A home equity line of credit ( HELOC ) is a secured form of credit. The lender uses your home as collateral, guaranteeing that you'll pay back the money you borrow. HELOCs are revolving credit. You can borrow money, pay it back, and borrow it again, up to a maximum credit limit.

You usually have no fixed repayment amounts for a HELOC. Your lender will generally only require you to pay interest on the money you use.

Question: What types of HELOCs are there?

Answer: There are 2 main types of HELOCs: the first is one that’s combined with a mortgage, and the second is a stand-alone product.

Question: What is a home equity line of credit combined with a mortgage called?

Answer: It’s sometimes called a readvanceable mortgage. Many of Apply’s financial institutions offer readvanceable mortgages, or a HELOC combined with a mortgage.

Question: What payments and loan limits are made on a re-advanceable mortgage?

Answer: The portion that is a fixed term mortgage will have an amortisation period. You have to make regular payments on the mortgage principal and interest based on a schedule.

The credit limit on a HELOC combined with a mortgage (readvanceable mortgage) is the maximum of 65% of your home’s purchase price or market value. The amount of credit available in the HELOC will go up to that credit limit as you pay down the principal on your mortgage.

Question: How does a borrower buy a home with a home equity line of credit combined with a mortgage or readvanceable mortgage?

Answer: You can finance part of your home purchase with your HELOC, and part with the fixed term mortgage. You can decide in our mortgage products engine how to best use these two portions to finance your home purchase.

Question: What is the downpayment or home equity requirement for a readvanceable mortgage?

Answer: You need a 20% down payment or 20% equity in your home, and you’ll need a higher down payment or more equity if you want to finance your home with just a HELOC.

Question: What portion of my home can I finance with the HELOC component of the readvanceable mortgage, or HELOC’s in general?

Answer: The portion of your home that you can finance with your HELOC can’t be greater than 65% of its purchase price or market value. You can finance your home up to 80% of its purchase price or market value, but the remaining amount above 65% must be on a fixed term mortgage.

For example: you purchase a home for $400,000, make a 20% downpayment of $80,000. Your mortgage balance owing is $320,000. The maximum you’d be allowed to finance with your HELOC is $260,000 ($400,000 x 65%). The remaining $60,000 ($320,000 - $260,000) needs to be financed with a fixed term mortgage.

Question: What’s the second type of HELOC?

Answer: Stand-alone home equity line of credit. A stand-alone HELOC is a revolving credit product collateralised by your home. It’s not related to your mortgage.

Question: What is the maximum credit limit on a stand-alone HELOC?

Answer: Maximum credit limit on a stand-alone HELOC is 65% of your home’s purchase price or market value, and won't increase as you pay down mortgage principal (if any).

Question: Will I need to re-qualify for my HELOC if I don't use it immediately?

Answer: You only have to qualify and be approved for a HELOC once. After you’re approved, you can access your HELOC during its term whenever you want.

Question: Can you substitute a HELOC for a mortgage?

Answer: A stand-alone HELOC can be used as a substitute for a mortgage. You can use it instead of a mortgage to buy a home. Buying a home with a HELOC instead of a traditional mortgage means you’re not required to pay off the principal and interest on a fixed payment schedule. There’s a higher minimum down payment or more equity required (at least 35% of the purchase price or market value). Using a HELOC as a substitute for a mortgage can offer flexibility, as you can choose how much principal you want to repay at any time. You can also pay off the entire balance any time without paying a prepayment penalty.

Your mortgage payment frequency options may include

Frequency	Description
Monthly	You make one payment each month. This is the most common payment frequency.
Semi-monthly	You make two payments each month, typically around the 15th and the end of the month. Each payment is half of the monthly amount.
Biweekly	You make a payment every two weeks, resulting in 26 payments per year. Each payment is calculated by dividing the monthly payment by 2.
Weekly	You make a payment every week, resulting in 52 payments per year. Each payment is calculated by dividing the monthly payment by 4.
Accelerated biweekly	Similar to regular biweekly, but with an accelerated schedule, meaning you make payments every two weeks, but the amount is higher because it's calculated as half of the monthly payment.
Accelerated weekly	Similar to regular weekly, but with an accelerated schedule, meaning you make payments every week, but the amount is higher because it's calculated as one-fourth of the monthly payment.

How do accelerated payment schedules work?

Accelerated payment schedules capitalize on subtle differences in calendar calculations to help borrowers pay off loans faster. One method involves dividing the annual cost by 52 weeks, reflecting the standard number of weeks in a year. Alternatively, another approach considers there being 4 weeks in each of the 12 months, totaling 48 weeks in a year. Opting for 52 weeks results in smaller weekly payments compared to the 48-week method.

For instance, suppose you have a $1,000 annual cost for a loan. Dividing by 52 yields a weekly payment of approximately $19.23, whereas dividing by 48 gives approximately $20.83 per week. Despite the frequency of payments being the same in both scenarios, the amounts differ slightly. This slight increase in payment amount is what constitutes the "acceleration" in accelerated payment schedules.

By choosing the 52-week method, which effectively spreads the annual cost over more weeks, borrowers make slightly larger payments each week. Consequently, they end up paying off the loan faster, akin to making an extra month's payment annually. Over time, this acceleration can lead to substantial interest savings, potentially totaling thousands or even tens of thousands of dollars over the life of a mortgage.