10 Smart Tips to Build Home Equity

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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.

4 Genius Ways to Use a Home-Equity Loan

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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!

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

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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!

Is It Wise to Get a Second Mortgage?

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Getting a second mortgage isn’t as simple as marching to a bank and telling lenders that you want to take a loan against your home equity. Although a second mortgage is just defined as a loan against the equity you’ve built up for your home, getting one is a complicated process that can result to you losing your home if you’re not careful. You should only take a second mortgage if you’re sure that you can handle the terms and that the risks will be worth it for you.

Why Get A Second Mortgage

Most people apply for a second mortgage to finance projects that they don’t have the cash for, such as an expensive home improvement project or extensive home repairs. Some do so to fund big expenses such as a dream wedding or vacation. There are also people who take a second mortgage to save money in the long run, such as when the money is used to consolidate loans with a high interest rate – effectively converting them to a low-interest single loan that is easier to handle.

How a Second Mortgage Can Help You

Whatever your reason is for trying to get a second mortgage, you need to understand how a second mortgage works to ensure that you end up helping yourself by getting it.

Know that a second mortgage gives you a one-time set amount that you have to pay on top of your first mortgage. The payments are a fixed amount monthly and is set until you’ve fully paid off your loan. The downside is that failure to make payments as agreed can lead to your losing your home to foreclosure.

How to Apply for a Second Mortgage

Getting a second mortgage follows a process that is similar to getting a first mortgage. There will likely be an appraisal as part of determining your home equity and then you connect with a lender or a bank to begin the paperwork.

Banks generally take a long time to evaluate your details to determine how much they can lend you. A private mortgage lender might be a better option if you’re not traditionally employed or if your credit score isn’t as good as banks requires it to be.

Is it Wise to Get A Second Mortgage?

Getting a second mortgage shouldn’t be your first financial option when you need cash. Ask yourself if it is possible to simply save up for the huge expense you have to fund. Try to see if your loans can be consolidated some other way. Try to see where you’ll be financially in the future to determine if you’ll be able to pay or whether you’ll be risking going homeless.

Weigh all the pros and cons before making up your mind to apply for a second mortgage. Try to find if there are any other ways to finance your needs. Once you’re sure you want to get one, don’t hesitate to ask for professional help to get the best terms possible. You need to make sure that getting a second mortgage will have a lot of benefits for your situation for it to be a truly wise  decision.

If you feel that you should consult with mortgage experts before you get a second mortgage, do it! Contact us and we’ll be happy to discuss your concerns with you.

The Smartest Way to Tap Your Home Equity

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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!

 

Thinking of Using a Home Equity Loan? Here’s 4 Reasons Where it’s Worthwhile

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Getting a home equity loan sounds like a relatively easy way to get access to some cash but not all uses for it are created equal. Just because you can qualify for it does not mean that you should get one, as using it the wrong way can end up costing you your home. If you feel that you really want to use home equity loans, then the following are the smartest reasons to do so.

Adding Value to Your Property with Home Improvement Projects

One of the smartest ways to use your home equity loan is to fund home improvement projects that in turn, increase the value of your home. Examples of this include adding another room, modernizing your kitchen and bathrooms, adding a patio, improving insulation, or converting your home into a smart home. Energy-efficient upgrades generally take less time than bigger overhauls and improve your quality of life while living in the property by a significant value too. This way you benefit before you even sell your home.

Using Home Equity for Debt Consolidation

If you have several high-interest debts, you might be paying a fortune in interest alone. By taking a home equity loan and using that to pay for your existing high-interest debts, then you can save a lot of money over the years and also save yourself the hassle of keeping track of several debts. With a home equity loan used for debt consolidation, you will have only one bill to think of.

Funding Investments

Whether as extra funding for your business or extra cash to use as a deposit for another property, you can put your home equity into good use by using it for money-making ventures for you. The key is to make sure that whatever income your business or investment property brings in is enough to cover the fee and the bills for your home equity loan. Do not use your home equity loan for anything that produces more liabilities than assets or you will incur more debt.

Paying for Higher Education

You can use home equity loans to get some funding to pay for higher education which in turn will improve your long-term financial status by increasing your income potential. Remember, be sure to use your home equity for things that will improve your life and add value to it in the long term.

Saving It for Emergency Expenses

Do you know that most families do not have enough cash to sustain them in case of losing their main source of income for a few months? Most do not have extra cash ready for use and therefore also do not have funds for emergencies. If you have a sudden large expense like medical bills or need a new vehicle, you can turn to your home equity to save the day.

Are you decided on getting a home equity loan? Then contact the mortgage professionals at Mortgage Central Canada so that you can be assisted and get your loan approved in as fast as 24 hours!

Open Up the Tap on Your Equity with a Home Equity Loan

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You’ve been making timely payments all these years, isn’t it time your home started to give a little back? With the right mortgage broker (us!) and a home equity loan you can get all the money you need to consolidate your debts, send your kids to university or even start a business. With any kind of equity loan the devil is in the details and you don’t want to try and negotiate this one your own. Let’s explore how they work and why you would want one.

What is Equity?

If you don’t know, equity is how much you have invested in your home. If your mortgage(s) are completely paid off you have 100% equity. If you’re still paying off half your house you have 50% equity. You can figure out how much equity you have in your home by subtracting the remaining debt from the most recently appraised value of the home. This way you’ll be able to know exactly how much of a home equity loan you can take out.

Don’t Take Out a Large Home Equity Loan

Just because you’re approved for a big amount doesn’t mean you should actually borrow that much! You’ll want to work with one of our Toronto mortgage brokers; we understand the market, the tricks lenders pull and we’ll work hard to help you get the best equity loan possible. Every situation is different, don’t take a cookie cutter mortgage that just isn’t in your best interest. Also be careful about what the terms are before you sign on that dotted line.

Plan Ahead

When it comes to home equity loans you need to have a plan for the future. Why are you borrowing this money? Will you get some kind of return on it? Are you going to be able to pay it back? How much will you need to pay each month to pay back your home equity loan? If you don’t know the answers to these questions one of our Canada mortgage brokers can help. We have a lot of experience when it comes to home equity loans and we’ll be able to show you how to get the right loan.

Your Equity is Important

Each time you make a mortgage payment you’re socking away money for the future – that future is now. Why should you get robbed of your equity because you didn’t know any better? We’ll work with you to help you understand your rights and obligations as a borrower and to really understand what you’re signing. From finding the right mortgage lender to signing we’ll be there with you for every step of the way.

You’ve worked hard for your home and you shouldn’t have to lose it. Working with us as your Toronto mortgage broker will help you not only get the money you need now but keep your home in your future for years to come. Don’t get a bad deal, get the right deal!

Discover our home equity loans today!

Your Choices for a Home Equity Loan in Ontario

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Determining the type of home equity loan that could be right for you can be very confusing and overwhelming even for the more seasoned homeowners who want to use their home equity. We’ll try to make things easier for you here by laying out your choices for a home equity loan in Canada.

Let’s Talk About Home Equity

Home equity is the real value that you own in your home. It is determined by taking away all existing debts from the professionally assessed current market value of the home. Say a home is worth $800,000 and the remaining debts and other liabilities total $180,000. That means that the home equity is $620,000.

The ability to build home equity is one of the biggest benefits of owning your home. Another is the fact that once you have home equity, you can access it or tap into it without having to sell your home. You just have to apply for a home equity loan.

Let’s Talk About What Is A Home Equity Loan

A home equity loan is a type of loan that is secured by the equity of one’s home. The home equity serves as collateral for the loan to be approved. Because it is a secured loan, it often has much more attainable requirements and friendlier interest rates.

You can apply for a home equity loan from a bank or a private lender. You can also opt to use the services of a mortgage broker to get better deals and terms.

Home Equity Loan Choices in Canada

If you are still paying your mortgage, you can choose a second mortgage. It got its name because it is second in position with regards to the priority of repayment if you fail to pay your obligations. Once approved, you will be able to access a huge percentage of your home equity as a lump sum that you have to pay within a stipulated time. Another good reason to get a second mortgage is that it allows homeowners to borrow against their home equity even when they have bad credit.

If you want flexibility and a friendlier-to-the-pocket interest rate, then a HELOC could be a good choice for you. This is especially true if you are planning to use your home equity for various needs through the next few months to years. With a HELOC, you will be able to access your home equity as revolving credit. You will only be charged interest on the amount that you use.

If you are a retiree, then a reverse option could be another option for you for a home equity loan in Canada. This is a bit more complicated, and your age will be a factor as well. Talk to us if you are interested in this choice for a home equity loan.

Overall, owning a home gives you a lot of freedom in how you want to use the value that you accumulated through real estate if you are not keen on selling. Contact us today and we will be glad to assist you to get approved for a home equity loan of your choice at Mortgage Central Canada.

 

Second Mortgage Loans in Canada

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In Canada, second mortgage loans are an additional loan that a homeowner can take on a property on top of a primary mortgage. Because a second mortgage is an additional loan, the risks for the lender are quite high, prompting them to charge higher interest rates for second mortgages as compared to a primary mortgage to mitigate their possible loses should the homeowner fail to make payments.

Defining a Second Mortgage

Second mortgages technically come in 2 forms, the lump sum home equity loan, and the revolving credit HELOC which stands for a home equity line of credit. These 2 loans sound similar but they are not the same in terms of format, interest rates, and payment terms. Usually, the term ‘second mortgage’ applies to home equity loan to avoid confusion with a HELOC.

A good credit score is most certainly needed when trying to get a second mortgage from a bank or similar huge financial institutions. This is because the risks of nonpayment are higher for second mortgages due to the fact that paying for them is on top of an existing mortgage. For individuals who do not qualify for a second mortgage with banks, going the private lender route with the help of professional mortgage brokers is possible.

Who Needs a Second Mortgage?

People with a lot of credit card debts from various providers are ideal candidates for a second mortgage as the most popular use for it is to consolidate debt. With a second mortgage, you can access a part of your home equity as a lump sum and pay off your high-interest debts so that you end up with just one bill to pay instead of a few. By using a second mortgage to consolidate debt, you’ll save up on interest fees and more of your payment will go towards paying your actual loan than just struggling to cover interest fees. Other people who may need a second mortgage are people who need to fund a huge project (such as a much-needed home renovation). Consolidating debt and financing home improvement are great ways to use a second mortgage to improve your credit score too.

How to Qualify for a Second Mortgage?

Qualifying for a second mortgage means passing the lender’s requirements on 4 key areas, your credit score, your ability to pay, your property location and status, and your existing home equity.

Lenders are looking for people who have a great property with a substantial enough equity and have the means to pay. Credit score is negligible depending on the lender’s specific requirements.

The best way to find lenders with whom you might qualify for is to reach out to a professional mortgage broker. Good mortgage brokers have years of industry experience and have a huge network of lenders that they can match with specific borrowers based on the factors mentioned above. At Mortgage Central, we’d be happy to discuss your options with you as well as help you get approved for a second mortgage. Contact us soon!

 

Get a Second Mortgage with Bad Credit

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Bad credit may get in the way of getting a second mortgage but it is still possible to get approval even with a less-than-desirable credit score. This is definitely worth a consideration because a second mortgage can be used to improve one’s credit score. A strong application is a must and you must shop for the best interest rate to reap the most benefits.

Dealing with Bad Credit

Getting a second mortgage with a bad credit comes with certain disadvantages. First of all, a second mortgage already comes with a higher interest rate than a first mortgage but with a bad credit, the lender will surely ask for a higher interest to cover the risk of lending to you. This is because a second mortgage is subordinate to the first mortgage and the lender for the second mortgage runs a higher risk of not getting paid if financial troubles arise. It is therefore only logical to be given higher interest rates for a second mortgage if you have bad credit but you can still get a good deal by shopping for the right lender.

Apply for a Second Mortgage with Bad Credit

The first step that you must do before applying for a second mortgage if you have bad credit is to find ways to improve your credit score. It is possible that there are some mistakes that can improve your score once corrected. By getting a copy of your credit history and reporting wrong entries, you may be able to get a great boost in your credit score for a relatively short span of time.

The second step that you must take to get a second mortgage despite having bad credit is to actively work towards reducing your debt, particularly the high-interest ones such as credit card debt. If it is possible, pay them off in full or make sure that the balance is below 30% of your credit card limit. Don’t fall for converting your credit card debt into new lower-interest card debts because this won’t help you in getting approval for a second mortgage. It will look like you have multiple credit applications which will make it seem that your finances are in worse shape than it really is.

Find the Best Lenders in Canada

Getting help from a mortgage professional will make your second mortgage application a lot smoother if you have bad credit. Mortgage professionals know which lenders are more lenient and which lenders will give you a better interest rate. Mortgage professionals can also share some tips for faster approval such as having a co-signer with a good credit score.

Getting a second mortgage with terms that you can manage within a short span of time will drastically improve your credit history and open the possibility of qualifying for other loans in the future. Contact us if you have bad credit and need help with applying for a second mortgage in Canada. We’ll be more than happy to discuss possible solutions with you at Mortgage Central Canada!