A home equity line of credit is a revolving loan and uses your home as collateral. It can be coupled with a mortgage or it can also be used for financing another home. It is similar to a credit card; however, with the HELOC, the minimum payment amount needs to be paid monthly.

New homeowners that have enough of a down payment for equity in their home and typically offered a HELOC. Generally, people get a HELOC for similar reasons why people get a cash-out refinance such as paying for weddings, car payments, investments, tuition, home renovations, medical expenses, TFSA/RRSP contributions, etc.

The great thing about a home equity LOC is that it can help provide financial security.

Requirements

Like any other loans, a HELOC will require good credit, reliable income and a reasonable debt level relative to that income:

• You need to own a minimum of 20% equity in your home.

• Good credit score: usually 650 minimum but 740+ for the best rates.

• Proof of income: T4, pay stubs, etc.

• Relatively good income to debt ratios

Don't meet the requirements for a HELOC? You might be able to qualify for a second mortgage.