6 Things You Must Know About A Home Equity Line of Credit

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Getting a home equity line of credit is increasingly becoming popular for homeowners who need some extra spending money. It is also relatively easy to qualify for compared to other types of loans as long as what the homeowner owes is less than the equity built in the home.

The above are just some of the important things to know about getting a home equity line of credit. The following are a must read if you’re trying to finalize your decision about getting a HELOC.

Know Your Exact Equity

Because a HELOC lends you money against the value you already own in your home, you have to know what percentage of the home you already paid for. That value is your equity. To get that, you have to subtract what you still owe to the current value of your home. Divide the result by your home’s value and multiply by 100. The end result is your equity.

Example, your home is worth $300,000 and you still owe $210,000. Your equity is $90,000. $90,000/$300,000 is 0.30. Multiply that by 100 and you get 30% equity.

Find Out If You Are Eligible

A good credit score and a minimum 20% equity are usually the most common requirements. Your lending professional can also help you with this.

Understand Draw and Repayment Periods

Your HELOC has a draw period and a repayment period. The draw period is the span of time wherein you have access to the money and can be as long as 10 years. The repayment period is the span of time wherein you are expected to pay and can’t withdraw more money. This can last up to 20 years. Note that you are expected to pay the interest on the outstanding balance and the principal for both period.

Your Interest Will Be Variable

A HELOC will only charge you interest on amount withdrawn, no matter what full amount you have access to. This is why your interest will change by how much you withdraw along with other factors such as the prime rate. A HELOC’s interest is also lower by comparison to other types of credits or loans. Some lenders may also offer you a fixed rate.

Enjoy Spending Flexibility

A HELOC allows you to withdraw the amount you need when you need it (subject to terms and regulations). It gives you freedom similar to withdrawing from a savings account or using a credit card.

Use Your Equity in A Smart Way

Most people use a HELOC to invest on home improvement or for college funds. It can also be used to consolidate debt so you can save money in the long run. It can also be used to fund a dream wedding or a much deserved vacation.

Still have questions about getting a home equity line of credit? Let us answer them for you! Contact us for assistance about getting a home equity line of credit today! Your HELOC approval await you!

Ontario Tightens Rules Against Double-Ending by Real Estate Agents

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A fine that can go as high as $50,000 awaits real estate agents who engage in unethical double-ending. Double-ending is when brokers, salespersons, and brokerages push through a real estate deal while representing more than one party in the deal.

When Interests Are Conflicted

Regulatory changes are being introduced by Ontario to address scenarios wherein real estate agents are representing both sides of a real estate sale, truly a conflict of interests. It is to be noted that although Ontario is getting stricter on the practice of double-ending, this move did not go into banning the practice.

The changes were announced at Queen’s Park by Minister of Government and Consumer Affairs Tracy MacCharles. The announcement means that those brokerages, salespersons, and brokers who are representing more than one side at a sale will now be subject to stricter rules.

The proposed legislation is also raising the fines for those who violate the code of ethics of the real estate industry. The new fines are up to $100,000 for brokerages and around $25,000 to $50,000 for individual brokers and salespersons.

The Media Brought Light Into the Issue

MacCharles told reporters that what the government is doing is a response to an issue that’s been circulating in the press, wherein one agent is representing both sides in a transaction. She added that they won’t be banning double-ending, but will put a limit to the situations that it’s acceptable to take place.

MacCharles mentioned certain situations such as in some locations wherein there are very few agents, a family situation, or in some industrial or commercial situation where the expertise and representation of a real estate professional is needed – are good examples where double-ending is allowed.

It was also mentioned that the ideal situation is still wherein a seller and a buyer would have different representatives as what is referred to in the industry as the ‘designated representation model’.

​MacCharles further shared that the disciplinary actions against those who choose to not comply with the new rules will be up to the Real Estate Council of Ontario.

Double-ending is a real problem as was uncovered in an undercover investigation made by CBC’s Marketplace. Their investigation revealed that some Toronto real estate agents are offering unfair advantages to potential clients in an attempt to secure a deal from both ends.

Big Changes Ahead

The new rules include disclosing to clients when double-ending occurs, a move applauded by Ontario Real Estate Association CEO Tim Hudak, who believes that this is a big step towards the right direction and allows for more trust and better business practices. Other real estate experts have a neutral stance on the issue but acknowledged that full disclosure would be best, more so for sellers who bought from the same agent and want to sell their home with the help of someone they already know and trust.

Concerned about getting the best deal that will work for you when refinancing your mortgage, applying for a second mortgage or a home equity loan? Let us help you! Contact us today!

Reasons to Get a Second Mortgage

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It seems that getting a second mortgage is very popular these days, but why are people getting a second mortgage, to begin with? Is it a safe or a wise decision to do it when you’re not yet paid with your first mortgage? We have answers (and more) below!

First, What is a Second Mortgage?

Investopedia defines a second mortgage as a subordinate mortgage that is approved while the homeowner has another mortgage in effect.

This type of mortgage is backed by your home; which is why it is required that you have some equity before you can apply for it. By applying for a second mortgage, you’ll be able to refinance up to 85% of your home’s value, freeing fund to use for other purposes.

It is the freeing of some funds that is the main reason why most people apply for a second mortgage. Once they are approved, they usually use it for the following:

For Investing

It is no secret that you need money to make more money. In the case of investments, the bigger capital you put in it, the larger the gains that you can get.

For Further Schooling or Self Investment

Getting ahead in life for most people means needing to have the credentials for some positions, hence the need for further schooling. In some instances it is needed for a career change or just to be a better version of one’s self. Unfortunately school is not cheap and requires a significant investment on your part. If you qualify for a loan and have the means to pay the future monthly payments, why not go for it?

For Investing in a Second Property

Buying a second property for a vacation home, a rental, or an investment property requires some capital as most banks ask for a minimum 20% downpayment. Tapping into the equity of a home you already own allows you to come up with the funds for this quickly. By doing this, you van effectively grow your assets as long as you won’t default on your monthly payments.

For Paying Debts with a High Interest Rate

Credit card companies can charge as high as 30% interest on your balance. This is a lot of money that simply goes to the banks, burying you deeper in debt. By taking a second mortgage to pay loans like this, you can pay your way out of debt faster.

For Funding a House Renovation

Spring is just a few months away or perhaps you will want to get renovations done before winter. You will need a substantial amount of money to make this possible. Taking a personal loan for this purpose is usually met with a rejection but with a second mortgage, you can get what needs to be done completed by the time you want it. This is especially handy for repairs and renovations that preserve the home such as a roof replacement.

How to Get a Second Mortgage?

Getting a second mortgage is not as challenging as most may think more so if you get the help of a licensed mortgage broker. Our mortgage professionals at Mortgage Central Nationwide will help you throughout the process of mortgage application until you finally qualify for a loan. We will ensure that your mortgage will have the lowest possible interest rate and that the terms will be exactly what you can manage so you won’t fall behind on your monthly payments. Simply contact us at your earliest convenience.

 

When (and How) to Use Second Mortgages

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Determining when is the right time to take advantage of your home equity is a tough decision for most homeowners. Some worry that they may not be able to pay back a second mortgage and some don’t apply for a second mortgage because of fear that they won’t be approved or that the process would be too difficult.

The truth is, using a second mortgage is a powerful financial tool that homeowners can use to their advantage, more so if they are struggling to get approved for an unsecured loan.

Why Apply for A Second Mortgage

People get second mortgages for a variety of personal reasons, mostly when they need a significant amount of money quickly. Reasons usually range from wanting to invest in another property, having a tough time financially, wanting to renovate their home, consolidating credit card debt, or securing bridge financing. Add to this the fact that the interest rates for second mortgages are currently very low, then the appeal of getting a second mortgage is understandably quite strong.

Assess If You Really Need A Second Mortgage

Second mortgages come with good benefits but is still a huge financial responsibility. It is only smart to try to look for other options that may be better and with fewer risks. After all, using your home as a collateral is not to be taken lightly. You can take a look into possibly opting for a personal loan or a cash advance. They do come with strict requirements such as having a good credit and a stable job and have a higher interest rate, but if you only need a small amount, then they can be better options for you.

If your needs can’t be met by the other options above, or if your qualifications for their requirements are a bit lacking, then a second mortgage would be the right choice  for you. Ask yourself if you can afford paying off the second mortgage and what are you going to so should you decide to sell the house later. It’s about anticipating your future needs and planning ahead too.

Second mortgages do come with attractive benefits too, such as low interest rates, can be easier to pay off, and with more borrower-friendly application. Another thing is that because they are secured through your equity, you will be able to borrow a larger sum as compared to other types of loans.

How to Secure A Second Mortgage

You can get a second mortgage by applying to a trust company, a major bank, or a private mortgage lender. Generally speaking, the best interest rates are offered by banks although their requirements are often very strict. Your best option if you can’t meet most banks’ lending requirements is approaching a private mortgage lender or a trust company.

Choosing which one would be best for your needs and means can be very tricky. The process may also require more paperwork than you think. That is where professional mortgage brokers like us from Homebase Mortgages come in. We take care of the details to ensure you are well taken care of and you get approval for your application the soonest time possible.

Need more answers about when and how to get a second mortgage? Let us help! Contact us today!