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.