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 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!

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.

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!

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.

 

Advantages and Disadvantages of Using Your Home Equity to Pay Off Debt

Trying to pay various bills per month can take a lot of effort, not to mention worrying about racking up fees due to interest and dealing with the stress brought on by seeing bills pile up. Consolidating bills can give you the breathing space you need so you can focus on working to pay instead of worrying about paying on time.

One of the best ways to consolidate debt is to use a home equity loan because unlike transferring to a lower-interest card or getting a personal loan, using home equity to consolidate debt have fewer disadvantages. We’ll talk about the advantages and disadvantages of using home equity to consolidate your debts below.

Advantages of Using Home Equity to Pay Off Debt

Saving on interest is the most popular reason why people turn into using their home equity for debt consolidation. The savings are usually in the thousands of dollars per year on average. The lower fixed-rate interest of a home equity loan is also far easier to manage than trying to gain control over multiple loans. Another bonus is that the interest for a home equity loan is oftentimes tax-deductible because it is considered a second mortgage. On the other hand, if you choose to access your home equity via HELOC, you’ll have to make sure that you get a capped lifetime rate and that you make payments towards the principal to avoid fees as much as possible.

Fewer monthly payments is another popular reason for debt consolidation using home equity. It is near impossible to forget to pay when you only have to deal with a single bill instead of several.

Access to higher loan limits is one of the best advantages of using home equity for debt consolidation. If you try to consolidate debt by transferring to a lower-interest card, the limit will usually be low more so if your credit score isn’t speaking much for you; and the same goes for a personal loan. In using your home equity, you can access as much as 85% of it minus what you still owe in your mortgage. This amount can be in the hundreds of thousands, allowing you to take care of all your debts in one swift consolidation move.

Disadvantages of Using Home Equity to Pay Off Debt

The main danger in using home equity to pay off debt lies in forgetting that it is also a loan that will have to be paid later. It isn’t a long-term solution unless you take it upon yourself to learn to budget and address the factors that got you into debt, to begin with. Because using home equity for debt consolidation means taking out a loan with your home equity as collateral, failure to abide by the terms can result in you losing your home. The above are why you need to be sure that you get loan terms that you can handle, otherwise, you’ll be back in square one.

Are you thinking of consolidating debt using home equity? We can help you get on the right track! Contact us for an obligation-free initial consultation for debt consolidation.

Why Borrow Against Your Home Equity?

Borrowing against their home equity gets some people feeling iffy, viewing the transaction with suspicion and thinking that it is a ploy for lenders to rob someone off of their home. The truth is far from this. Borrowing against one’s home equity can prove to be a smart financial decision as long as it is done right and for the right reasons.

Using Your Home Equity

Your home equity is the value your home that you actually own. It is defined as the difference between what the homeowner still owes in the current mortgage and the home’s current market value. Considering this definition, there are 2 ways to increase your home equity. One is when you make payments towards your mortgage, and another is when the value of your home increases such as when real estate value increases or when you make certain home improvements that add value to your home.

Borrowing Against Your Home Equity

You can tap your home equity by getting a loan against it. There are different types of home loans that are taken against your home equity. We will talk about the 3 most popular options today – getting a HELOC or a home equity line of credit,  getting a  mortgage refinance, or getting a second mortgage or a lump sum home equity loan. It can get confusing regarding whether you should go for a HELOC, a second mortgage, or a home refinance to access your home equity so read on to get an idea about each one.

Mortgage Refinance

A mortgage refinance is a great way to tighten things up when there has been a significant change in your home’s value such as in the case of skyrocketing home prices in areas that have undergone some recent development. Depending on the terms of the refinance, you may find yourself saving a lot of money on interest fees, finding that it is easier to pay your loans, or even both.

Second Mortgage

Also called home equity loan, a second mortgage allows you to tap your equity and get a lump sum of cash that you can use to consolidate debt or pay for any huge expense. Debt consolidation is a popular reason for applying for a second mortgage because it lets the homeowner save so much on interest fees for high-interest loans. The downside is that paying back a second mortgage usually comes with a short time frame.

Home Equity Line of Credit

A HELOC is the most flexible compared to the previous 2 ways to tap your home equity. The payment for a HELOC can also prove to be the easiest to manage; however, you won’t benefit much from a HELOC unless you need access to a revolving credit source cash for quite some time. Remember that payment will be scheduled at a certain time so you can’t just go to the lender and pay back your HELOC even when you have the means to do so.

Are you still unsure whether is it time to leverage your home equity? Talk to us and let us know what your concerns are so we can help you choose a loan product that will best suit your needs. Contact us at Mortgage Central Canada today!

Should You Choose a HELOC, a Second Mortgage, or a Refinance to Access Your Home Equity?

There are many ways by which you can access the equity that you have in your home, but choosing which one to go for will not be an easy call. You have to consider the purpose that you’ll be using your home equity for, your financial goals, and how you’ll be able to pay back the funds after you’ve used them.

Your equity is one of your biggest assets; hence choosing what to do with it and how to access it is not something that can be taken lightly. Luckily for you, we’ve summarized some information that can help you decide whether you’re thinking of accessing your home equity via a second mortgage, a HELOC, or a refinance.

Get A Second Mortgage

If your credit score is less than 650 and your home equity is just around 20%, your best option to access your home equity is through a second mortgage. Second mortgages are relatively easy to qualify for, with some private lenders only requiring a 10% home equity and a credit score between 550 and 700; however, you have to be ready for the fact that you’ll pay mortgage fees, legal fees, self-insured fees, and appraisal fees. This makes getting a second mortgage less attractive than the other options to access your home equity below but remember that a second mortgage like this can still save you a lot of money if you’ll use it to consolidate high-interest credit card debt. Don’t forget that payments for a second mortgage go on top of your payment for your primary mortgage.

Refinance Your Mortgage

A refinance is a smart way to use your home equity if you know how much funds you need and you have a credit score of at least 650. A refinance will allow you to access as much as 80% the value of your home provided that you meet the lender’s parameters which you can get via a lump sum and pay with a fixed or variable interest rate. Note that with a refinance, you will be charged interest on the entire loan, unlike a HELOC below.

Apply for a HELOC

HELOCs have many advantages and disadvantages but the most attractive feature is definitely the flexibility to only withdraw or use a portion of it when you need it. A HELOC won’t force you to use the entire loan amount and will only charge you interest on the amount you use. It is a form of revolving credit so you can pay and reuse until a predetermined time or value is reached. Lenders typically require about 20% home equity and a credit score of about 650 to qualify for a HELOC, however, private lenders may be able to provide you with options depending on a variety of factors.

The above are the 3 most common ways to access the equity of your home. Should you need further details, feel free to contact us at Mortgage Central Canada.

Must Read About Home Equity Lines of Credit (HELOC)

You may be interested in getting a home equity line of credit or perhaps have at least heard of it, bringing you here to read this blog. A HELOC comes with a lot of benefits such as relatively low interest rare, possible tax deduction, and access to your home equity, no wonder it is so tempting to get a HELOC!

Is a HELOC Right for You?

If you’re looking for ways to tap your home equity, then getting a HELOC is one of the options that could be right for you – but at a cost. A HELOC is still a type of loan and loans always come with a set of risks along with potential benefits. It is up to you to research these factors and determine if the benefits outweighs the risks. Remember, failure to pay your HELOC can mean the loss of your home as this type of home loan uses your home as collateral.

What is a HELOC in Simple Terms?

A HELOC is a line of credit that is tied to your home’s equity and functions as a revolving form of credit. It is similar to having a credit card but with potential for a truly high credit limit because the homeowner’s home equity is a major factor in determining how much can one borrow through a HELOC. Because of this, people who get a HELOC often do so to finance major expenses such as paying for higher education, recurrent medical bills, or home improvements.

How Does a HELOC Work?

With a HELOC, the borrower is approved for a certain credit limit that the borrower can borrow all at once, or little by little if needed be. The credit limit is based on several factors including the value of the home equity that the homeowner had built, the ability to pay, credit score, financial history, outstanding debts, and other financial obligations.

HELOCs typically come with a fixed period of borrowing followed by a period of repayment as well as possible renewal. Note that some plans will require a full payment before allowing a renewal while some will allow to renew as soon as the borrowing period is over. This varies from one lender to another.

Shopping for the Right HELOC Plan

Getting a HELOC comes with obligations and certain limitations. You will want to make sure that you’ve considered various lenders/providers to see which plans will fit your needs and ability to pay. Different plans have different features as well as interest rates. A low interest rate may apply for the first few months, so you better watch out for possible financial traps that you might overlook. You should also consider accompanying fees, needed paperwork, and upfront charges before choosing a provider. It won’t hurt to consult with mortgage professionals to explore other ways of tapping your home equity, such as getting a second mortgage instead of a HELOC.

Getting a HELOC is an important decision that you shouldn’t make blindly. If you have questions about getting a HELOC or how to leverage your home equity, do not hesitate to contact us at Mortgage Central. We’d be happy to help!