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!

Is a HELOC a Good Choice?

Getting into debt is unavoidable these days. Although most people wish that their debt will always be within their control and remain manageable, circumstances can change to make managing finances a lot more challenging. This is why one of the most popular types of home equity loans is getting a HELOC.

A HELOC is popular because it is a very flexible type of home equity loan. It allows homeowners to borrow money from their home equity at a very reasonable rate and terms. Perhaps the only con with a HELOC is that it is not as easy to apply for as other types of home equity loans. The good thing about it is that since it gives homeowners access to a revolving line of credit, borrowers can attain a certain degree of freedom without having to keep applying for a loan.

Different Home Equity Loans

Home equity loans come in two forms, as a HELOC, and as a fixed-rate loan. A fixed-rate home equity loan means that an outstanding HELOC’s balance is locked to a fixed interest rate for a term of 1 to 5 years. Some homeowner choose this type of home equity loan because they like having peace of mind knowing that they won’t have to deal with increases in mortgage interest rates. A HELOC or a home equity line of credit works like a credit card in the sense that a homeowner is given a credit limit and the credit in it can be reused for a specific time frame because it is a revolving type of credit. The repayment is based on fluctuations in mortgage interest rates and the type of HELOC a homeowner can qualify for.

Most of the time, home equity loans are taken as loans with fixed interest rates or as a home equity line of credit. They differ in structure and in how the homeowner can access the funds. Fixed-rate home equity loans are given as a lump sum while a homeowner can access funds from a HELOC as often as he/she wants.

Is a HELOC a Good Choice?

Because a HELOC comes with a fixed spending limit based on the homeowner’s equity on a specific property and is a revolving type of credit, it is easier to control and can be used as needed. It also gives homeowners a more flexible repayment schedule with rates that are based on current market interest rates. Borrowers like the zero time-based limitations plus the freedom a HELOC provides.

With other types of home equity loans, it is easy for homeowners to rely on debt and just fall into a cycle of borrowing and spending. A HELOC helps with preventing that. Of course, a HELOC may not be the home equity loan of choice for everyone. This is why it is best to consult with mortgage professionals like us in Mortgage Central Canada to assess which type of home equity loan might be best for your specific financial needs. Contact us at your earliest convenience and let’s discuss what we can do for you to access your home equity the smart way.

How to Use Your Home Equity in 2019

People have been using their home equity as a source of emergency funds or as a backup savings plan for years, but not a lot understand how it really works. If you haven’t tapped your home equity yet, 2019 might be the year to consider tapping your home equity for huge bills, consolidate loans, or pay for expenses that your savings or income can’t cover.

Building up your home equity by diligently paying your mortgage is a smart move that builds up this asset of yours over time. Once you’ve accumulated a significant amount of home equity, you can use it for any of the following!

Debt Consolidation

Consolidating your debts to start the year is a smart move towards better management of your finances. By consolidating your debts, not only will you make it easier for you to get your debts paid but you will also save money on interest. You can use your home equity to finance your debt consolidation. Just ask us how!

Home-Equity Line of Credit (HELOC)

A HELOC is a line of credit that acts like a credit card but instead of a credit limit, you are given access to a certain amount of your home equity. You are free to use as little or as much of the HELOC as you want as long as you are able to make payments according to the terms. New terms are currently in the works for HELOCs these days so be sure to consult with us whether a HELOC will be advisable for you.

Refinancing Your Mortgage

Refinancing your mortgage involves renewing your current mortgage so that you can use your home equity to access a cash amount. For instance, you have an initial mortgage of about $500,000 and you were able to pay about 70% of it, that will give you $350,000 in home equity. However, if the real estate prices in your area have increased, your home equity can be a lot more than that. In this situation, refinancing your mortgage makes sense to create a new mortgage loan to replace your current one in order to access some of your home equity as well as make payments easier for you. Know that specific steps have to be carried out to refinance your mortgage (like getting a home appraisal), and there are other fees that you’ll have to pay too.

Second Mortgage

A second mortgage might be a good option for you if you have an existing mortgage but don’t want to refinance. In a second mortgage, your house is your collateral and you still have to pay off your primary mortgage so you have to be sure that you can afford paying two mortgages at the same time to avoid possibly losing your home to foreclosure. We have some articles on what you have to know about second mortgages but feel free to reach out to us should you have additional queries.

Use Your Home Equity in 2019

It is up to you to determine which is the best way to access home equity for yourself this year based on your financial situation and other personal factors. If you need professional help to assist you in assessing your options, contact us at Mortgage Central Canada and we’ll surely help!

Planning on Getting a Second Mortgage or Applying for a HELOC? Read This!

If you’re a homeowner, it may have crossed your mind to use your home equity to get a second mortgage or perhaps apply for a HELOC; but how possible is it for you to get one? Are you sure that you can get HELOC or second mortgage approval with the recent changes in interest rates and mortgage rules? Do you know that getting a HELOC is not the same as applying for a second mortgage because they are entirely different types of home equity loans? We’ll talk about what you have to know regarding HELOCs and second mortgages in this write-up.

Both Second Mortgages and HELOCs are Secured Loans

Your home equity serves as the loan security or collateral when you decide to go for a second mortgage or a HELOC. The difference is in how you can access the funds. With a second mortgage, you can get the funds as a lump sum while with a HELOC, you can access as little or as much as the whole predetermined amount for a set span of time. With this difference, payment for a HELOC usually fluctuates on a monthly basis while payment for a second mortgage is a fixed monthly rate.

Missing Payments Can Mean Losing Your Home

The terms of both second mortgages and HELOCs state that the lender has a right to your home equity if you fail to make payments. To access your equity, the lender will liquidate your home. With this in mind, you have to be extra careful before signing up for these loans or risk losing your home if you default.

The Most Common Reason for Both Remains to Be Home Improvement

Most people get a HELOC or a second mortgage to finance home improvement or home renovation. Lately, more people are using HELOCs for debt consolidation too.

HELOCs and Second Mortgages Need Financial Planning

Because missing payments on second mortgages and HELOCs can have serious effects on your finances and life, you have to at least have a general idea of your cash flow so that you’ll be able to manage payments and other expenses in the future. Know that just because second mortgages and HELOCs are easier to apply for than primary mortgages do not mean that repercussions for nonpayment are less severe.

Be Ready for Pitfalls

HELOCs and second mortgages come with pitfalls too. One wrong decision can mean financial ruin more so if you simply decide to get one without guidance from mortgage professionals. For instance, a lot of people have the wrong notion that they can max out their home equity and things should be fine but that is not the case. Note that the bigger the amount you take out from your home equity, the bigger the interest rate and consequences for nonpayment and delayed payment will be.

Are you ready to get a second mortgage or are you planning to apply for a HELOC? Contact us today so that you can get answers for your home equity loan questions straight from mortgage professionals!

Best Home Equity Loan Options for You

Living on a fixed income can be quite limiting. You face challenges that hamper opportunities to enjoy life, create a better life for yourself, afford unexpected huge expenses such as medical emergencies and so on. The good news is, you’re sitting on a lot of money if you own your home or have built quite a sizable home equity. This is money that you can borrow to pay for expenses that can’t be covered by your savings or fixed income. Find out more about how you can make your home equity work for you below!

What is a Home Equity Loan?

Your home equity is the value that you own in your home. It is the difference between your home’s current market value and what you still owe. If your home is currently worth $700,000 and you still owe $35,000, then you have a whopping $665,000 home equity!

Although you may not be able to sell your home equity, you can certainly build on it over time. Because it is the value that you own, you can use it as collateral to take out a home equity loan such as a second mortgage or a home equity line of credit.

A home equity loan is a type of loan that uses the equity you’ve built up in your home as collateral. Because it is a secured loan, borrowers often enjoy lower interest rates and larger loan limits as compared to unsecured loans. Depending on the lender and the home equity loan option you choose, you may also enjoy flexible payment schemes.

What is a Second Mortgage?

A second mortgage is a home equity loan that you take on top of a primary mortgage. It comes with a set schedule of payment as well as penalties for inability to pay on time. Note that a second mortgage does not erase or nullify a primary mortgage but is another mortgage that you have to pay off. It can be better than other types of loans because the requirements are often lenient towards people with bad credit or those with low income. The money you borrow will be released as a lump sum which makes this type of home equity loan perfect for a one-time big expense such as funding a home renovation.

What is a HELOC?

A home equity line of credit gives you a line of credit with a set limit from which you can borrow as much or as little as you need. It also allows you to reborrow the money if you pay it back. Unlike a second mortgage, a HELOC often requires a reliable income and relatively good credit. A HELOC is best for recurrent significant expenses such as paying for college tuition or hospital treatments.

The best type of home equity loan for you largely depends on your financial needs and your means to pay. If you’re undecided whether to apply for a second mortgage or apply for a HELOC, contact us and we’ll be glad to discuss how to best use your home equity.

Get to Know Home Equity Loans in Canada

Financial stress is a real challenge for many homeowners in Canada. There are home expenses, work, living expenses, possible maintenance medications, and other expensive needs. No wonder homeowners are getting more interested with the idea of tapping their home equity to give them financial relief when needed. But how can home equity be used this way? What makes this possible?

Using Home Equity for a Loan

Home equity is the value that a homeowner owns in a home. If a homeowner has been making payments towards a home, then over time, a larger portion of the home is truly owned by the homeowner. This value can be computed as the difference between existing debts and the home’s current market value.

If there has been a recent development in the area, then the home equity could be a lot larger than the sum paid over the years. Home equity loans allow homeowners to use their home equity for expenses that they cannot cover with their income or savings.

A home equity loan in Canada means any type of loan that makes use of the home’s equity as collateral. Compared to unsecured loans such as credit card loans, home equity loans have higher limits and lower interest rates plus offer better payment options.

To get a home equity loan in Canada, you can either approach a mortgage professional to connect you with private lenders or go to banks in your area. Note that applying to banks will often require more work as well as a great credit score whether you’ll be applying for a second mortgage or a HELOC.

Types of Home Equity Loans

Home equity loans are usually divided into reverse mortgage, second mortgage, and HELOC. We will only tackle HELOCs and second mortgages in this article.

A second mortgage is a home equity loan that is second in position to a primary mortgage. In the event that the homeowner fails to make payments and the home goes to foreclosure and sold, the primary mortgage will be the first mortgage to get paid followed by the second mortgage. This is why second mortgages have higher interest than primary mortgages. People who have a bruised credit or in a financial bind have an easier time getting a second mortgage than to qualify for a personal loan same as those with an excellent credit score; hence, homeowners opt for a second mortgage when they need extra funds. Funds are released as a lump sum for a second mortgage.

A HELOC is a home equity loan where a borrower is given a revolving credit with a certain limit. The funds can be accessed when needed and can be re-accessed after payment until the terms of the loan are up. Interest is only charged for the actual amount borrowed for any given month. Generally speaking, a HELOC is the most challenging to qualify for among all the types of home equity loans. There is a possibility that you can still get a HELOC even with a bruised credit if you borrow from private lenders with the help of mortgage professionals.

Do you want to know more about second mortgages and HELOCs? Are you still on the fence about applying for a home equity loan? Contact us and our mortgage professionals will be happy to answer your questions.

 

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.

 

Need a Home Equity Loan in Ontario? Here Is What You Need to Know for 2019

A home equity loan is a home loan that requires a piece of real estate to be used as collateral or security. This loan is provided as a mortgage on a piece of property. The amount someone can borrow from this type of loan is based on the equity of the property used as security. Because of this, a homeowner who needs a home equity loan should have a relatively significant amount of money paid on the property versus the debts taken on the property. Note that a home equity loan is not the same as a bank mortgage.

Home Equity Loans in Ontario

In Ontario, a typical home equity loan comes with an interest of 7% to 15% as a one-year open first mortgage or second mortgage. Most of the time, an option to end the mortgage early is part of the terms. In such cases, the borrower will only have to pay a penalty fee equivalent to three-month interest. In this regard, home equity loans are much more forgiving than traditional mortgages from banks and can also be made in such way that will fit the borrower’s specific situation. The terms can be drawn up between the borrower and the lender with the help of Canadian mortgage professionals.

What is the Limit for a Home Equity Loan

The amount of existing debts on the property and the current value of the property in question are major factors in determining how much a homeowner can borrow as a home equity loan. Lenders will also calculate the LTV or Loan to Value ratio and adjust what they can lend accordingly. Some lenders may also consider employment history, source of income, and credit score as additional metrics.

Using a Home Equity Loan in 2019

The common uses for home equity loans remain the same. Most people either use their home equity loan to fund a home renovation or to pay expensive debts (debt consolidation). Some use their home equity loan as capital for a new business and some use it to pay for higher education.

Please know that the best uses for home equity loans are expenditures that give value back to you. If you can, refrain from using it to buy luxury bags, gadgets that you don’t really need, or spend it in gambling.

Is a Home Equity Loan the Same as a HELOC?

Although a home equity line of credit may sound almost the same as a home equity loan, they are different types of loans. A HELOC allows you to use up to a predetermined amount in a revolving manner whereas a home equity loan is given to you as a lump sum with a fixed interest rate and payment. If you need to know more, you can talk to us at Mortgage Central Canada so we can discuss which may be better for you.

Are you thinking of applying for a home equity loan in Ontario and nearby areas? Contact us and we’ll try to make the process as easy as possible for you!

How to Borrow Against Home Equity

Owning a home comes with a lot of financial responsibilities which can add up and make things difficult especially for those who are just making enough to cover their needs. For a lot of Canadians, having a savings account for unforeseen needs is not always possible and hence, tapping their home equity is one of the best financial solutions to cover a large expense. So, what should one know about borrowing against home equity?

For starters, home equity is defined as the value of one’s home that the homeowner truly owns. If you’re paying your mortgage, the money that goes towards payment builds your home equity. It can also be defined as the market value of the home minus the amount still owed in the mortgage. This means that when property prices increase, your home equity rises with it.

Borrowing Against Home Equity

Given the above, the first thing you should do before you borrow from your home equity is to determine how much home equity you have. You need a computation of how much you still owe in your mortgage and have your home appraised to know the current market value.

There are many different ways to borrow against home equity and they all come with specific requirements when it comes to the minimum home equity a homeowner should have before qualifying for a home equity loan.

Types of Home Equity Loans

There are 3 common or traditional ways to access home equity. By getting a home equity loan or a second mortgage, by getting a HELOC, or by refinancing your mortgage.

Getting a second mortgage will allow you to access up to 80% of your home equity. It works like other secured loans with the main difference being the fact that this one uses your home equity as security. Failing to pay a second mortgage can still result to you losing your home although, in case of continuous nonpayment, the primary mortgage will be the first one to get paid after assets are seized.

Getting a HELOC (Home Equity Line of Credit) is like getting a credit card with a relatively substantial credit limit and is backed by your home equity. Just like a credit card, you can keep borrowing from a set limit as long as you adhere to the set terms. A HELOC is great for covering small expenses that can’t be covered by your income. Most HELOCs require that you have at least 20% equity and a good credit score but some lenders may be more lenient.

Refinancing your mortgage allows you to access some of your equity after you break your first mortgage with your current lender. Refinancing will let you access up to 80% of your equity but remember that you’ll have to pay prepayment penalty fee for breaking your first mortgage.

Using Your Home Equity Loan

You can use your home equity loan to fund big projects, to invest in your home, pay for university education, or start a new business. The key to success with borrowing against your home equity is to approach the right lender with your intent and show that you’re capable of handling the loan you’re applying for. If you need help borrowing against your home equity, contact us at Mortgage Central Canada.

 

 

Get Out of a Bad Debt in Canada

Getting out of a bad debt is quite a challenge, but to try to do so with a bad credit is even harder to accomplish. A bad debt is a debt that you can’t afford to overlook payments for but the terms of payment are making it near impossible for you to have the debt taken care of. It takes a bit of planning and financial maneuvering to get out of a bad debt and we’ll share about this below.

Assess Your Debt Situation

If you have a bad credit or a bad debt, the first thing you need to do to pay off the debt is to find out what caused your present financial situation to begin with. Where you in the habit of purchasing things that are beyond your means or was your situation because of repeatedly forgetting to pay on time, thus damaging your credit score and accumulating lots of interest? Understanding the cause of your bad debt and/or bad credit situation will help you pick the best solution and plan for payment.

You also need to ask yourself if you are truly in debt. Most people are not aware that simple mistakes in recording or computing interest can cause a downward spiral that can place a person in debt although there is no debt, to begin with. Checking one’s credit history is important to see if all information contained therein are accurate. If everything is accurate, then it is time to find a way to pay off the debts.

Consolidate Loans

A possible solution to paying debt is to consolidate your loans to a lower-interest debt in order to manage payments easier. Going this route can help you get out of both bad credit and bad debt by eliminating huge fees for interest and taking care of the hassle of trying to get separate bills paid on time. However, you have to understand that simple debt consolidation may not be enough if you don’t take your financial history into consideration because the truth is, having bad credit and/or bad debts are just symptoms of having a deeper issue with handling your finances. You have to pick a solution that works for your long-term benefit.

Plan for the Future

A personal plan for paying debt allows you to see what you can afford to pay towards debts each month. To determine how much you can set aside for debt payment per month, list down all monthly expenses and subtract the total from your expected monthly income. Whatever is left is what you can truly afford to set aside for debt payments. Determining this prevents you from agreeing to payment terms that you cannot fulfill which will just result in worse credit and worse debt down the road.

Get Out of a Bad Debt the Smart Way

Some smart ways to take care of a bad debt and bad credit is to use your home equity for paying debts or to get a bad credit loan. Both have pros and cons that are worth a look to see which would suit your financial needs better. Contact us at Mortgage Central Canada for an obligation-free initial consultation as soon as possible if you need help with getting out of a bad debt.