Top Uses for Home Equity Loans in Canada

Getting a home equity loan is one of the increasingly popular ways for Canadians to take advantage of current low-interest rates and increasing house prices. Below are the top uses that Canadians are utilising their home equity loans for.

Funding Home Renovation

A home equity loan is a smart way to raise funds for home improvement and renovation. Renovating a home results in increased home value which can then further decrease a loan’s interest rate. More so a renovated home is not only more attractive to look at but is also often more functional.

Paying Taxes

Back taxes can be as high as a few tens of thousands of dollars, cash that not everyone has in their savings account. Home equity can be tapped as a short-term loan that can be used to pay the CRA for back taxes.

Home Construction Loan

A home equity loan can be used to fund a home construction. This has been done by a lot of Canadians in recent years when upgrading to a new home.

Paying for Big Purchases for Self-Employed Individuals

Self-employed individuals often face stricter lending restrictions, making it difficult for them to buy a home or make a big purchase using a loan. Tapping their existing home’s equity is a good workaround to the existing system.

Investing in Advanced Education

Going to a university can be very expensive, more so for someone who doesn’t have a lot of savings or who have to stop working to complete a degree. By using equity to finance education, a person can afford to stop working for a year or two to place himself or herself in a better position to earn money to pay back the home equity loan.

Starting a Business

Starting a business needs capital and capital means lots of money. By accessing home equity, a homeowner can gain easier access to funds as compared to getting other types of loans. A home equity loan can also be used to pay for a business loan.

Spousal Buyout After a Divorce

Divorce is sometimes followed by having to split the family home so each party will get to have a share. In situations where one spouse can’t just move out and get another place, getting a home equity loan to ‘send off’ a spouse is not uncommon.

Debt Consolidation

Home equity loans in Canada are most often used for debt consolidation. This is because tapping home equity is for a loan has significantly lower interest rates as compared to credit card debts and personal loans. By using home equity for debt consolidation, homeowners can save a lot of money on interest as well as having to worry about paying several separate bills per month.

There are many uses for home equity loans in Canada. Thanks to their flexibility, they can be utilised as a solution to various financial situations. Contact us if you need help getting a home equity loan in Canada or want to assess whether applying for a home equity loan will be best in your situation.

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What You Need to Know About Using Home Equity to Borrow Money

Borrowing money by using home equity is nothing new, but many people are still misinformed about what they need to know about how to do it. Tapping your home equity for a loan is easier to get an approval of than trying to get other types of loans. Below are further details on this.

Computing Your Home Equity

Your home equity is the value that you own in your home. The more money you pay for your mortgage, the larger your home equity gets and the easier it will be to qualify for loans that use home equity as collateral. Your home equity can also get larger if real estate prices rise in your area. This is because home equity is computed as the difference between your home’s current market value minus the money you still owe in your mortgage.

Computing your home equity means that you have to get your home appraised to have an idea about the current market value. You need details on how much you’ve paid in total as well because the more information you have, the easier it will be for you to apply for a home equity loan.

Getting a Home Equity Loan

A home equity loan is a loan that is secured by your home equity. You will be lent a certain amount by the lender based on the value of your home equity as well as your perceived ability to pay. Below are 3 common types of home equity loans and some information about them.

  • A Mortgage Refinance means that you’ll negotiate a new contract with your lender after breaking your first mortgage contract. You may need to pay a penalty fee for your first mortgage but you’ll gain access to as much as 80% of your home equity. This can be helpful if you have a big expense coming up and you’re confident that you can take advantage of better interest rates to pay off this new loan.
  • A HELOC or a Home Equity Line of Credit is a revolving line of credit tied to a set value of your home equity. With a HELOC, you can access as much as 65-80% of your home equity at one time or little by little as needed. You can pay off a small amount and borrow again over and over just like what you do with a credit card as long as you pay the minimum payment required per month. A HELOC also has a lower interest rate than a second mortgage so if you’re looking for flexibility and a better interest rate, a HELOC could be for you.
  • A Second Mortgage is another loan that you apply for on top of your primary mortgage. By getting a Second Mortgage, you need to make sure that you’re able to pay off 2 mortgages at once. This can be a burden for those who are financially struggling but an advantage for those who just need access to a large amount of money as a lump sum.

Know that by applying for any type of home equity loan means that you’ll be using your home as collateral for a loan. Contact us if you have questions or if you need help assessing which home equity loan you should get and need help borrowing money.

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Handle a Bad Debt Using Home Equity

Getting out of debt when one has bad credit is one of the most common issues faced by Canadians these days. It may be quite easy to get out of debt if one has good financial records but for those with bad credit, this is a huge challenge to overcome.

Is it Smart to Get a Loan to Pay for Debt?

Most people who have bad debt are in such a situation because they’re strapped for cash; hence, the way to pay off a debt for them is to get a loan. This can be a good idea but can turn out to cause more problems if the new loan is more difficult to manage than the existing debts in the first place.

To effectively use a loan to pay for debt, the smart move is to consolidate high-interest debt with funds from a low-interest loan. This way, it will be possible to get out of the bad-debt-cycle that can result in bigger problems down the road if not dealt with promptly. The idea is to take the long-term approach in handling bad debt and to avoid falling into short-term band-aid solutions that only serve to make things worse later. Loans that can work for this purpose are second mortgages or home equity loans.

Are you Really in Debt?

If you’re a homeowner, you may actually be better off financially than you think. The reality is that your home, or rather, your home equity is a huge asset that can get you out of debt if used properly. You may think that you’re in debt but if you look at the big picture, you could not be in debt at all.

To pay off bad debts with your home equity, you need to assess your real financial situation by getting a credit report and listing down all your assets and debts. Find out how much you truly owe and your current credit score to give you a good starting point to determine which possible solutions can be the best for you.

Once you have a list of your debts and assets, take a close look at your credit report and your list to find any mistakes as well as prioritize which debts need more of your attention.

Plan Ahead to Get Out of Debt

You need to have a long-term plan to pay off debt to avoid reborrowing in the future. Your plan should include what percentage of your current income will go into paying debt as well as how to effectively use a loan to consolidate debt if applicable. If you’ll be using your home equity to pay for your debt, you need to look into which type of home equity loan will help you achieve your goals.

Remember that as you pay your debt with your home equity, you should do so in a way that will also help to fix your credit score. We can guide you with this at Homebase Mortgages. Call us today and we’ll talk about the details of getting a bad credit loan or using your home equity to pay your debts with you!

Using Your Mortgage to Build Assets

Most people wouldn’t think of their home equity as a form of savings that can be used just like cash, but if you know how to tap your equity, you can make it work for you and improve your financial situation.

Using Your Home Equity

Your home equity is the value of your property that you own. You can easily have an estimate of it by subtracting what you still owe from the current market value of your home. The better the market value of your home and/or the less you still owe in your mortgage, the larger your home equity!

A great thing about your home equity is that you don’t have to sell your home in order to access it. Once you have a good percentage of your home’s value as your equity, you can apply for a home equity loan and use the approved loan to improve your home’s value (with upgrades and renovations), to pay for a degree (to improve your income potential), or to invest in other opportunities.

The secret is in using your home equity in a way that helps you attain your financial goals. The 3 common ways to use your home equity for cash are through a HELOC, a second mortgage, or via mortgage refinancing.

Using a Home Equity Line of Credit (HELOC)

A HELOC is the secured loan you’ll want to get if you want to use your home equity for a recurring expense that you may not be able to finance just by trying to save for it (like tuition for university studies).

A HELOC is a revolving line of credit that allows you access to funds as you are able to pay them back until a time limit or value limit is reached. It is very flexible and is wallet-friendly considering that you’ll only have to pay interest for the amount you borrow. A possible issue is the fact that the interest rate is often variable too, leaving those who are not very savvy with money a bit confused come payment time.

Using a Home Equity Loan or a Second Mortgage

Although often mistaken to mean the same as a HELOC, a second mortgage is a totally different type of home equity loan. For one, funds are received in a lump sum and a one-time deal until the loan has been paid off. The monthly payments and interest rate are fixed amounts as well – which is the opposite for a HELOC.

A second mortgage is ideal for funding a very expensive home renovation or a much needed debt consolidation plan. Just like a HELOC, a second mortgage is paid on top of a primary mortgage; hence, having a clear picture of your financial situation is best before applying for one and risk losing your home for non-payment.

Using Mortgage Refinancing

A refinance means breaking your existing mortgage contract and creating a new one with the benefit of giving yourself access to your home equity while doing so. Another benefit is that a refinance allows you to get better terms although you’ll have to trade it with some of your equity. Not a bad bargain if you’re strapped for cash and need access to funds in a cheap and relatively easy way.

Building your assets can be a lot easier if you can make your existing assets do the heavy lifting for you. Contact us if you wish to discuss possible ways of using your home equity for investment opportunities. We’d be happy to help you apply for a home equity loan!

How to Use Your Home Equity for A Loan

Home equity is a huge asset that you can use to help you fund some projects, finance investments, or use as emergency cash with the help of a home equity loan. There no one specific way to best use a home equity loan but by understanding what it is, you’ll be better equipped to decide how to use your home equity.

Home Equity As An Asset

Oftentimes, a homeowner’s biggest asset is the value of the property he/she truly owns, otherwise known as the home equity. It can be viewed as a time deposit that the homeowner can access later in life to fund retirement or as an emergency piggy bank for when a sudden need for a lot of cash arises. It is therefore in your best interest to build your home equity while you can.

How to Build Home Equity

You can build your home equity by paying your mortgage or by improving the market value of your home. After all, home equity is computed as your home’s market value minus the amount you still owe. The pricier your property becomes and the smaller the amount you still owe, the bigger your home equity is.

Simply put, you can steadily build your home equity by going for home improvement projects that propel your home’s price appreciation up or by paying any loans you have on your house. .

Uses for Home Equity

Because home equity is an asset that is as good as cash savings, you can convert your home equity to cash that you can use to finance big expenses such as buying another property for investment with a home equity loan, funding your retirement with a reverse mortgage, and financing small expensive projects with a HELOC.

You can surely borrow against your home equity but you have to be sure that you understand the terms involved. Know that when you decide to borrow against your home equity, you’ll be risking your home to a foreclosure if you signed up for terms that are not within your means to fulfill. You have to communicate with your mortgage broker to ensure that any home loan you take is within your means to pay back or you might face losing your home.

Get a Loan Using Home Equity

Two popular ways to tap home equity is by applying for a HELOC and getting a home equity loan:

A home equity loan is given in a lump sum but will require you to keep paying a billed amount monthly. You won’t be allowed to take any new home loans on top of this until you’ve fully paid the amount you borrowed and interest is set from the start.

A HELOC is a line of credit from which you can borrow as little or as much as you need and as often as you want as long as within the set timeframe and limit. It is a great option for those who’ll have recurring big expenses. A bonus is that you only pay for interest on exact amount taken out and not the entire loan limit.

Both loans can prove to be beneficial as long as you honor their terms and make sure that you find a fair lender to borrow from. Ready to apply for a HELOC or a home equity loan? Contact us today so we can discuss what home equity financing option is best for your needs.

Finishing Your Basement – What Is The Impact on the Value of Your Home?

Finishing your basement isn’t just about increasing your living space, it is an investment in home improvement that can significantly affect you home’s value and increase your home equity when done right.

You have to make sure that you take certain precautions to ensure that your new finished basement will result to a livable space that’s not prone to leaks, water damage, and other issues. Below are some tips to remodel your basement in a way that maximizes function and gives you the most bang for buck.

Don’t Forget to Waterproof

Basements tend to be damp places even for homes that are not subject to flooding. It is not uncommon to find damp areas of moisture on the walls or get a musty odour even for basements that do not have any water leaks. This is why a complete waterproofing is the first step in remodeling or reconstructing your basement. You can DIY this but it will be much better to hire professionals to save yourself from future issues.

Design or Plan According to Your Needs

The cost of your basement remodel will vary depending on what you plan to add in it. A bedroom or new living area would be a little less pricey compared to a home theatre. You might also want to look into creating a walkout basement if your home is on grade. Another popular addition is setting an area aside for storage and utility space.

Get It Done

After coming up with the final vision for how you would want your finished basement to be, it is time to turn it into reality by researching the best team for the job. Go ahead and seek out the right plumber, carpenter, contractor, and other home remodeling professionals that you might need. Decide which projects you’ll be able to DIY and which ones are better left to professionals then get things done!

Reassess and Enjoy

Remember that finishing your basement is an investment in your home. More than enjoying its new functionality, you’ll also enjoy a substantial increase in your home’s value and therefore your home equity.

By how much?

There are a lot of factors involved in determining the increase in your home’s value after finishing your basement. What is known, though, is that a 2010 study showed that homeowners were able to recover 74% (of what they spent on average) when selling their home after finishing their basement. This is really good, considering that a finished basement will also allow you to save hundreds of dollars a year in energy savings.

Do not forget to install heating and get permits if you want your new finished basement to be officially recognized as a living space more so if you have plans to put your home on the market in the future. This is also a great selling point when the time to sell your home comes.

Investing in home improvement projects that add value to your home not only increases your home’s value but your equity as well. If you’re strapped for cash but want to pursue finishing your basement, we can help you tap your existing equity through a home equity loan. Contact us today so we can discuss with you what you’ll need for your loan application.

Home Equity Facts: What You Need to Know

Homeowners refer to their hone equity as wealth, but what does it have to do with building your net worth? What is home equity and how does it contribute to your wealth?

What is Home Equity?

Home equity is the value that you have built up in your home. If you still have some mortgage left to pay, it is the current market value of your home minus all the money you still owe.

Because of the above, your home equity is very much like a type of bond because it locks up your money with your property. There are ways to tap your home equity; however, note that the longer you let it sit (without real estate depreciation), the more it can create more wealth for you as your paid for percentage of your home increases.

Building home equity is a slow process unless there is a sudden increase of real estate prices in your area because of housing demand or some other factor. Note too that it can suddenly fall if home in your area lose their marketability. This is why it would be wise to be picky when it comes to choosing a property’s location.

Significance of Your Home Equity

Your home equity can be tapped once you meet the requirements set by lending institutions, companies, or private lenders. It serves as a financial resource that grows and increases value over time as  the homeowner continues to pay mortgage payments.

In a way, you can look at home equity as some sort of a forced savings account. This is because building equity on a home isn’t like spending money on material things like cars that lose value while you are still paying for it. If your property is in a good location, then you can build up quite a lot of wealth in home equity.

How to Grow Your Home Equity

Growing your wealth through home equity takes time. The longer you stay in your home and keep up to date with mortgage payments, the bigger your home equity will be (unless you live in a housing bubble). Once your mortgage has been paid for, your equity continues to grow with the property’s value.

Using Your Home Equity

You can tap your equity wealth by applying for a home equity loan. By doing so, you will be borrowing money against the value you’ve built up. You can choose to go for a home equity loan that will allow you to get money in a lump sum, or choose a HELOC or a home equity line of credit. A HELOC will let you take out as much or as little as you wish within set limits.

Note that a HELOC and a home equity loan are far from the same although they might sound similar. Both have pros and cons that should be weighed carefully depending on your needs and means.

Want to know more about how you can tap into your home equity? Contact us at Homebase Mortgages so we can assist you in home equity loan application.

4 Smart Uses of Home Equity Loans

Some people apply for a home equity loan just because they qualify for it and not for any smart purpose or reason. Sure, it is quite nice to have access to some cash that you can use to buy or pay for some things you may like now, but you have to remember that a home equity loan comes with obligations and interest that you will have to pay on top of your loan. It is therefore wise to apply for a home equity loan if you know how to use it to get the most benefits! Below are 4 smart uses for home equity loans and why.

Spend the Home Equity Loan on Home Improvement

Do you know that you can raise the value of your property by a significant percentage if you target certain home improvement projects for your home? The thing is, home improvement and minor home renovations can cost quite a bit of cash that not everyone may have. That’s where funds from a home equity loan can come in hand.

Certain additions such as remodeling the kitchen or upgrading appliances can increase the fair market price of your house. Not only that, but carefully planned and professionally executed additions can make living in your home a joy. You might even forgo selling once you’ve got your home improvement projects done!

Just some things to think about though, lenders might add additional fees if they know that you will be putting your home on the market. Also note that if your purpose is to sell, you must make enough profit to cover the cost of your first mortgage plus the home equity loan.

Use the Home Equity Loan for Debt Consolidation

Paying off a lot of loans with various due dates and interest rates can be tricky. You might fall behind on payments or end up paying a lot more because of missed payments and high interest rates plus fees. By using a home equity loan to pay off existing loans, you end up consolidating your loans into one loan that has a lower interest rate and is less of a hassle to keep track of. Smart!

Buy Something Expensive That You’ve Been Wanting for a Long Time

While a home equity loan shouldn’t be used for buying frivolous goods, it can be used to pay for a dream vacation, the car you’ve always wanted, or pay for a huge medical bill for a procedure that can save your life. Just do not go overboard and remember that the money you spend from your home equity loan should be paid back because your home is on the line.

Pay for College or Post Graduate Studies with a Home Equity Loan

Education can get very expensive but the cost shouldn’t be a hindrance if by getting higher education means getting more out of life and reaching your dreams. You can use your home equity loan to pay for your kid’s education or your own so that you can have a better and brighter future. Remember that a good education means better compensation in whatever field so this investment will surely pay for itself.

Need help applying for a home equity loan? Contact us at Homebase Mortgages so we can guide you with your loan application. We can also help you get approved for other types of loans more so if you have a bad credit history! Inquire today!

Second Mortgage Loans vs. Home Equity Loans

Most people get confused when referring to home equity loans and second mortgages because some websites may use the terms interchangeably, so how are they different?

A second mortgage is actually a type of home equity loan. When mortgage professionals bring up the term home equity loan, they are usually referring to a HELOC or a home equity line of credit. Both loans allow you to use the equity you’ve built up in your home to your advantage but subtle differences may make one better than the other for your needs.

To make it easier for you to pick whether a second mortgage or a home equity loan would be better for you, we’ll have to touch up on their basics so you can have a clearer understanding of each loan type.

A Look into HELOCs

An easy way to describe a HELOC is to compare it to a credit card. Your current equity is a determining factor in setting your credit limit but just like a credit card, you can use a HELOC for both big and small purchases as long as you do not exceed your limit. Interest is charged just like a credit card but only to the amount you’ve taken out of your equity via your HELOC. The limit of your HELOC’s credit is based on your credit worthiness and the equity value you’ve built up.

A Look Into Second Mortgages

A second mortgage allows you to tap into a set amount of money that you will have to pay according to the schedule set out by your mortgage lenders. This is not the same as refinancing because unlike it, a second mortgage does not replace your first mortgage.

A second mortgage usually last for 15 to 30 years and offer you a fixed interest. The interest will be based on your credit history so the cleaner your record is, the lower the interest rate you will have to pay. The price of your home and the current market’s interest rates are also factored in.

Note that although the above means that your second mortgage will have a higher interest than your first one, the fees that you will have to pay are generally lower.

Should You Go for a HELOC or a Second Mortgage?

The main factors that will determine whether a second mortgage or a HELOC is better for you are your financial needs and your financial capabilities. If you need a substantial lump sum of cash, then a second mortgage will be best for you. On the other hand, if you are someone who needs small amounts of money on a recurring basis, then going for a HELOC would be better for you. Beware though that if you’re the type that gets easily tempted with purchases that you do not need, then getting a HELOC may not be the best idea.

To help you decide which loan can answer your needs, it would be in your best interest to talk to professional mortgage brokers who can help you choose your loan and connect you with refutable lenders.

Ready to apply for a loan? Contact us today at Homebase Mortgages!

Home Equity Loans – What You Need to Know

Second mortgages or home equity loans are getting popular once again. It fell back a bit after the recession, but as people are making moves now to take charge of their finances once again, interest in various loan options are picking up. If you want to find out more details about home equity loans and whether you might qualify for it, you’ve come to the right place.

How to Qualify for a Home Equity Loan

The first thing you need to be eligible for a home equity loan is that you need to have equity. In layman’s terms, this is the value of the portion of the home that you already own and paid for versus the portion that is still owned by the bank. The amount of your equity in this scenario is also known as your loan-to-value ratio – the balance that you still have to pay for compared to the total value of your property.

According to the report posted by credit.com on the Home Buying section of Fox Business, lenders generally want you to have a loan-to value ratio of at least 80% after your home equity loan. In other words, you will need a minimum of 20% ownership to qualify for this type of loan.

This applies as follows: If you have a $500,000 home and you want to qualify for a $50,000 home equity line of credit or home equity loan, you will need at least 30% equity, or a loan balance of no greater than $350,000.

2 Types of Home Equity Loans

Home equity loans have 2 types, a standard home equity loan and a HELOC or a home equity line of credit. In a HELOC, you can use up your loan in smaller increments very much like how you use your credit card’s credit limit. In a standard home equity loan, you borrow a lump sum and can’t borrow more than the set limit.

Both loans have specific terms and interest rates plus limits to until which you can borrow before having to pay it back. You can choose which of the two types of loans would suit you best based on the amount of money you need now and future ability to pay back.

Getting a Home Equity Loan

Most people who need a huge amount of money to pay for home renovations opt to get the lump sum type of home equity loan. It is also the second mortgage of choice for people who want to use their equity to consolidate debts. Consolidating debts is a smart way to use your home equity loan because the payments are much more manageable and the interest rates are not as high as credit card interest (although typically higher than your mortgage’s interest).

In comparison with the above, people with a variable need for funds favour getting a HELOC because it allows them to only borrow what they currently need until a certain limit is reached.

Keep in mind that no matter what type of second mortgage you choose to go for, it should be one that you are sure you can pay off. You also have to be fully informed of the risks and fully understand the terms you are getting yourself into before signing anything. This is the service that professional mortgage brokers give you – we make sure to look out for you so your loan will help you manage your finances, not cause you problems. Need a second mortgage? Contact us at Homebase Mortgages today!