Get a HELOC in Canada by Following These 5 Steps

You may be planning to get HELOC to pay for school, finance a home renovation project, or just want access to your home equity for emergencies and the like. For a lot of homeowners, a HELOC is a good borrowing option with relatively low interest as compared to other types of loans. Having a low-interest rate is possible for a HELOC because the money you borrow is secured by the home equity you’ve built up in your home.

Do you know that close to half a million Canadian homeowners have a HELOC? There is no doubt that getting a HELOC is becoming increasingly popular for Canadians. If you want to know how you can get a HELOC in Canada, then read the following steps below.

Know Your Purpose for Getting a HELOC

No matter how we look at it, a HELOC is still a loan that uses your home equity as collateral. This means that not paying it back can result in you losing your home. Because of this, it is very important to truly have a reason for getting a HELOC. Once you have a reason in mind, you can better assess if the fees and time you’ll spend on getting a HELOC will be worth it.

Understand How HELOC Fees Work

Getting a HELOC comes with fees. This may include administrative costs, appraisal fees, legal costs, inactivity fees, title search, and discharge fees. You need to know when these fees can be charged to you and if there are ways to reduce the cost. By understanding HELOC fees, you won’t be caught out in the cold when your bill comes. Alternatively, you can get the help of a mortgage professional who specializes in HELOCs to make sure that you truly understand the terms for your HELOC.

Know the Minimum Home Equity Requirement to Apply for a HELOC

As much as it is great to know that a HELOC charges only a minimal amount for interest once you qualify for it, you also need to know about the minimum qualifications to make sure that you can qualify. Most lenders have a specific minimum home equity requirement while some need additional data such as proof of verifiable income and good credit score from the borrower. You’ll need to prepare these data before applying for a HELOC.

Learn More About What is a HELOC and Associated Rates

You need to understand how a HELOC works as well as the expected fees and interest you’ll have to pay. This way, you’ll be better equipped to understand what you’ll be getting yourself into and can hold your own when discussing payment and other terms.

Find the Right Lender

Different lenders have different terms for approving a HELOC application. You need to find a lender with favourable terms and willing to work with you so that you can be in a better position to pay your debt in the future. This can be very challenging but not impossible especially with the help of trusted mortgage professionals.

Do you need help applying for a HELOC in Canada? Do not hesitate to contact us at Homebase Mortgages. Our mortgage professionals will be happy to talk to you soon!

 

Important Things You Need to Know About HELOCs and Second Mortgages

Home equity loans and home equity lines of credit are hot mortgage news topics recently because of changes with mortgage rules and interest rates. There is also quite a lot of misunderstanding from readers thinking that HELOCs and home equity loans are one and the same. In this write-up, we’ll be delving more into HELOCs and differentiate them from second mortgages.

A HELOC or A Second Mortgage is a Line of Credit That is Secured by the Value of Your Home Equity

Second mortgages and HELOCs are both loans that use the equity of your home as collateral; however, while a second mortgage is dispensed as a lump sum, a HELOC is given as a loan limit from which the borrower can use as little or as much of for a predetermined period of time. Because of this, the required monthly payment for HELOCs may differ from month to month unlike with second mortgage with which the required payments are oftentimes fixed rate.

You Can Lose Your Property if You Miss Payments

Because second mortgages and HELOCs are home equity loans, inability to pay your debt can mean losing your home according to the terms you agreed with. A lot of people can forget this crucial detail so be sure that you fully understand the loan terms you’ll sign for. Remember that a secured loan means that if you leave it unpaid, the lender can take the security.

Second Mortgages and HELOCs Are Not Without Pitfalls

Home prices are rising up and this equated with a lot of people becoming rich on paper because their home equity has gone up faster than anticipated. However, just because you can tap into your home equity does not mean that you should max it out. It is still best to borrow an amount that you’re sure you can pay to avoid repayment issues later. Note that the bigger the debt, the bigger the interest rate is as well.

Home Renovations Remain a Favorite

Do you know that HELOCs were originally meant to help homeowners finance home renovations that can, in turn, increase the value of their property? Though an increasing number of borrowers use HELOCs for something else, a lot still consider getting a HELOC to fund home renovations. The same goes for second mortgages, more so if the planed home renovation is meant to be an extensive one.

Second Mortgages and HELOCs Also Require Financial Planning

Even though you are doing okay now in terms of cash flow, things can change drastically in a matter of months. With this said, it is important to know possible changes in the interest and payments that the lender may initiate before you even sign for your home equity loan. Understand that although second mortgages and HELOCs are easier to apply for, especially if borrowing from private lenders, they are still loans and have to be paid on time according to the terms you agreed with.

Are you worried that you may not be able to handle getting a second mortgage or getting a HELOC? Contact us today and we’ll discuss with you what home equity loan option may be best for your unique circumstances.

 

 

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The Differences Between Home Equity Loans in Canada and HELOCs

Home Equity Loans and HELOCs allow you to use your home’s equity as collateral when borrowing money. The borrowed money from a HELOC or a Home Equity Loan can be used to pay for college education, buying a new property, or used for home renovations and repairs. But is this all? Before borrowing any sum of money using your home’s equity, it is best to understand how specific loans work to protect yourself by understanding the disadvantages and advantages of these loans.

How do Home Equity Loans and HELOCs Work?

HELOCs and Home Equity Loans are both secured loans. You use your property’s equity as collateral for the lender to hold on to as they lend you money. Failing to pay the loan allows the bank or lender to claim your property.

For Home Equity Loans, you may borrow as much as 80% of your equity in one go. This loan usually gets a low interest rate and is affordable for most people.

For a Home Equity Line of Credit or a HELOC, you will be given a line of credit that is secured by the value of your equity. The ceiling amount for the HELOC is computed based on your home equity. This is the amount that is made available for you by the lender. You can borrow from this limited credit line in times you need cash and can pay according to set terms.

Repaying a Home Equity Loan and a HELOC

HELOCs usually come with repayment terms that range from 5 to 25 years. The amount borrowed should be paid after that term either as a lump payment or installment basis. During the term, the borrower can be charged interest on the borrowed amount and required to pay the said interest.

Repayment for a Home Equity Loan is usually a fixed amount per month or can also be variable depending on the agreed upon terms between the borrower and the lender.

Pros and Cons of HELOCs and Home Equity Loans

A huge advantage is the fact that both Home Equity Loans and HELOCs allow you to access a huge amount of money without having to sell your home. This gives you the flexibility to use your money as you need it. A HELOC will give you the freedom to use only an amount that you need for a given time, making it a good option if you have a few scattered recurring expenses here and there such as expensive medical bills and tuition fees. A Home Equity Loan, also called a Second Mortgage, is a great option for huge expenses such as a complete home renovation or buying another property.

A disadvantage that can’t be ignored is the fact that you can lose your home if you fail to pay your HELOC or Home Equity Loan. You really need to make sure that your financial situation isn’t stressed enough at time current time to afford repayment in the future.

Make sure that you’ve got help from mortgage professionals who will do their best to get favourable terms from your lender. Remember that you have to be smart and truly assess your financial situation before risking borrowing a home loan.

Are you ready to get a Home Equity Loan? How about getting a HELOC? Contact us so we can discuss which one will fit your needs best.

 

Make the Most Out of a HELOC

Getting a HELOC can either be a smart financial decision or a cause for trouble. A lot of people are worried about applying for a HELOC despite needing one because they worry about not being able to pay or getting tempted to max out the HELOC limit and plunging deeper into debt. These are valid concerns as recent statistics show that 40% of Canadians with a HELOC do not make regular payments and about 25% only pay the interest for their HELOC. So, how can one make the most out of a HELOC?

What is a HELOC?

Far from being easy money, a HELOC should be perceived the same way as any other loan, noting that it is a financial obligation with one’s home equity as the collateral. A HELOC is a home equity loan with a set limit and with revolving credit. This means that if you apply for a HELOC, you will be given access to a certain percentage of the value of your home equity from which you can withdraw or borrow any amount that does not exceed the set limit. It is a revolving line of credit because you are allowed to reborrow any amount within the limit if you’ve been making repayments. The payment terms for HELOCs are very forgiving with most lenders allowing interest-only payments as the minimum.

How Popular is a HELOC?

The number of Canadians who’ve applied and got approved for a HELOC has been steadily growing through the years. The total outstanding HELOC debt in Canada between 2000 and 2016 rose from just $35 billion to $211 billion with about 3 million HELOCs at present time averaging at around $70,000. With this said, there is no doubt that HELOCs are indeed one of the most popular home equity loan products more so that it allows the borrower to tap as much as 80% of the borrower’s home equity.

 

What a HELOC Can Do for You

If a HELOC is used wisely, it can help change your life and significantly improve your finances. You can use it to pay for renovations to drive up the value of your home (getting you more home equity), help you consolidate debt so you can finally work towards getting out of debt, invest in yourself through further education, use it to purchase a second home, or even allow you to save a lot of money on interest if used to pay off high-interest credit cards.

Money from a HELOC is immediately available as soon as approved. Think of it as a sort of ATM with your home as the bank although you have to be careful not to borrow more than you can pay off because you’ll risk losing your home. It will offer you convenience and a viable way to effectively manage your finances but you have to take care that you don’t go overboard and abuse it for unnecessary expenses.

Are you worried about getting a HELOC in 2019? Talk to us and we’ll be more than happy to answer your HELOC questions! Contact us and find out why a HELOC is one of the top ways to use your home equity in Canada!

Should You be Worried About Getting a HELOC in 2019?

Home Equity Lines of Credit are as popular as ever, but some homeowners may think that they may not be able to get a HELOC in 2019 in light of recent changes and reports regarding HELOCs.

The Issue with Repayment

Research says that about 25% of those with HELOCs only manage to pay the interest for their loan most months. With the average debt at $70,000, borrowers’ ability to pay is now a bigger consideration in getting a HELOC more than ever.

Policy makers and regulators initiated some changes along with increased interest rates to address issues such as increasing debt and taming the increasing residential real estate prices.

Research on plans to pay off loans are optimistic, as shown in the Financial Consumer Agency of Canada’s data. FCAC’s Commissioner Lucie Tedesco warns that there is an increasing need for Canadians to realise that irresponsible use of HELOCs can have profound effects on their finances.

Only about 60% of the 25% surveyed by FCAC who were only paying their HELOCs’ interest rates share that they plan to pay off their loans in the next 5 years, a worrying number considering that the average HELOC debt for Canadians is at $70,000.

Tighter Regulations?

Moody’s Investors Service senior analyst and vice-president Jason Mercer says that there is a concern about higher debt-servicing costs caused by rising interest rates. Interest rates are continually rising because a lot of those who are in debt manage to pay only their interest. Mercer adds that since consumers are barely making regular payments, they will likely have a bigger challenge paying higher monthly payments unless they begin paying more of their HELOC debt.

The concerns over the future of HELOCs is shared by other market watchdogs. Bank of Canada Governor Stephen Poloz shared in December that how Canadians use their HELOCs is part of the many concerns keeping him up at night.

HELOCs were initially marketed by banks as a way to easily get funds for home renovations and other similar financial needs, therefore a significant number of Canadians chose to apply for it, changing the policies on HELOC now can affect a lot of people; many of whom are not ready for higher required monthly payments.

What Can Happen This Year?

Ratespy.com founder Rob McLister says that policymakers are anxious to pull the reins on HELOCs now to avoid bigger issues down the road. He adds that it is only a matter of time before HELOCs get new restrictions since both the Bank of Canada and FCAC began looking into it. He says that policymakers should remember that HELOCs are often used by people as a financial fall-back and that trying to solve debt by over-regulation is like trying to regulate heart disease by telling people to not eat French fries. Things will only get better when people take more personal responsibility

It looks like it will be more challenging to qualify for a HELOC with a bank once changes are rolled in this year. If you need to get a HELOC now, do not hesitate to contact us and we’ll try our best to assist you use your home equity.

A Primer on Getting a Home Equity Line of Credit

A HELOC, or a home equity line of credit, is a type of revolving loan that is secured against the value of your home. You may borrow and reborrow funds long as it is within your credit limit and only pay it back in full when you reach the repayment period.

Types of HELOC

Home equity lines of credit come in 2 forms, the common one is as a stand-alone debt and the other is combined with mortgage, though many may not be aware of this.

HELOCs that are combined with mortgages are typically only offered by huge financial institutions under the term “readvanceable mortgage”. We will focus on a HELOC as a stand-alone debt product in this writeup as that is the type of HELOC that is offered by private mortgage lenders and other private lenders; hence, also easier to qualify for as opposed to debt products offered by banks and other huge financial institutions.

HELOC as a Stand-Alone Debt Product

A home equity line of credit that is backed by your home equity and not related to your mortgage is what most of our clients qualify for. With this type of HELOC, you can gain access to as much as 65% of your house’s market value and you’ll be in better control of payments.

Home Equity Loan VS Home Equity Line of Credit

A HELOC gives you access to a predetermined amount for a defined length of time whereas a home equity loan is given as a lump sum. Interest is paid for the whole amount for a home equity loan; on the other hand, you only pay interest for the exact amount you used with a HELOC.

Qualifying for a HELOC

Qualifying for a home equity loan from private lenders is a lot easier than qualifying for a HELOC from banks and other huge financial institutions. Typically, you’ll need the following to qualify for a HELOC:

  • Your financial history records
  • Proof of employment or income
  • An acceptable credit score
  • A reasonable amount of debt for your income
  • Other documents or proof that you can pay future debt
  • Possibly help from a lawyer

When to Get a HELOC

Ideally speaking , tapping your home equity by using a HELOC should only be used for funding projects that improve your home and increase its value, or for funding self improvement measures such as in the case if paying for advanced education.

Remember that a HELOC is still a type of loan and backed by your home. Using a HELOC for frivolous things could spell financial disaster if you’re not careful. To make sure that you’re getting a home equity line of credit for the right reasons, be sure to talk to mortgage professionals who can walk you through the process of getting a HELOC as well as assess your financial compatibility for this type of home loan. It pays to arm yourself with knowledge and contact mortgage professionals with a long track record to help you with understanding HELOCs and processing your HELOC application. Contact us as soon as possible if you have questions regarding getting a HELOC!

 

 

 

Household Lending Tightened Due to New Mortgage Rules

New mortgage rules made household lending a bit trickier for the first quarter of 2018, shared Bank of Canada. This development regarding the OSFI mortgage stress test that started in January led to more Canadians going to loan sharks and to private lenders because they can’t qualify for a bank mortgage.

Survey Results

A survey by the Bank of Canada’s financial institutions showed that the tighter household lending conditions for the first quarter of 2018 is linked to the new mortgage rules. The survey usually just report on business loans but have recently included household lending.

The Bank of Canada added that the tightening in mortgage lending resulted from changes to Guideline B-20 (about the underwriting standards) which primarily affected non-price conditions for HELOCs (home equity lines of credit) and low-ratio mortgages. The tightening also affected price conditions for mortgages because the spreads charged to borrowers increased together with mortgage rates.

These developments may be a preview of what other changes will take place. Canada’s biggest lenders are saying that it is still too early to tell what other impacts are in store, a sentiment shared by Dave McKay, president and chief executive officer of the Royal Bank of Canada.

HELOC on the Rise?

The Bank of Canada’s survey shared that the demand for low-ratio mortgages and HELOCs experienced an increase during the survey period. It should be noted that the new B-20 rules regarding having a stress test for uninsured mortgages may also affect low-ratio mortgages because they fit the criteria for uninsured loans.

The survey also shared that there are increases and decreased in demand affected by regulatory changes that were reported by institutions. The figures could have been due to expectations of higher interest rates as well as borrowers having placed an application prior to the implementation of the B-20 changes. These are about the same findings reported in March in connection with the Bank of Canada’s rate-setting decision wherein people pushed to pull forward before the implementation of new mortgage guidelines and other related policies.

The BOC said that the survey respondents also expect that the current quarter will reflect a decreased demand for HELOCs and low-ratio mortgages. It noted that the demand for such tailed off after regulatory changes were introduced late 2016.

Business Lending Developments

The survey found that overall business lending conditions eased slightly during the surveyed period. This was driven by increasingly intense competition for corporate borrowers as the demand for business credit increased in the survey period.

The questions used for the business lending and the household lending portions of the survey reflect each other and the respondents were 18 financial institutions. They were asked about their lending practices, demand for credit, as well as changes noted from the prior quarter.

Not sure about how the developments shared will affect your existing mortgage or plan to apply for a new one? Contact us at Homebase Mortgages and our professional mortgage brokers would be happy to assist you with your mortgage concerns regarding the latest mortgage news.

 

5 Must Ask Questions Before You Apply for a HELOC

Applying for a HELOC is serious decision that needs careful consideration of several things. You can’t just apply for a HELOC with no battle plan in mind and no real purpose for applying for this type of home loan. Here are 5 questions you must make sure to ask before you apply for a HELOC.

Are you aware of what makes HELOC different to a home equity loan?

Both HELOC and a home equity loan allow you to tap your equity but you will be able to use more of your equity with a HELOC as compared to a home equity loan. A HELOC is also a revolving type of credit whilst a home equity loan is a one-time lump sum loan.

A HELOC would be a better option for you if you know that you will have multiple substantial expenses in the future. Another pro about getting a HELOC is that you will only pay interest on the amount that you’ve actually taken out.

Are you sure that you can pay it back?

Getting a HELOC can seem like a quick hack to get access to funds but remember that a HELOC is a secured loan with your home as the collateral. If you fail to pay credit cards the worst that can happen is a lawsuit but failing to pay back a HELOC means you and your entire family can go homeless. This is why it is so important to make sure that you get a HELOC with reasonable terms with the help of a mortgage broker who’s also thinking ahead for you.

Are you okay with variable interest rates?

A home equity line of credit has a variable interest rate that is usually tied to whatever the present economic condition is. You might have a very low interest rate now but who knows what will happen in the future? Economic changes can adjust your HELOC interest rate many times over. Are you prepared to handle this uncertainty?

Are you going to use your HELOC wisely?

Using your HELOC to consolidate high-interest debts is a smart decision but using it to finance vacations you can’t afford may lead to you losing your home for non-payment. This is why you must think long and hard and discuss applying for a HELOC with a mortgage professional so you won’t end up finding about important details when it is too late.

Are you thinking about financial flexibility?

Veering off slightly from the subject of using your HELOC wisely, you have to be sure that getting a HELOC is the right financial move for you because of huge risks involved as mentioned earlier. You have to be sure that you are applying for the right reasons such as having a need for the financial flexibility that a HELOC can give you and not just because you love the idea of having a huge-limit-revolving-credit-card. Instead of using a HELOC for purposes that generate more debt, why not use it for purposes that either save you money (like debt consolidation) or make money you money (like an equity-boosting home remodel). The financial flexibility possibilities are there, you just have to know how to use it for your best benefit.

Applying for a HELOC can be a lot of work. Allow our mortgage professionals to help you with the details until you get approved for this means of tapping your home equity.. Contact us right away!

What You Need to Know Before Applying for a Home Equity Line of Credit

Having the means to tap your home’s value is a great resource to have for when you’re suddenly faced with an emergency need for cash such as for an unforeseen illness, vehicle repairs, or home expenses that are not covered by insurance.

Who wouldn’t want access to a cash source that offers lower interest rates than a credit card and offers you flexibility with the amount you need, right? More so that applying for loan after loan can become very taxing.

This is where applying for a HELOC or a home equity loan comes in. You apply to get a line of credit based on your home’s equity and you can reuse and repay it a number of times. Sounds great? Then you better read the other facts about getting a home equity line of credit below!

It Resembles Using A Credit Card

A HELOC can be used for multiple expenses or repurchases, repaid, and used again; just like having a credit limit for credit cards. You only pay interest on the actual amount used and won’t be charged anything on the unused portion.

Unlike a credit card, though, a HELOC’s interest is much lower and that there are nearly no fees charged for getting a cash advance, even up to 100% of what you are allowed to borrow. This is a far cry from the 20% limit for credit cards. Note that a HELOC can only be used for usually  maximum of 10 years until you need to reapply for one.

It Will Give You Freedom to Spend But Don’t Abuse It

Though a HELOC gives you so much flexibility, understand that it can result to increased debt if used irresponsibly. This means that you shouldn’t use it for frivolous things such as having grand vacations, buying expensive gadgets, splurging on clothes, and similar things. Use it for when you are unemployed, need to spend for a wedding, got a huge medical expense, have to pay for tuition, got a significant business expense, need overdraft protection, or when faced with an emergency such as multiple big bills at the same time.

It Has a Highly Variable Interest Rate

A HELOC’s changing interest rate can work for you or against you. You’ll have lower payments to make when interest is low and the opposite is true if interest rates are high.

You can opt for a a hybrid HELOC that allows you to lock on a fixed interest rate but be sure that you won’t end up on the losing end if you choose this by having your lending professional assess if this will work for your specific needs and means. The locked interest rate should be reasonable enough for you not to have future repayment issues.

Still have questions about applying for a HELOC? Contact us so we can give you the answers you seek! We also help with home equity line of credit approval. Talk to our lending professionals today!

Utilizing a Home Equity Line of Credit to Increase the Value of Your Home

Do you know that you can increase your home’s value by tapping into your home equity with the use of a home equity line of credit? Most homeowners have a ton of renovating and remodeling projects they would like to tackle but are refraining from because of shortage of funds. The thing is, now is the perfect time to use mortgage to finance projects like these because mortgage rates are at record lows while home prices are at an all-time high. Let us walk you through ways you increase the value of your house by using your HELOC aka home equity line of credit or your home equity loan.

Unlock Equity in Your Home

If you’ve been paying mortgage for quite some time, then you have built up quite an equity in your home. This equity can be tapped by refinancing through a home equity loan or a HELOC. You can borrow as much as your 80% of your home’s value without the mortgage and use that money for a dream vacation, tuition, or your much awaited home renovation.

Note that home equity loan and a HELOC are not the same. A home equity loans allow you to borrow a one-time amount with a fixed interest rate that you can pay over a fixed period of time while a HELOC allows you to borrow funds up to a set limit and pay interest only on the amount you borrowed. A HELOC also allows you to borrow again as you pay just like a credit card but using your home equity.

Refinance and Remodel – Increase Your Home’s Value!

Most people remodel or renovate their homes to meet the changing needs of their family but you can totally do the same to increase the value of your property. If your home is outdated, doing this can make staying in your home more enjoyable for you as well as make it easier for you to sell at a later date.

By tackling home remodeling projects using your home equity, you will have the funds to pay for quality. Meaning you will have money to pay contractors to do things right and not try to DIY to save money. You will also be able to maximize your home’s potential and turn it into an investment that you can make money from when you sell in the future.

Apply for a Home Equity Loan and Get Approved!

If you’re planning to do a home renovation to update your home and make it better, we can help at Homebase Mortgages. Our mortgage brokers can connect you with private lenders and help you determine your best options. We will help you evaluate your current situation financially and assist you in finding the best lender to suit your lifestyle and financial needs. Contact us today or at your earliest convenience so we can set up a free consultation and help you with your mortgage application.