Sometimes it’s hard to figure out if now is the right time to tap the equity in your home; after all, you need food and shelter, but your home is the only thing you can really leverage to raise money. It’s important they think about what you’re going spend your money on, have a plan for using it wisely, and understand if this is really the right decision. Working with one of our Canada mortgage brokers can help you understand the benefits and the pitfalls of borrowing against your home. You’ll want to have your first mortgage payoff is much as possible, be free and clear of any liens, and have good credit before you try and take out another mortgage on your home.
What is a home equity loan?
A home equity loan allows you to trade the equity in your home (known as collateral) for money from a lender. This is a secured debt, so if you default you run the risk of losing your home. It’s very important to borrow only what you can afford and to be very careful about how quickly you repay. Since you’ll be relying on the equity in your home, you can get underwater if you borrow too much at a high interest rate and just can’t repay it fast enough.
How much equity do you have?
You’ll need to figure out just how much equity you hold in your home before you start thinking about taking out a second mortgage. Check your monthly statement to see how much you owe (principal + interest!) and subtract it from the most recently appraised value of your home. This way you’ll be able to figure out just how much you own of your home and how much equity you have available. You can borrow up to 80% of your available equity, but most won’t want to borrow this much.
How quickly can you repay?
Before you take out a second mortgage or home equity loan, you’re going to need to make sure that you can repay your mortgage fast. Working with one of our Canada mortgage brokers we’ll help you create a payment schedule that will help you save thousands of dollars – but we’ll also be there to help you find the cheapest lender with the best service too. The last thing you want to do is take out a high interest second mortgage with a low loan to value ratio; if you want to best, work with us.
Should you tap into your equity?
This isn’t a question we can help you with until we speak with you. Give us a call today or contact us on our site to set up a free consultation about your home equity loan. We’re here to help you answer any questions you may have, and we’ll work hard to help you figure out if now really is the right time for you to start tapping into the equity in your home.