Looking to take on some home renovations? Want to consolidate debt? Aiming to send a child to post-secondary school? Accessing the equity you have built up in home is a great way to reach the goals that matter to you. And, there are a few ways you can go about it: obtaining a Home Equity Line of Credit (HELOC); refinancing your current mortgage; and taking on a second mortgage.
While all options enable you to access your home equity, they come with some differences and varying pros and cons. Understanding the solutions – and what they’re best suited for – can help you determine the approach that best meets your needs.
Obtaining a HELOC
A HELOC is a line of credit that is secured against the equity in your home. As a revolving line of credit, you can borrow funds from your HELOC, pay them back, and borrow them again up to your maximum limit. Learn more about HELOCs.
Refinancing your mortgage
Refinancing your mortgage involves taking out a new mortgage to pay off your original loan. Because of the equity you’ve built up in your home, you have the option to borrow more on your new mortgage than what you owe on your current one, which means you’ll have cash left over. Learn more about refinancing your MCAP mortgage.
Getting a second mortgage
A second mortgage is as it sounds – it is a second loan that you take out on your home. You can borrow up to 80% of the appraised value of your home, minus the balance on your first mortgage.
If you are a MCAP homeowner, you may be able to access the value in your home and get the money you need to achieve your goals through the MCAP Safeguard Mortgage, a second mortgage that can be added to any existing and eligible MCAP mortgage at any time.
Visit the MCAP Safeguard Mortgage page for more information.
Comparing solutions
Here is a snapshot of how these solutions stack up:
| HELOC | Refinance | Second Mortgage | |
| In a nutshell: What is it? | A line of credit secured against your home | A new first mortgage | A second mortgage that is separate from your first mortgage |
| How much equity can I access? | Up to 70% of the appraised value of your home | Up to 70% of the appraised value of your home | Up to 70% of the appraised value of your home |
| What happens to my first mortgage? | It remains untouched – the HELOC is simply added to your account | It is replaced by a new mortgage | It remains untouched |
| What fees apply? |
Some administrative fees, including:
|
If you refinance before your maturity date, early payout fees apply.
You will also need to pay legal and appraisal fees. |
Some administrative fees, including:
|
| What interest rates can I expect? | The loan is secured against your home, so interest rates will be lower than other forms of credit (i.e. unsecured credit lines and credit cards). | Obtain a new mortgage at today’s rates. |
Maintain the existing rate on your first mortgage.
Your second mortgage will come with today’s rates. |
| Timing | Apply for a HELOC at any time. | It’s best to align refinancing with your maturity date to avoid early payout penalties. | Apply for a second mortgage at any time. |
| What are the repayment terms? |
Interest only payments on the money you borrow.
You can pay off your balance in full or in part at any time without penalty. |
Principal and interest payments on the repayment schedule you choose. | Principal and interest payments on both your first and second mortgages according to your repayment schedules. |
What to choose
Because each of the above solutions allow you to tap into your home’s equity, it can be tricky to know which one to choose for your specific goal or project. Here are some guidelines you can follow:
A HELOC is an ideal solution when:
- You’re looking to access funds over time, versus in one lump sum
- You have an ongoing project, such as a home renovation
- You’re not sure how money much you’ll need for your goal
A refinance is an ideal solution when:
- Current interest rates are low – especially if they’re lower than your current mortgage rate
- You’re near or at your maturity date, which means you’ll pay little to no prepayment fees
- You’re looking for a lump sum of cash (and know how much you need)
A second mortgage is an ideal solution when:
- You’re in the middle of your mortgage term and would face significant prepayment charges if you broke your mortgage
- Your current rates are low and you want to keep your first mortgage intact
- You’re looking for a lump sum of cash (and know how much you need)
Have questions?
If you have an MCAP mortgage and you’re not sure which option to choose, Contact Us and an MCAP representative can help you select the best solution for you and your goals.
