One of the biggest questions you will ask yourself when deciding to purchase a new home in Saskatoon is “how am I/how are we going to pay for it?” Currently, there are two main options for paying for your home (assuming that you do not have the savings to pay for the whole home outright). These options are a conventional mortgage or a home equity line of credit (HELOC). Here are some differences between the two financing options:

  1. Mortgages are structured – Typically, a mortgage has a fixed time period (amortization), fixed payments, and in some cases a fixed interest rate. HELOCs on the other hand are entirely open. Interest rates with a HELOC fluctuate with the prime rate, there is no fixed time period, and no set payments which can be a great option if you want flexibility.
  2. HELOCs can be re-borrowed – A HELOC allows you to take money out of the line of credit multiple times, which offers the ability to borrow against the HELOC for home renovations, emergencies, or the down payment on a second property. Mortgages are a one-time loan that cannot be re-borrowed (unless a second mortgage is taken out).
  3. Mortgages are stickier – With conventional mortgages, there are penalties for paying it off early or for paying more annually than a set percentage of the mortgage (usually 20%). With a HELOC, you can pay off the loan as quick as you want and there are no limits to how much you pay at a time, however, if you miss payments on either structure there may be repercussions.

If you’re looking at purchasing a new home soon, talk to your banking institution about your financing options and then come talk to us.