10 Reasons Why Transferring Your Credit Card Debt to a Home Equity Loan Is A Great Idea

You may be curious why some people are converting their credit card debt to a home equity loan. Why would they do that? Are there any benefits? To answer these questions, we’ve compiled 10 reasons on why transferring your credit card debt to a home equity loan is a great idea. Read on and be enlightened about improving your finances and cleaning up numerous credit card loans!

More Manageable Minimum Payments

Home equity loans typically charge for the interest only for minimum payments, resulting in you having lower minimum payments and gives you breathing room when your finances are not in such good shape.

Beats Transferring to Another Credit Card

Some people transfer a credit card debt to another card with a lower interest rate and while that may work, that only shaves off a small percentage. If you’ll think of the transfer fee that comes with doing this, you may not be saving any interest at all.

Save on Interest Charges with Lower Interest Rates

Credit cards charge interest rates of 19% to 21% while home equity loans charge only a portion of that. Need we say more?

A Chance to Improve Your Credit Score

Because a home equity loan is a lot easier and faster to pay off than a credit card debt, it will help raise your credit score by lowering your credit burden. A tip is to keep your credit cards even after you’ve successfully transferred your debts as unused credit will help further improve your credit score.

Better Flexibility and Freedom

Because home equity loans are typically interest only, you have the option to pay for just the minimum or pay off more of your debt depending on the current state of your finances. This gives you so much more freedom and flexibility.

Better Than Going for a Personal Loan

Because they are backed by the equity of your home, home equity loans are a secured debt that is seen as a safer investment from the lender’s point of view, hence why it has a lower interest rate and offers you more flexible terms when it comes to your credit rating and income.

You’ll Like the Availability of Customized Reports

Providers of home equity loans often will give you free information on customized debt consolidation so that you’ll be going into this better informed. Who doesn’t like that?

Faster and Easier Debt Reduction

One of the primary benefits of converting your existing credit card debt to a home equity loan is that it allows you to reduce debt faster by having better interest rates that let you pay more of your loan instead of merely paying for interest. This means huge savings for you!

Simplicity for Less Stress in Life

Paying bills has been proven by studies to increase anxiety and stress levels. By having only one bill instead of numerous credit cards, you’ll save time, money, and prevent yourself from missing a payment – all leading to a simpler, less stressful life.

Quick and Easy Online Application

If you’re not yet aware that you can apply for a home equity loan from the comfort of your home, then we’re letting you know that’s possible now! What’s great is that doing this will only take minutes and you’ve got nothing to lose!

To learn more about getting a home equity loan in Canada, you can contact Homebase Mortgages or simply fill up the detailed online form so we can help you out.

Difference Between Home Equity Line of Credit and Home Equity Loan

Borrowing against the equity build up in your home’s mortgage is a great way to have access to funds you won’t otherwise have. When you need money for home improvement, a little renovation, or maybe to replace an expensive appliance, considering to get a HELOC or a home equity loan would be the smart thing to do rather than put everything on your credit card. The thing is, you need to be sure that you understand what is the difference between the two to ensure you’ll decide on the best option for your needs.

What then, is a Home Equity Loan?

Equity is the value between the difference of your property’s worth and what you still owe on it via mortgage. If you’ve been paying your mortgage on time, then you probably have already built a sizable equity.

To tap into that equity for paying off debt, going on vacation, paying for much needed improvements, or maybe paying for college, you have the option to go for either HELOC (home equity line of credit) or home equity loan. You might be thinking that they work the same way, being that they sound nearly the same, but they don’t. This is why understanding the difference between the two is crucial for you to make the best decision depending on your circumstances.

Introduction to Home Equity Loans

Technically speaking, there are two types of home equity loans (also called second mortgage) namely, the close-ended term loans and the much more forgiving lines of credit.

The possible value that you can borrow on a HELOC or a home equity loan depends on your property’s current value minus any current loans. Lenders will get the loan-to-loan value by adding your second and first mortgage together.

Your maximum borrowing limit will differ between a HELOC and a home equity loan. A home equity loan allows you to borrow up to 85% of your equity whereas a HELOC allows you to borrow up to 65%. There are other technicalities that can raise the amount you can borrow but that’s for another article.

Home Equity Loan VS. HELOC

A home equity loan or second mortgage gives you a lump sum cash out when approved by a lender. This means you cannot borrow more money until your loan is paid off. More so, it comes with scheduled payments with a fixed interest rate.

A HELOC works like a revolving line of credit in the sense that you can borrow up to a specified value by the lender. You can withdraw funds when needed, pay it off so you can use it again almost like a credit card; however, a HELOC has a variable interest rate while a credit card often has a fixed interest rate.

Why Choose a HELOC or a Home Equity Loan

Both the home equity loan and HELOC has lower interest rates compared to unsecured bank loans or credit card. It should be noted though, that the payments you have to make with a HELOC will vary because it has varying interest rates and that those rates will only apply to the amount you’ve withdrawn. In the case of a home equity loan, you’ll know what your monthly payments will be because it has a payment schedule plus charges a fixed interest rate on the total loan amount.

A home equity loan works like a regular mortgage in terms of payment while a HELOC works like a credit card. To best understand the subtle differences between the two so you can decide which one to choose, it would be better to opt to speak to a mortgage specialist in your area. Feel free to contact us at Homebase Mortgages if you’re in need of a mortgage professional in Toronto!

 

The Best DIY Projects to Increase Home Equity in 2016

With good homes becoming increasingly difficult to find when it is time to go for an upgrade, homeowners in sought-after areas often opt to stay in their current homes and simply add new features. The tricky thing here is making sure that you are not pricing yourself out of your existing equity because upgrades and renovations can become very pricey. What to do then? DIY home upgrades and do it smartly!

Opting to DIY smart upgrades will not only increase the value of your home, it will also make your stay a lot more enjoyable. Choose projects that will pay off in the end and will improve your quality of life. Simple fixes are easy to do on your own, won’t cost you too much, but make such a huge aesthetic difference that it can look and feel like you’ve got a brand-new place!

Flooring Upgrade

Flooring styles come and go. Carpet colours and tile patterns can easily make a space look old and dated, but the good thing is, they can also be easily replaced!

Simply putting on new flooring or refinishing your existing one (as in the case of timeless hardwood floors) can make your space brighter and cleaner-looking. More so, if you are planning to change your existing floor to hardwood ones, there are cheaper options that look and perform like hardwood but cost significantly less.

Kitchen Remodel

Kitchen remodels are notoriously expensive but if you go carefully on the appliances, flooring, and countertops, you can end up saving while still pulling off what you want. Go for changes that offer the most effect for the least dollar amount. Repainting cabinets is a lot less expensive than having them replaced.

Thinking of replacing your kitchen appliances? Go for stainless steel ones! Not only are they timeless but they are also perceived to cost more, thereby can help you sell your home in the future if you wanted to.

A New Bath

Another bathroom is always a welcome addition to a home. Some people just choose to redo an existing bath and that is okay if budget is a real problem but then, the value that a new bath will add will far exceed the cost of adding one to begin with.

Change Fixtures

Simply changing faucets, door knobs, cabinet pulls, and your shower head can really make a huge difference. Each design era has certain characteristics that make a home seem outdated so changing these superficial details can really shave off years from your home’s age. Aesthetics-wise, changing wall sconces, room lighting, ceiling fans, and rugs can do more for your home than a complete renovation.

Remember that smart home remodeling is all about choosing upgrades and updates that offer more benefits than cost. Everyone can remodel on a budget, but not everyone can make changes that are truly worthwhile.

Need more home ownership tips? Then be sure to bookmark our site. We’re not just your average Toronto mortgage brokers, we take pride in helping out people like you purchase and keep your homes. In case you need some extra funds to push through with your home upgrades, don’t hesitate to contact us!

Use Home Equity to Invest in Income Property

Every home is not ‘just’ a home, it is an investment more than anything else. Being smart when purchasing a home means that you are tapping into better ways to secure your financial future, and one of those ways is using your home equity to invest in income property.

What is an Income Property?

Any property that you purchase and develop for the purpose of earning income or generating profit through price appreciation, leasing, or renting is called an income property. This can apply to both residential and commercial property. Basically, a residential income property can also be called a non-owner occupied property.

One thing to remember though is that the mortgage for a non-owner occupied property usually sports a higher interest rate as compared to a property that the owner lives on because residential income properties are commonly viewed by lenders as carrying a higher risk.

What is Home Equity?

If you own your home, then your home ownership has built up some added value that’s referred to as home equity. It is the current market value of your home minus any mortgage payments that you still have to pay.

Home equity is the value that has been built up over time as you pay off your mortgage and the market value of your home appreciates, either because of some changes in current real estate prices or because of upgrades.

Investing on Income Property Using Your Home Equity

Your home equity is money that you can use for other purposes. One of the best ways to use a home equity loan is to make use of it to invest on income property, how so? Cash flow is the number one barrier as to why people often cannot buy a vacation home or another property that they can rent out to tenants. With current low interest rates and refinancing options that our team of Toronto mortgage brokers can help you with, you can make owning a second home or investing in income property a reality.

You can get a home equity loan by borrowing against your own equity. This will allow you to have a considerable amount that you can use as a down payment for an income property. Any income that you can get from leasing that property can cover that property’s mortgage payment, essentially having a property that pays for itself!

If done properly, especially with the help of mortgage professionals, you can purchase an income property with very low interest rates. It is a smart move because again, it will be the tenants who will be paying for your second home until the time you get full ownership. Once that happens, you can either sell the property for profit (great location means your property’s value will appreciate over time) or choose to continue renting it out as a source of passive income that you can enjoy for years to come!

Not a fan of purchasing a second home or an income property? Then use your home equity to further increase your property’s value by using it for upgrades! Contact us to find out more about how you can use your current home equity to finance your future investments.

Best Ways to Use a Home Equity Loan

There’s no stopping anyone from getting a home equity loan these days. After all, a home equity loan is money to spend on whatever they wish to use it for. Although this is true, some reasons to obtain a home equity loan is a lot smarter and more financially rewarding than others. Below is a list of the best ways and reasons to obtain a home equity loan straight from your expert team of Toronto mortgage brokers!

For Debt Consolidation

Debt has a habit of piling up and becoming a major source of stress. The usual way of someone falling harder into debt is by buying more than needed and racking up credit card debt that eventually gets harder to pay off because of often high interest rates (which result to even higher debts!).

By using your home equity loan to pay off your debts, you’ll end up having to pay just one payment per month with manageable interest rates. The new ‘debt’ with a more affordable rate can mean less stress for you and possibly will be easier to pay off in full.

For Home Renovations

Renovating your home can present you with a lot of advantages. First off, it allows you to upgrade and/or redesign some areas of your home based on your changing needs and standards. This also adds resell value to your home more so if the upgrades are something that a lot of possible future owners will enjoy. This means that going for a home equity loan to renovate your home can actually make you some profit when it’s time to sell; but only if you do so correctly.

For Financing Education

Post-secondary education can get very expensive. More and more parents and/or students are going into debt just to be able to afford paying for residential fees, books, tuition, and other expenses associated with attending higher education. Availing of a home equity loan enables you to have a monthly payment plan that’s convenient for your means while being able to cover yours or your child’s education expenses.

Another advantage of using the funds you can get from your home equity loan to finance education is you get to pay even before graduating so there will be less debt to pay by the time you or your child graduates. Attending college or grad school opens more door and more ability to pay.

Interested in Getting a Home Equity Loan?

If the reasons above have convinced you to get a home equity loan, then be sure to contact your trusty Toronto mortgage brokers soon so that we can help you process your loan faster. If you already own your home, then we’ve got much to talk about that can speed up the process! Our lending specialists can recommend a great loan structure for your needs and will guide you on the best course of action to take. At Homebase Mortgages, we are here to help with any questions you may have regarding home equity loans.

Home Equity Loans for Small Businesses

Expanding or starting a small business means that you need to have the capital to do so, but not everyone have enough savings to cover the expenses and funds for that. If you own your home, then there is a chance that you can use a home equity loan to finance your business. Find out more about this below.

Why Use a Home Equity Loan

Home equity loans are ideal for funding small businesses because it offers the lowest interest rates, are very straightforward, and have flexible payment schemes. In fact, in Canada, investing, whether in the form of stocks or a small business is one of the main uses of home equity loans.

What are Home Equity Loans?

Home equity loans are just loans that are backed by residential equity. You can also look at it as a form of second mortgage either by your bank or by private lenders. Usually, a home equity loan is interest-only and short-lived, which means it only lasts 6 to 12 months because they are supposed to transition into a refinanced mortgage or something similar at the soonest possible time.

Home equity loans are available to applicants with poor credit history and can be as little as $25,000 to as high as $2 million. The loan’s value can be as much as 80% of your home’s value and interest rates are quite manageable, starting at 5.95%

Home Equity Loans for Your Small Business

A home equity loan is great for a small business primarily because of the short-term nature of the loan, ranging from just 6 months to a full year. It also allows you to adjust your payments according to your situation and needs because it is interest only. It also offers lower interest rates compared to unsecured debt.

A home equity loan is different from a typical mortgage because it does not require income qualification. If you are a small business owner, procuring a mortgage might prove to be difficult because it is common practice for owners of small businesses to write off as much of their income to lower their tax. Although that saves you (or any other small business owner) some money, it can affect your ability to obtain a mortgage even with good income and credit. Needless to say, a home equity loan would be great for small business owners and those who are self-employed as the loan is based on your existing equity and not what income is reflected on your tax return.

Getting a Home Equity Loan

Home equity loans are designed for homeowners with the main criteria by banks and private lender being your Loan-to-Value ratio or LTV. The home equity loan you want to avail of plus the value of your existing mortgage cannot exceed 80% of your home’s value (this is for security).

Applying for a home equity loan is actually quite easy and quick. In fact, you can do it right in the comfort of your own home! Contact us at Homebase Mortgages and experience what it is like to have the best Toronto mortgage brokers at your side!

Is a Home Equity Loan Risky?

home equity loansThere are many kinds of risky loans that you can take out against your home; like with everything else in life, the risk is only there when you don’t know what you’re doing. You’re going to need to understand how equity works, how much you should borrow versus how much you can borrow, and you need to know if it’s the right lending choice for you. Here we’re going to go over everything you need to know about home equity, and we’ll help you decide if it’s the right choice for your financial future. Don’t get a home equity loan without consulting a mortgage broker first!

What is Equity Anyway?

The most important thing to know about HEL loans is the equity part. Equity is the true value of your home minus any mortgages or liens you have against it. So if you have a $200,000 home and you have $100,000 in mortgages against it, you only have $100,000 in equity. You may borrow up to 70% of your true equity stake in your home, but lenders rarely give this much to anyone regardless of their credit. You’re going to want to be careful about borrowing against your home. While the money may be easy to get, it can be hard to repay. This is why you need a Toronto mortgage broker who can help you get the right one for you.

How do HEL loans work?

HEL, or home equity loans, work by using the equity you have in your home has collateral. You’ll be able to get the money you need much faster than you would with a second mortgage, but you’re using your home to get the money instead of your credit. Home equity loans sound a bit scarier than a traditional mortgage, but it’s all pretty much the same thing. You’re going to need a mortgage broker to get the help you need to get a good loan.

Everything starts with the application! You’ll need to have all of your ducks a row before you apply, and a mortgage broker is going to be able to help you do that. If you don’t have enough credit to apply or not enough money in the bank to cover your closing costs, they’ll advise you as to how much money you’re going to need. They can recommend credit repair procedures that you can do and they’ll help you know what kind of loan you can expect to get.

Do You Need Good Credit for a HEL?

You don’t necessarily need great credit for this kind of loan, but you will want decent credit to get a good interest rate. Even private lenders that accept poor credit will look to it to give you an interest rate. With interest rates in Canada at all-time lows, you’re going to want to apply as soon as possible. 

Visit our HELOC page here to learn more: http://www.homebasemortgages.ca/home-equity-loans/

What do Lenders Look for with Home Equity Loan Applications?

If you’re looking for any kind of mortgage, there are a few set things that lenders will always look for. Your credit, your housing expense ratio, how much debt you have, all of these things and more will tell a lender what they need to know about you. You will have to have enough disposable income to apply to buy a home, but the more liquid you are the better. If you can show them that you already have 20% of your down payment ready to go, or if you’re trying to get pre-approved before you apply, your chances will be much better.

What’s Your Housing Expense Ratio?

How much of your monthly income is going towards your new mortgage? Your lender is going to look at how much money you make and project how much your monthly home equity loan payment will be, along with home owner’s insurance and even private mortgage insurance if you have to go that route. If this ends up being in excess of 28% of your gross income, you’ll be denied. The numbers have to make sense or they just can’t lend to you. So if you make $5,000 a month, and your mortgage payment is going to be $2,500 a month, this is 50% of your gross income; this means you’ll be denied. Make the numbers work, know how much things cost before you apply.

What’s Your Debt to Income Ratio?

Take the amount you earn every month and multiply it by 36% or .36 This will give you a guideline. Again, if you’re making $5,000 a month and $2,500 a month is going towards your debt, you’ll be well over the 36% guideline. You can only have so much debt, and you’ll need to keep this number below INCLUDING your new mortgage. You just can’t go over this number, most lenders don’t like it and if you want a home equity loan you’re going to have to be able to keep this number low.

Are You Steadily Employed?

You have to have some kind of income coming in if you want to get this kind of loan. If you can’t prove that you can make the payments you might need a co-signer or a co-applicant. While home equity loans do run off the equity that you hold in your home, you’ll still need to be able to show that you can make your monthly payments.

What Does Your Credit Report Look Like?

You need to know where you’re at with your credit – if you have bad credit you will have a hard time getting a home equity loan. Don’t fall into the trap that you have equity so you won’t have to worry about credit as much; credit is a determining factor when it comes to deciding your terms and interest rate. Get your credit as high as you can before you apply for any kind of loan, even an equity based one.

Apply for a home equity loan today! https://www.homebasemortgages.ca/apply/

Can You Afford a Canadian Home Equity Loan?

home equity loanMany will go over the benefits of a Canadian home equity loan, but few will actually talk about their affordability and what situations they’re right for. These types of loans are not for people who just need a small loan to get through the month… they’re expensive but effective in the right situation. Here we’re going to talk about how they work, what you can do with them and if they’re the right kind of financing for you. To assess your situation, speak with one of our Toronto mortgage brokers and see what we can do for you.

What is a Home Equity Loan?

The first thing you need to know about a home equity loan is what a home equity loan is! Equity is what you actually own in your home. So if you have $1,000,000 home and you only owe $200,000 left on it, you hold 80% equity in your house. This means you’re going to be able to borrow up to 80% of this when you borrow on a home equity loan.

Home equity loans are often mixed up with home equity lines of credit. The difference between a home equity line of credit is that with a line of credit you can borrow again and again. A home equity loan can be a lump sum that you get, or you can convert it to a line of credit. To know which one is right for you, talk to one of our Toronto mortgage brokers. That way you’ll be able to get the best financing for your situation without worrying about getting the wrong one.

What are the Benefits of a Home Equity Loan?

  • Credit: If you have good or bad credit, it won’t matter. As long as you have equity you’re going to be able to get this kind of loan. You will have a varying interest rate depending on what kind of credit you have though.
  • Speed: You’ll be able to get the money you need much faster than you would if you were taking out a second mortgage on your home.
  • Savings: The savings, depending on the terms negotiated by your mortgage broker, can be much more favourable than those you’d face with a home equity line of credit. It’s important to talk with a mortgage broker before you choose which one is right for you.

Can You Afford a Home Equity Loan?

Figuring out how much you can afford should be done before you sign on for financing. We can help you with something known as a “good faith estimate” so you’ll know hat your repayment terms will be, how much and how long you’ll have to repay your loan for. A home equity loan can be taken out pieces at a time. If you need $3,000 here, $5,000 months later you may be able to depending on how your loan is structured. Let us help you find out if a home equity loan is right for you!

What You Need to Know About Home Equity Loans

If you need a steady flow of money but don’t want to go through the hassle of another mortgage, home equity loans is something that needs serious consideration. The costs of the loan can outweigh the benefits, so you’ll want to have a Toronto mortgage broker handy to help you understand the terms of your agreement. Most home equity loans will let you take out up to 75% of your home’s value.

What is a Home Equity Loan?

Most home equity loans will let you take out up to 75% of your home’s value. If your home is worth $100,000 and you can borrow 75% of the value, which means you can borrow up to $75,000. But if you already have a $10,000 mortgage (you’ve paid most of it off!) you’ll only be able to borrow $65,000. That’s the max; you may only be able to borrow only half to three fourths of that. Once you’ve found a good rate with your mortgage broker, you’ll have a line of credit that you can live with.

One thing to know about home equity loans are that depending on who you go through your credit rating may not matter as much with the loan amount. You may have a higher interest rate, but you’re using your home as collateral.

What Should You Ask When Shopping for a Home Equity Loan?

You need to ask if there are penalties associated with the home equity loan. Since this is one of the more creative loans out there for you to use, there may be tricky rules and terminology used in the contracts. Make sure you have a mortgage broker helping you shop for your home equity loan. Ask them if there is a prepayment penalty, and if you can pay it off within ten years or so. You don’t want to take too long to repay your loan, since even low interest rates can compound over time. Also make sure that you only spend what you’re going to pay back. You don’t always need to take out the entire credit limit against your home.

Is it Hard to Apply?

  • Ask how much the fees will be to have your home appraised.
  • How much will the application fee be, and will you be able to get it refunded if you’re rejected?
  • Who pays the closing costs on the loan, what will the taxes be and who is paying the title company? Is it all included, is it split up into different sections (some things may be covered in the closing costs and the rest on you)

These are things you need to think about before you apply. This is why you need an experienced professional to help you through the process. Do you have relationships with the banks and know how to read contracts? Mortgage brokers will be able to help you navigate the muddy waters of home equity loans and get you the best outcome possible.