With the world changing so quickly, it's hard to know what life in Canada is going to look like in a year, or even six months from now. So, it's more important than ever to make sure your financial plan is ready for whatever comes next.

Building an emergency savings fund is one way to protect yourself and add more flexibility to your budget, but it's often tough to set aside enough rainy-day funds to cover life's biggest expenses.

Some people turn to credit cards when they need to fund big or unplanned expenses, but credit card debt is expensive and can put you at risk of accumulating more debt than you can afford.

So, what else can you do when you're trying to plan ahead and simplify your expenses?

If you own your home and have equity in it, one option is to refinance your mortgage so that you have more spending power available. 

Now you can switch your mortgage to Scotiabank online with eHOME


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How a mortgage refinance can help1

Depending on the option you choose to go with, a mortgage refinance can add crucial breathing room to your budget. For example, refinancing your loan with a longer repayment period will cost you more interest in the long run, as well as additional fees but it may also lower your monthly payment amount.

If your goal is to repay your debt more quickly, now may be a good time to refinance your mortgage to a lower rate so you can boost your monthly payments. It’s important to ensure you consider all associated fees (including any prepayment charges if you end your existing mortgage term early) so you're confident you're making the right financial decision.

An alternative is to apply for a combined loan program, a mortgage option that most major lenders offer. This is a type of mortgage that helps customers set up multiple mortgage solutions, including home equity lines of credit, providing access to home equity as mortgage balances are repaid. The payment flexibility and low interest of a home equity line of credit make these products a powerful tool for building flexibility into your budget — especially if there's a significant gap between your remaining mortgage balance and the current value of your home.

Scotiabank’s combined loan program is the Scotia Total Equity Plan (STEP).3 The STEP offers you the ability to take advantage of a variety of credit solutions that cater to your individual requirements. Setting up multiple mortgage solutions with varying term and rate structures is a great way to manage interest rate risk.

A Scotia Total Equity ® Plan (STEP) is a borrowing solution that provides you flexibility over your borrowing needs



What is a home equity loan?

A home equity loan allows you to take advantage of a competitive housing market and borrow at lower rates without having to move or sell your home. It works by giving you borrowing power that's tied to your home's value.

The amount you're allowed to borrow will be determined, in part, by your home's equity, which is the gap between what you owe against your home and what your home is worth today.2

Since the loan is secured against the home, your lender will likely view the loan as less risky and offer you an interest rate that's well below the cost of a personal loan or credit card.

When to consider adding a home equity line of credit to your financial toolbox

Depending on how you choose to receive your funds (all at once or over time), your loan may be considered a home equity term loan or a home equity line of credit (HELOC).

Deciding between these two loan options often comes down to the solution that works best for you. If you have a significant upcoming expense, such as a roof repair or a college tuition, a home equity term loan will give you the cash you need in one lump sum.

But if you don't have an immediate expense, you may want to consider applying for a home equity line of credit instead.

Similar to a credit card, a HELOC will give you access to funds that you can borrow for expenses as they come up. You'll only be charged interest on the amount of credit you use so you can avoid spending money on debt you don't need.

Choosing a loan that grows with you

Unlike a one-time loan that's based on your current financial situation, the STEP grows with you over time, increasing your borrowing power in line with your home's equity.

You’ll be able to keep tapping into the STEP as long as your account is open and in good standing. You also have the ability to easily add multiple products under the STEP within your pre-set borrowing limit without having to re-qualify for additional credit and remove products as your needs change over the years. Think of it as a borrowing solution that allows you to simplify your debts to help lower your overall borrowing costs.

Learn how you can save by using the Scotia Total Equity Plan Calculator.

Ready to talk about how to choose the right mortgage for you? Book an appointment with a home financing advisor.