Is It Time to Leverage Your Home Equity?

If your homeowner with equity, you can cash in and start making equity in your home work for you with a home equity loan. After all, you’ve been saving for years, making your payments on time, isn’t it time you started getting something back? This kind of mortgage, also known as a second mortgage, can help you remodel your home, start a business, pay for retirement, or help you buy a new home. Under the current mortgage rules, you can burn up to 80% of your home’s worth; you may not actually borrow this much though! Here were going to talk about equity, how one of our Toronto mortgage brokers can help you, and if this is the right choice for you.

What Is a Home Equity Loan?

After years and years of payments, you’ve started building value in your home, and that’s equity. The less debt you owe on your home, the more equity you have. As Canada mortgage brokers we can help you unleash the power of your home’s hidden equity to get the money you need for your next project.

But before we talk about qualifying for a home equity loan we need to talk about loan-to-value ratios or LtV. No one will ever get 100% loan to value, even with the 720 or above credit score. You’re most likely to get between 60% and 80%, and you’ll only be able to borrow up to 80% of your home’s value – and that’s after they subtract whatever you still own it. This is why you to have as much equity available as possible.

Who Can Qualify for a Home Equity Loan?

If you have equity you can qualify for home equity loan – the trouble is finding the RIGHT but home equity loan. When you work with us as your Toronto mortgage broker you’ll understand what your real options are. We don’t work for the banks, we work for you, so you’ll know what you’re supposed to be getting. Credit, employment history, and payment history all play a role in your eligibility.

Understanding the Risks of Borrowing

Anytime you borrow against your home there will be risks. What we can do as mortgage brokers is mitigate those risks, helping you understand if now is the right time to get a second mortgage on your home. After all, what’s the point going through with it if you’re only going to end up losing your home?

Let Us Help You

Working with us will help you save time, money, sanity, most importantly your home. We’ll help you understand if your lender is on the up and up, you can find a better deal somewhere else, or if maybe you should just wait to borrow against your home. A little time can do a lot of things for your credit, and the better your credit is, the better your mortgage terms will be. Visit our home equity loans page today, and see how much you could save on your next mortgage!

Understanding HELOCs – The Pros and Cons of Home Equity Line of Credit

Understanding what a HELOC is can be simplified, which is what we aimed for in this write up. A HELOC stands for Home Equity Line of Credit, a type of second mortgage that allows homeowners to access as much as 80% of their home equity in the form of revolving credit.

Most people apply for a HELOC for funding home repairs or home renovations so that they can further increase the value of their home. This is a smart move as long as you’re sure that you have the capacity to pay because failure to do so can result to you losing your home.

How Does A HELOC Work?

The easiest way to remember how a HELOC works is to think of it as a credit card backed by your home’s equity. With a HELOC, you will be given a spending/borrowing limit and you can borrow against it as often as needed, repay, and borrow again. This means that a HELOC can give you flexibility and freedom in ways that other home loans cannot.

A key information to remember about HELOCs is that they have variable interest rates. The lender will start with an index rare that can go up and down based on many factors. Factors include your credit profile, local economy, etc.

What a HELOC Means for Your Credit Score

HELOCs are often treated by financial institutions as installment loans rather than revolving lines of credit. This means that borrowing your entire HELOC credit limit can impact your credit score the same way that maxing out your credit card can. This also means that you’ll have a temporarily lower credit score once your HELOC is approved.

Pros and Cons of HELOCs

Even in view of the above, there are still many reasons to get a HELOC. Your HELOC might even be tax-deductible if used in specific ways such as improving your home. Other reasons to get a HELOC include needing a new car, having to fund a wedding, consolidating loans,  and paying for college.

Some people may be better off avoiding a HELOC if having it can make them lose their home. Examples are if you are unemployed or not sure if you can pay as failure to pay can result in you losing your home. For situations like this, looking into other types of loans could be the better option. Other reasons not to get a HELOC are if the fees cannot justify the amount you want to borrow or if you are on a very tight budget as of now and additional expenses will just mean more debt.

Home Equity Loan VS. HELOC, Which is Better?

Whether a Home Equity Loan or a HELOC is better for you depends on a lot of factors. One thing of huge significance that you must look into is how much do you want to borrow and need asap. A Home Equity Loan will give you a lump sum that you must pay in installment whereas a HELOC will allow you to reborrow even though you’re still repaying what you initially borrowed. Both are smart ways to tap home equity but one comes with a fixed interest rate (and fixed loan) while the other comes with variable payments and interest (and can be used like a credit card). Talk to us to discuss which one could be the smarter choice for your financial needs!

Getting a Home Equity Loan or a Line of Credit is bound to come with challenges. This is why it pays to arm yourself with knowledge and contact mortgage professionals with a proven track record to help you with your HELOC application. Contact us today if you have questions!

 

What You Need to Know About Getting a Home Equity Loan

With the steadily rising home prices at present (more so in key cities), it isn’t far fetched that you’re probably sitting on a huge equity especially if you’ve been paying your mortgage for about 10 years or more. Tapping into your home equity by using a home equity loan can give you a huge advantage in paying off high-interest debts and affording some expenses without having to sell your home.

Do you know that approximately 10 million homeowners will take a home equity loan between 2018 to 2022 as predicted by a TransUnion study? That’s double the numbers from 2013 to 2017! What better time than now to understand how equity loans work and find out what you need to know in order to get one?

Know Your Credit Score

Your credit score is a key factor in determining whether your loan will be approved or not, so finding out your credit score is a must more so if you want to really plan out your options just in case a line of credit or a home equity loan may not come into fruitition.

Find Out How Much Debt Do You Have

The current debt that you have may become a hindrance to your securing a loan. Although a lot of people get a home equity loan for debt consolidation, wanting to do the same may not sit well with some lenders. Lenders lend you money so that they can get interest in return. They know they won’t be getting any if your existing debts are eating up 43% of your income or more.

Determine Your Equity

Your equity will let you know about how much you can tap by getting a home equity loan or a line of credit. Do this after the initial steps above. To simplify, you need to have an estimate of your home’s current value and subtract how much you still owe from that. Reduce the answer to 80% of your numbers and that will be the maximum a lender is probably going to lend you. Plan around that accordingly to avoid surprises and determine if the effort of filing and fees will be worth it.

Why Are You Getting A Loan?

Assess why you are getting a loan and what you can do besides applying for a home equity loan. Find out what are the types of home equity loans and determine which will fit your needs and goals better. Do you need a huge lump sum payable in the next 5 to 15 years? Then a home equity loan is the right option for you. If what you need is extra funds for repeated expenses, a line of credit can help ease your financial burden for about 10 years.

Want to talk with Canadian mortgage experts about ways to use your home equity in the future? Talk to us and we’d be happy to walk you through the various details of applying for a home equity loan as well as the benefits of home equity loans.

 

10 Smart Tips to Build Home Equity

Building one’s home equity is one of the most searched terms by homeowners these days as more and more people are becoming aware of how important it is to invest in their home. Below are 10 smart tips on how you can build home equity.

Increase Your Mortgage Payments

Making larger mortgage payments per month means that you’ll be able to pay your mortgage sooner by building equity faster. The more monies that actually go into the principal, the bigger your equity becomes.

Choose High Value Home Improvement

Smart home improvement choices increase the value of your home thereby also driving up your home equity. Choose home improvement projects that have a higher expected value than what you spend on it and you’ll be in good hands.

Support Changes that Increase Home Price

Anything that can drive up your home’s value will also increase the equity. Examples are better infrastructure and amenities in the neighbourhood, a new park, a new train station, or schools nearby that rank high. Support local improvements in your neighbourhood to indirectly increase your home’s market price and your home equity.

Start with a Bigger Down Payment

The bigger the downpayment you put in, the lower will be your loan-to-value ratio and the better interest rates you’ll get. Low interest means being able to pay off your mortgage sooner while building home equity faster.

Shave Your Mortgage Balance

Paying your mortgage bills on time each month means that you’re paying towards the principal of your mortgage (if it is not an interest-only loan). Any amount that goes towards your principal is going into building your equity.

Opt for a Biweekly Mortgage Payment

Paying your mortgage every 2 weeks means paying it off faster and building your equity in the process. This option also has a lower interest rate so more of your payment goes into the actual mortgage instead of just the interest.

Invest in Maintenance

Keeping your home in the best shape possible will mean that you’ll either retain or grow the value. Doing that directly translates to building home equity.

Choose a Shortened Mortgage Term

Refinancing at a shorter mortgage term will increase your payments but you’ll also save on interest aside from being able to build your mortgage faster.

Improve Your Curb Appeal

Making your home look good will give it a higher market value, therefore increasing your home equity. Landscaping, better lighting, some flowers, and an inviting front door can work wonders!

Avoid Repeated Refinancing

Building equity is not just about increasing it but also retaining it. Repeated refinancing will suck your equity dry, not something you’ll want to do when you’re trying to build it.

Want to consult with experts about the best ways to use your home equity in the future? Contact us and we’ll be happy to talk to you about using your home equity for a loan and building your assets.

Turning Your Mortgage Into Assets

Not many are aware that a home mortgage can be turned into an asset builder with the right mindset and know-how. Most people view their mortgage as an obligation or a money pit, not seeing the fact that paying mortgage is similar to building a huge savings fund.

The above is true because the more a homeowners pay towards their mortgage, the bigger their equity becomes. Equity can be turned into cash that can be  used for further growing one’s assets without having to sell one’s home. Below are the common ways of accessing home equity.

Get a Second Mortgage

Do you know that a second mortgage can get you access to as much as 80% of the home equity you’ve built up? That is quite a substantial amount that can be funneled to finance major home renovations (that can drive up your home’s value) or perhaps spend for a much-needed large expense (such as debt consolidation) that can improve your overall finances.

Getting a home equity loan (another term for a second mortgage) may prove to be quite challenging if you do not have good credit.Professional mortgage brokers can help you get one from other lenders if banks decline. The most important thing to remember is that applying for a second mortgage means having two mortgages instead of just one and that both have to be paid on a monthly basis.

Get a Home Equity Line of Credit (HELOC)

Just like a second mortgage, a HELOC is a loan secured by your property but instead of a lump sum, you’ll be given a line of credit that you can use for a specified length of time as long as you do not exceed the approved ceiling amount.

As much as 65% of a home’s value can be tapped for a HELOC. Payment is usually just for the interest for a period of time and once that time is up, the repayment must be done. A HELOC is perfect for paying recurring big expenses such as medical treatment or university tuition.

Get a Mortgage Refinance

A mortgage refinance is a way to overhaul your current mortgage contract and convert it to a mortgage that more manageable for you while also giving you access to your home equity.

Penalties might be incurred for certain reasons and so a refinance isn’t for everyone unless refinancing will result to significant savings in the long run. It is best to talk this through with a mortgage professional to ensure that you’ll be making the right financial decision.

Get a Private Loan

80% is usually the highest percentage of tappable equity you can get access to by going through traditional lenders. If you are in need of more than that, you might be able to get access to as high as 90% of your home equity with a private lender more so if your property is in a desirable location and in good shape.

Are you thinking of tapping your home equity to fund possible investment opportunities? Talk to us at Mortgage Central Canada and we’ll be more than happy to explore possible options for you. Be it about getting a mortgage loan or the things you must be aware of before getting a home equity loan, feel free to contact us soon!

 

Comparing Rates – Home Equity Line of Credit in Canada

Getting a Home Equity Line of Credit in Canada means tapping into the equity you’ve built in your home through a line of credit. It is a way of utilizing the value of your home that you truly own. Note that it only sounds similar but is not the same as an unsecured line of credit.

HELOC Explained

A Home Equity Line of Credit is a type of revolving loan that is secured by the equity of your home. It is not the same as a home equity loan because a home equity loan is a one-time loan of your home equity that will have to be paid back in full before you can use it again.

A HELOC can be reused again and again as long as you don’t exceed the ceiling amount within the time agreed for your HELOC. Interest rates for a HELOC are more manageable as well because only the exact amount withdrawn gets computed for interest. This means that if your HELOC has a ceiling of $100,000 and you only used up $1,000, you only have to pay interest for the $1,000 you used. As you pay back that $1,000, your ceiling goes back to $100,000. Think of a HELOC like a credit card with a high spending limit that is tethered to the equity of your home.

HELOC Interest Rates

Interest rates for a Home Equity Line of Credit has been made a little bit higher since the Bank of Canada increased its key interest rate to 0.75% on July 12, 2017. This is still easier to manage than interest for credit cards which are more than 10X higher than that.

Those who have a HELOC can expect that their variable interest rates will be a little less predictable but ultimately they will still end up saving upwards of a few hundred dollars a month in interest as compared to more traditional loans.

How to Get a HELOC?

Applying for a HELOC may be a bit tricky if you’ll be doing it on your own or will be approaching big institutions to get one. Requirements vary by lender and some lenders (such as banks) can have very strict requirements.

If you are self employed, have variable income, have a non-perfect credit history, or have other debts, going the bank route may not be the best option for you. A good option is to apply for a Home Equity Line of Credit to private lenders or smaller lenders with the assistance of professional mortgage brokers to ensure that you’ll get higher chances of approval and that all your bases are covered.

If a HELOC is not for you, you can also look into a home equity loan or second mortgage, a private mortgage, or even home refinancing. The key is to ensure that you’re talking to the right people and that you really do your due research to determine what is right for you.

Care for an estimate of rates before you apply for a Home Equity Line of Credit or other possible ways to help you manage your finances better with a loan? Contact Mortgage Central Canada today!

What is Home Equity? And How You Can Use It!

Home equity is a great asset to have. It is computed as the difference between the home’s market value and the sum the homeowner still owes. A large home equity is built over time as the homeowner is able to pay mortgage. It is largest when the homeowner is totally debt-free.

Understanding Home Equity

With the above said, home equity is the percentage of the property that the homeowner truly owns. It is the value of the property asset that the homeowner can use because any mortgage left unpaid is ‘owned’ by the lender.

Say you bought a $500,000 home and placed a $100,000 down payment on it with the remaining $400,000 in mortgage. This means that you ‘truly’ own 20% of your home’s value at this point. As you pay your mortgage, the percentage that you ‘truly’ own increases, more so when property values go up.

Does  this mean that the lender owns 80% of your home in the beginning? It would look like that but technically you own your home all along only that the house is your collateral for the loan that you take to buy it.

What does the lender gain in this set-up? Well, you pay for interest rate. The lender may also end up owning your home if you fail to pay according to terms set up and agreed by both your parties.

How to Build Home Equity

You can build equity by paying off your loan and improving your property so that it gets a higher market value.

Your equity will increase as you pay off the balance in your loan. You have to ensure that you’re paying more than just the interest and that you’re paying towards the principal. This way, you build equity over time.

Your equity will also increase during surges in the real estate market or when you take on home improvement projects that has a positive effect on home value.

How to Use Home Equity

Like any other asset, you can tap your home equity when in need. You can do this by getting a home equity loan or a HELOC. You can also use the equity you’ve built when you sell your current home to buy another one that’s better suited to your needs.

Another possibility is to use your home equity to fund your retirement by getting a reverse mortgage. This will allow you to use your home equity like a savings fund. You get to stay in your home and not have to sell it to enjoy the equity.

The most popular ways to use home equity is by applying for a HELOC or applying for a lump-sum home equity loan. Both have pros and cons and are good solutions for needing a large sum of accessible cash. What’s best for you will depend on several factors such as how much cash you need, your ability to pay, and for what purpose you’re taking the home equity loan for.

Do you want to use your home equity but still unsure whether you want to apply for a HELOC or apply for a second mortgage? Speak with our professional mortgage brokers so they can help you determine which one would be a better way of using your home equity for you! Contact us today!

The Smartest Way to Tap Your Home Equity

Tapping your home equity is often the most convenient way to come up with a significant amount of cash in a relatively fast way. There is no need to sell taxable holdings and incur extra taxes and all you need is an approval.

Here are 3 ways to tap your home equity with secondary home loans:

Apply for a Second Mortgage

A second mortgage also goes by home equity loan and is considered to be the most structured among the home loans, more or less mirroring your primary mortgage.

Second mortgages can have a variable or a fixed interest rate with the rate oftentimes higher than the first mortgage. They can have a set term and are often amortized in the beginning. Note that payments are very much like in primary mortgage with the principal and interest listed separately. A second mortgage also can’t be further drawn upon after being issued.

Get a Home Equity Line of Credit

A home equity line of credit, also referred to as a HELOC, is the most flexible secondary home loan in this list. There is often a minimum amount that has to be dispersed although no funds is usually released upon approval because a HELOC acts like a credit card, not a lump sum loan.

When you are approved for a HELOC, you’ll have the flexibility to just withdraw whatever amount you need as long as it does not exceed your limit. Most HELOCs nowadays come with a debit card and/or a checkbook making your life even easier when it comes to accessing your funds. Another feature is that you can avail of future amortization because of this loan type’s structure. Payment isn’t as strict because you can choose to just pay for the interest each month as long as you can pay for your entire balance at the end of the loan term.

Go For a Cash-Out Refinance

A cash-out refinance is different from the two other secondary home loans above because this option doesn’t necessarily involve a second loan. In a cash-out refinance, the homeowner can just refinance the home for a larger sum and get the difference as a cash-out. A downside would be that this type of loan can have really high closing costs depending on several factors.

Tap Your Home Equity in A Smart Way

Don’t forget that failure to pay any of the 3 secondary home loans above will mean losing your home to foreclosure; so choosing an option that fits your ability to pay, and not just your desired amount to borrow is crucial. Amounts that will be granted to you will also be dependent on several factors such as the desirability of your location, your home’s value, and your ability to pay. You’ll have to have an idea of your future cash flow before signing anything. To be on the safe side, it is best if you can consult with refinancing or second mortgage experts before deciding on one.

Need help and more information about the smartest ways to use your home equity? Contact us and we’ll assist you soonest!

 

4 Genius Ways to Use a Home-Equity Loan

Owning a home comes with the benefit of being able to build wealth through home equity. The good thing with having a good amount of home equity is that you can tap your equity when you need funds or need extra cash. However, you must be careful that you don’t end up using it for frivolous things. Here are 4 Genius Ways to Use a Home-Equity Loan so that you’ll use yours the smart way!

Use Your Home Equity Loan to Invest

Home equity loans usually have a low interest rate, which would be at around 5%. If you take out some money from your home equity loan and use it for investments that yield a return of more than that, then you’d be making quite a considerable amount of money.

The problem with using your home equity loan to invest is that losses could be great if you don’t know what you’re doing. However, if you research and think through investments before picking one, the returns can be very rewarding. The key is in not putting all your eggs in one basket. Diversify!

Pay for a Child’s Advanced Education with Home Equity Loan

Whether you’ll use your loan to fund a child’s college education or post graduate studies, it will be a smart move because higher educational attainment typically means better work and income opportunities in the future.

A word of caution, though. Make sure that you save enough for your retirement and don’t bank on your child’s education taking care of your needs when you’re older. You can also save your home equity and tap it later as extra retirement fund.

Use Your Home Equity Loan to Pay High-Interest Debts

Debt consolidation is perhaps the smartest way to use a home equity loan if you want a low risk option. You can’t lose when you use your home equity loan to pay off car debts or credit card debts because no matter how you look at it, you will be saving money in the long run if you consolidated a considerable amount of loan, to begin with.

The key to make the most out of this is to ensure that you only agree on terms that you can honor. This is important because you can lose your home if you fail to make agreed payments. Remember too that this will usually give you the most benefit if you’ve garnered a lot of high-interest debts because you’ll have to ensure that the benefits should outweigh the risks.

Finance a Major Home Improvement with a Home Equity Loan

Carefully planned home improvement can increase the value of your home and build you more equity. The best returns are usually a result of a kitchen makeover, the addition of a bathroom, or the renovation of the master suite. Some home improvement will work better if you’re planning on a renovation to help sell your home. You can discuss this with your mortgage broker so you can choose the best way to go forward for you.

Thinking of applying for a way to tap your home equity? Contact us today so that we can discuss the best ways that will fit with your needs!

How to Use Your Home Equity to Consolidate Your Debt

Debt in Canada has reached a record high. Canadians now owe $1.7 for ever $1 of disposable income, as shared by Statistics Canada. These numbers are alarming and it is a consolation that our housing market is strong. You might love to know that there’s a huge possibility that you’ve built up more equity than what you initially thought.

Equity built up in your home can be used to help you get out of debt if you use it the smart way. It isn’t easy to get out of debt when you’re simply trying to stay afloat keeping up with paying high interest consumer debts like credit cards and auto loans. Why not borrow your home equity to consolidate your debts then?

Why Borrow Your Home Equity?

It sounds counterproductive to borrow money to pay off debt, but know that using your home equity to consolidate debt means swapping huge interest-rate debts for one with very low interest rate. It helps too that once you do this, you’ll only have one easy monthly payment to think of instead of trying to track several.

Consolidating debts using home equity isn’t a new concept, but not many are aware of the different ways this can be achieved. We’ll talk about those ways below.

Apply for a Second Mortgage

A home equity loan, also called a second mortgage, is one of the easiest ways for you to use your home’s equity for debt consolidation. It will also allow you to use up to 85% of your property’s appraised value minus any outstanding mortgage balance from your first mortgage.

Getting a second mortgage will enable you to get a fixed amount of money that you can pay for a fixed amount of time as stated in your loan. It doesn’t replace your first mortgage so you’ll be responsible for making 2 payments per month once approved but the benefits are immense!

The interest rate of a second mortgage is really low so most of the payment you’ll be making will go towards the repayment of the loan. Compare that with credit card interest of about 30% and you can see that by not consolidating you are actually paying nothing but the interest in your credit card.

Get a Home Equity Line of Credit

Applying for a HELOC to use your home’s equity for debt consolidation is another smart move. It is different to a second mortgage because this one doesn’t give you access to funds in a lump sum, rather this gives you a limit as to how much of your home’s equity you can use. You are free to use as little or all of that limited amount at any given time.

Because of the revolving credit nature of a HELOC, you are free to use a huge chunk of it to consolidate debt, pay off a portion of that, and take out small amounts for emergencies and the like. This option gives you more flexibility and freedom as compared to a second mortgage.

Try a Traditional Line of Credit

A traditional line of credit could be great but know that it is very challenging to qualify for. You’ll need an impeccable credit history and possess a great credit score. We all know that most of those who have a lot of loans don’t have that, to begin with.

Need more information about how you can effectively consolidate debt? Contact us and we’ll be sure to discuss possible mortgage related financing options for you.