market value of your property.
- There is no due date, no amortization, no full repayment penalty.
- The margin offers many advantages, but re q uires greater rigor and discipline to avoid going into too much debt.