Turn Your Home Into A Piggy Bank by Borrowing From Your Home Equity

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Finances can be tight these days for a lot of Canadians. Luckily, if you are a homeowner in Canada, you can tap into your personal bank by making use of your home equity via a second mortgage or a home equity line of credit.

Most people think of owning a home as an investment and they are right, but not a lot of people think of their home as a handy source of funds in a time of need. Yes, it is possible to get some cash out of your home without having to sell your property by accessing your home equity.

Use Your Home Equity

First, what is home equity and how can you use it? Your home equity is the value that you own in your home. You can easily estimate your home equity by subtracting any remaining mortgage or debts from the current market value of your home. You can access it by applying for a second mortgage or a home equity line of credit. These are types of secured debts that use your home equity as collateral and therefore would have much friendlier terms as well as interest rates as compared to other loans.

HELOC versus Second Mortgage

Both a HELOC and a second mortgage allow a homeowner to access their home equity by getting a loan secured against it. With a second mortgage, the funds approved for the loan are approved as a lump sum and the monthly repayments are a fixed amount. With a home equity line of credit, the homeowner is given a line of credit that they can withdraw from as they see fit at any time during the loan period. Payments for a HELOC vary by month and the interest rate often varies as well.

The beauty of a second mortgage lies in its predictability as well as the lump sum access to the loaned amount. People who apply for a second mortgage often use the funds for big expenses such as paying for a home renovation. Compared to a second mortgage, a HELOC is more flexible. This can be advantageous for people who need extra cash every now and then in the near future. They can repay what they use in the HELOC’s credit limit and are only charged interest for the amount they borrow. Flexibility is why a lot of people choose to get a HELOC over a second mortgage.

Uses for A Home Equity Loan

A second mortgage and a HELOC are both home equity loans that can give temporary financial relief to homeowners when they need cash that cannot be covered by savings alone. Instead of applying for a regular loan or using a credit card that comes with sky-high interest, a home equity loan is friendlier for your pocket and oftentimes easier and faster to process. Funds from a HELOC or a second mortgage can be used to pay for school, fund home renovations, jumpstart a business, or pursue a life-long dream.

Borrow from Your Home Equity in 2021

Almost nothing has changed when it comes to borrowing from your home equity. With Mortgage Central Canada, you can start the home equity loan application process from the comfort of your own. If you’re a homeowner and have the requirements in place, processing can be as fast as a single day! Contact us today!

 

What You Need to Know About Getting a Home Equity Loan

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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.

 

Use Your Home Equity as Part of Your Retirement Planning

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Do you know that a lot of Canadian seniors feel that they cannot rely on just their pension after their retirement? As many as 8 out of 10 surveyed seniors feel that pension plans alone are not enough for them to have a comfortable retirement and are keen to find more ways of making sure that they can have better finances during retirement. A lot of the respondents are homeowners who are open to the idea of using their home equity as part of retirement planning but are not willing to sell their current home to downsize and are not planning to let go of their current home for any reason.

If you are one of the Canadians who are seeking ways to use your home equity as part of your retirement planning, then you are in luck today, as there are several ways for you to achieve that while still keeping your home. If you are not planning to sell, know that your options go beyond just getting a reverse mortgage. Even in retirement, you can take out a HELOC or a second mortgage more so if you are planning to use your home equity to help generate post-retirement income such as in the case of planning to purchase a rental property or choosing to invest in another property.

Selling Is Not Your Only Option

A lot of seniors feel pressured that they are expected to let go of their homes and simply ‘downsize’. Some people may not be willing to do this because they want their family to still have the original home for years to come. Some may want to stay in the same home because they have an emotional attachment to it. No matter what your reasons are for not selling your home to access your home equity, all are valid and there are workarounds for you to enjoy the fruits of your labour whilst keeping your home. Aside from a reverse mortgage, you can opt to get a HELOC or get a second mortgage even after retirement.

The common misconception is that a person needs to be employed to apply for a home equity loan, but the main requirement is to simply have home equity. With this said, if you qualify for a home equity loan or a HELOC after retirement or near retirement, be aware that you still have to pay the loan in the future to avoid losing your home. This can be addressed with smart financial planning and only using the funds from your home equity loan as a supplement or a possible emergency fund – to be used only when necessary or when using it can pay off in the future such as in the case of investing.

Are you near retirement or already in retirement and need assistance with tapping your home equity in 2021? Contact us today and we will be happy to answer your questions regarding this and any other concerns that you may have.

 

When Is the Right Time to Use Your Home Equity?

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The world economy is not yet in a good state and probably will not be back to normal for at least a few months or longer. Even economically strong countries like the United States and Canada are affected because of the crippling effects of the pandemic and other global issues. What does this mean and what can be done to alleviate this issue? One way to help the economy recover is for households to have more purchasing power so that they can use the money to help themselves and channel that money back into the economy. This is easier said than done since a lot of people have lost their source of income and many have still not yet recovered. So, where will the money come from?

Use Your Home Equity Now

A big part of the Canadian population are homeowners. Meaning, that a lot of people have home equity. Home equity is a financial asset that can be used as a source of funding or emergency funds. How can people access their home equity then?

Liquidating home equity is usually done by selling a home but that may not be easy to do now because of recent restrictions that were enacted in Canada to help control the housing boom as well as property prices. Because of this, there are a lot of mandates to navigate, requirements to meet, fees to pay, and needing to have at least a good credit score the qualify for certain things. For people who own home equity, refinancing their mortgage or getting a second mortgage might be an easier way to access their home equity through a home equity loan as opposed to selling their property.

Why Use Your Home Equity Now?

There is a lot of untapped value in terms of residential properties in Canada. The estimated value owned by homeowners sitting in property and houses are in the billions if not trillions of dollars. If a certain percentage of homeowners decide to tap their home equity, that will be money that can be re-injected back into the economy to restart businesses and help things move along as people are still reeling from the economic effects of the pandemic.

There is talk that using home equity could be a bit difficult or challenging for some people, but the truth is that some lenders have come up with less strict requirements these days. One thing to watch out for, though, would be the possibility of shifting policies and other regulations that the government may come up with in response to today’s trying times.

Does it Make Sense to Apply for a Home Equity Loan Now?

Interest rates remain at a historical low which means that the current terms are a lot friendlier for homeowners who might want to get a home equity loan such as A HELOC. With today’s interest rates of only around 4%, it means that someone will only need to pay around $33 in monthly interest if they owe about $10,000 for a HELOC. This figure will slightly vary based on specific home equity loans but gives one an idea of what to expect in terms of paying interest. This is a small amount considering the financial benefits of having an extra $10,000 to use for important matters.

If you’re thinking of using your home equity in 2022, do not hesitate to contact us whether you might be planning to refinance your mortgage or wanting to get a home equity loan. At Mortgage Central Canada, our offices are open to answer your questions and meet your needs. Contact us today.

Is It Time to Leverage Your Home Equity?

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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!

4 Fast Tricks to Build Home Equity

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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!

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!

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!