Don’t Get Home Equity Loan in Canada Until You’ve Read This

Getting a home equity loan is fast becoming the norm for homeowners who live on a fixed income and are either near retirement or already in retirement. Financial stress is real for those with already stretched finances. No wonder tapping into one’s home equity is perceived as a very attractive financial solution for those who’ve built up their home equity and now want to enjoy the fruits of what they’ve worked hard for. The question is, is it truly a good idea to get a home equity loan in Canada? Are there pitfalls to watch out for and are other types of home equity loans better than others?

What is Home Equity?

Your home equity is the value that you currently own in your home. You can estimate your home equity by subtracting any amount that you owe on your home from your property’s current market value. This means that if you still owe $15,000 and your home’s current market value is $600,000, then you have a whopping home equity of $585,000. That’s a nest of money that you can use to improve your life or use for unexpected big expenses.

What is a Home Equity Loan?

In Canada, a home equity loan is a generalized term that applies to any secured loan you take that uses your home’s equity as collateral. Because it is a secured loan, you can enjoy higher loan limits and lower interest rates than other loans such as a personal loan from a bank. It is also easier to get approved for a home equity loan than a traditional bank loan more so if your credit score is not as desirable as you want it to be or if your source of income is not as stable as banks prefer. Generally speaking, home equity loans also offer flexible repayment options but you may have to really look for certain private lenders to enjoy this. If assisted by mortgage professionals, you have higher chances of getting a home equity loan in Canada from private lenders. You can also try to apply for one from banks if you can meet their qualifying requirements.

Types of Home Equity Loans

Home equity loans come in various forms. Generally, a lump sum falls under a second mortgage while a revolving line of credit is referred to as a HELOC. There are pros and cons for each of the types of home equity loans. A second mortgage may be great for funding a really huge expense but repayment may be a bit too heavy for most people’s wallets. A HELOC is more flexible and can be a great alternative for those with recurring expenses but can also prove to be a source of temptation for those who have an issue controlling their spending.

Get a Home Equity Loan in Canada Fast

It is best to consult with mortgage professionals to determine which home equity loan option is right for your needs and ability to pay. This will also save you time and money plus minimize the chances of getting rejected. Sometimes, the fastest way is the slow but most efficient way that will lead to better chances of getting approval. Contact us at Mortgage Central Canada if you’re ready to apply for a home equity loan.

 

The Most Popular Reasons to Get a Home Equity Loan in Canada

More Canadians are getting home equity loans in recent years to make use of rising home prices and low-interest rates but these are not the only reasons why they are tapping into their home equity. Below is a compilation of the top reasons why people get a home equity loan in Canada.

Home Equity for Debt Consolidation

Getting a debt consolidation loan tops the list of uses for home equity in Canada. People go for it because loans that are tied to residential equity have a significantly lower interest rate as compared to other types of loans. By using home equity for debt consolidation, homeowners can manage their various debts faster as well as save money on interest.

Home Equity for Paying CRA Tax Money

A borrower who owes back taxes will not be lent new loans by banks unless the homeowner applies for a loan backed by their home. A short-term loan like this can help someone sort out their taxes and manage their financial issues.

Home Equity Loan for Spousal Buyout

A divorce often means dividing conjugal assets so that each party walks away with their half. This isn’t very easy to do when most of the couple’s assets are tied to their property. A home equity loan will allow one spouse to keep the family home and pay-off the other party for a clean break.

Home Equity for Home Renovation

A huge percentage of home equity loans taken in recent years were made for the purpose of funding home renovations. By using home equity for home renovation, a homeowner can have access to funds to improve their home and increase their property’s value. By doing this, it will be easier to refinance mortgage later or take out some other loan when needed.

Home Equity for Business Loan

It takes money to start or expand a business. However, it is often not easy to sway investors to want to put their money in someone else’s business. By tapping home equity for this purpose, a homeowner can take advantage of using what he or she already has and with friendlier payment terms to as compared to other business-related loans.

Home Equity Loan for Big Purchases

Trying to purchase a home or a car with a loan when you’re self-employed can be very challenging in Canada. Luckily, homeowners can take advantage of the different types of home equity loans to buy a home, a rental property, or a dream car. This is great news for the approximately 15% of Canadians who are self-employed!

Home Equity for Construction Loan

Building a house from the ground up is very expensive. The good news is that if you’re building your second home you can make use of your current home’s value to help fund the construction.

If you’re interested to apply for a home equity loan in Canada, you’re at the right website! Contact us and we’ll walk you through with what you need to know and help you get your loan approved!