Your Choices for a Home Equity Loan in Toronto
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.
How Do Home Equity Loans Work?
Home equity loan or second mortgage allows you to treat the equity you have in your home for money. The sounds pretty straightforward, but it really is. You’ll be able to borrow up to 80% of their homes equity – but we don’t recommend doing that. Working with one of our Canada mortgage brokers we’ll help you understand your options, and here were going to explain both the benefits and disadvantages of this kind. From understanding the difference between fixed-rate mortgages and home equity lines of credit, you’ll learn the ins and outs of home equity loans work.
What is equity?
You’re going to first need to figure out how much equity you hold in your home. If you just got a first mortgage and only paid a 20% down payment, you only have 20% equity in your home (minus any interest from the first mortgage you took out).
You’re going to want to wait awhile before you start looking into a home equity loan if you’re in this boat. If you’d like to figure out how much equity you have, take the most recently appraised value of your home and subtract how much you owe your lenders or any liens on your house – et voila, you’ll know how much equity you have in your home.
What kinds of the home equity loans are there?
There are two main kinds of home equity loans that you can take out on your home. These fixed rate home equity loans, also known as second mortgages, and a home equity line of credit or HELOC. Each of these has its benefits and drawbacks, so you’ll want to be careful about which one you take out on your own home. One of our Canada mortgage brokers can help you find out which one is best for you.
What is a fixed-rate loan?
A fixed rate loan, or second mortgage, allows you to keep the same interest rate and terms over the life of your loan. These are the most desirable for borrowers because you don’t have to worry about your interest rate floating up and down with the prime – a big concern with HELOCs and variable rate mortgages. You’ll get this in one big lump sum that you use to pay off bills or complete a project.
What is a home equity line of credit?
A home equity line of credit is a kind of home equity loan that allows you to borrow against the interest on your home like a credit card; you can pay it off and borrow again as many times as you need over the life of your loan. This means you can open the line of credit and never use it until you need it – unlike a fixed rate loan or second mortgage.
Always borrow carefully
Before you borrow, speak to one of our Toronto home equity loan lenders. We’ll be able to help you figure out if this is the right way for you to go.
What Our Clients Say About Us
I had a difficult time getting a loan from the bank. Mortgage Central got me approved for a loan within 24 hours at a great rate.
Mortgage Central consolidated my credit card debt into something that was much more manageable, saving me money and giving me peace of mind..
Not only did Mortgage Central help me refinance my mortgage, which greatly reduced my mortgage payment, but they were very professional and pleasant to work with.
Just wanted to say thank you for everything you did for us regarding the refinance. It was a pleasure dealing with you. Everything from our end went so smoothly and we are extremely happy.
The Latest From Our Blog
