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!