However, financial institutions are very competitive these days and will shave points off their posted mortgage rates to secure customers, Duncan says. A line of credit, also known as a home equity loan, is like a second mortgage, says Bernard Roy, associate V.P. of home equity lines of credit at TD Canada Trust. Also, you have the option of paying only the interest due each month or paying off the whole loan at any time without penalty. Interest rates fluctuate with the prime rate, but most institutions will give a home equity loan at prime. Otherwise, lenders usually charge prime plus a fixed amount, such as half a point or more.
Some institutions also offer a choice between fixed and floating interest rates on lines of credit.
Gobel argues that this is one of the cheapest forms of credit available. Back to top Loan to business Financial planner Bryan Rindal of BTR Financial Planning in Prince Albert, Sask., took his own advice when he purchased the business of a local GIC broker. If you contemplate taking out such a loan, make sure that you take back security for it, such as a debenture. This won't put you ahead of the bank in the event the business collapses, but it will put you ahead of any trade creditors. Back to top Reverse mortgages Another way to get equity out of your home is through a reverse mortgage, which is usually worth up to 30 or 40 per cent of your home's market value.