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!

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!

4 Fast Tricks to Build Home Equity

Building your home equity is one way to build wealth. After all, your home equity can be used as an emergency fund or even as funding for your next home. But how easy or how challenging is it to build home equity? What can you do to make sure that you gain equity the fastest ways?

Home equity grows over a period of time as you continue to pay your mortgage. It also grows when home prices in your area goes up as it is defined as the difference between what amount you owe and your home’s market value. For the fastest ways to build home equity, take a look at the tricks below.

Start With a Large Downpayment

Although paying the least amount for the required downpayment when buying property is tempting (more so if you have great credit), it will be in your best interest to go for the biggest downpayment that you can afford. A large downpayment means that you own a larger portion of your home’s value from the start, therefore letting you start home ownership with a substantial equity.

Pay More Toward The Amount You Owe

Paying more towards your principal will help you pay your home loan a lot faster. Do you know that just paying an extra month of mortgage payment per year can shave off 7 to 8 years of payments from your payment schedule. Paying off your home quicker means building equity at a faster rate.

If you’re not sure whether you’ll be able to afford paying an extra month a year, then start with paying a little over your required payment per month. The idea is really to just pay more towards your principal to cut your loan quicker. You’d be surprised at what an extra $100 and above per month can do.

Go for a 15-Year Mortgage Loan Instead of a 30-Year One

It is a common misconception that choosing a shorter-term mortgage loan means having to pay twice the monthly payment required for say, a 30-year loan. Once everything has been computed, you’d be glad to know that choosing a 15-year loan over a 30-year one can mean paying just a few hundred dollars more per month.

Although coming up with a few hundred dollars more per month may seem like a huge adjustment, the point here is to consider asking for computations based on shorter term loans. You might just be able to afford it and also allow yourself to build your home equity faster.

Choose Home Improvement Projects Wisely

Anything that can boost the market value of your home is a way to build home equity. This means that any renovations and additional features or upgrades you do will increase both the value of your home and your home equity.

The key here is to invest in home improvement projects that won’t empty your bank account yet give you huge returns. Examples are upgrading kitchen appliances (that can drastically increase your home’s value) or even just investing in some new turf for your front lawn (which adds a few thousand dollars to your home’s market value) for landscaping.

Now that you know how to build your home equity, it will also be great to know about how to use home equity to benefit you financially. Learn about second mortgages and the benefits of home equity loans by talking to us. Contact us if you would like to discuss more tips about using your home equity today!

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!