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!

Pros and Cons, a Look into Home Equity Loans and Lines Of Credit

More and more homeowners are looking into being able to sell homes for profit, unfortunately, whatever you can gain from doing so is often left far from your reach unless you are able to access it using a HELOC or using a home equity loan.

So which one then is better?

A home equity loan and a home equity line of credit are types of second mortgages that you can gain access to if you have a certain built-up amount of equity in your home. More often than not, financial planners would advise you against using the equity you’ve built up unless you are doing so for purposes that can further increase your home equity. That is a smart way of using it after all.

A Look into Home Equity Loans

It would be easier for most people to budget around a home equity loan since it has a fixed interest and fixed payment every month. The thing to remember is that the fixed value for your home equity loan is something that you will have to pay on top of your mortgage. It is also a good source of funds for big expenses because it allows you to take out money in a lump sum.

A pro for a home equity loan include an interest rate that is tax deductible and has a fixed rate. A con would be that should the property values in your area suffer from a decline, going for a home equity loan can work against you as you might end up owing more money.

A Look into Home Equity Lines of Credit

HELOCs or Home Equity Lines Of Credit are similar to home equity loan because both are ways to tap into your home’s equity. It also differs in the sense that it operates more like a credit card with a pre-determined credit limit or credit ceiling. A good thing about this type of second mortgage is that you will only have to pay interest on the amount that you’ve withdrawn, and you can borrow as much or as little as you need as long as it does not exceed the limit.

Furthermore about interest rate is the fact that with HELOCs, the interest rates usually start small and then becomes variable or is adjusted according the movements against the benchmark. This detail means your monthly payment is also variable.

Some lenders can allow you to convert a part of your HELOC into a fixed rate while allowing a part of it to still be used like a credit card limit.

Pros about a HELOC include interest-only payments during your draw period, being allowed to pay interest on just the amount you’ve withdrawn, and the fact that interest paid is often tax deductible. Cons include increasing interest rates that will increase the amount you have to pay and possibly falling victim to your own overspending due to how flexible a HELOC is.

Ready to apply for a HELOC or a home equity line of credit? Contact us at Homebase Mortgages today!

Best Home Renovations to Increase Your Property Value

Let’s be honest with ourselves, the most compelling reason why homeowners choose to go forth with having a home renovation is not for aesthetic reasons but for increasing the home’s value. In today’s blog post, we are sharing with you some of the best home renovations that can drum up a return of investment that is up to 5X the cost of the renovation undertaken. Bring out your pen and be sure to take notes!

Flooring Upgrade

The floors are the biggest area of your home that gets the least attention when it comes to maintenance and repair but do you know that by just installing hardwood floors, your home’s value can soar up a significant percentage? Another good news is that if you have existing hardwood floors but they have seen better days, refinishing them can even net you more return of investment as older hardwood floors have a charm of their own!

Bathroom Makeover

The bathroom is typically the room in the house that dates it or shows the most wear and tear. If you can give an existing bathroom a makeover or manage to add even just a half bath to your property, your home’s market value will rise dramatically. A dead space in your home such as under the stairs can be converted to a powder room, an extra shower room, or a full bath. You can make the area seem more spacious by using glass for the shower.

Kitchen Touch-Up

A desirable modern kitchen can make buyers put in an offer right then and there, so why not invest in a kitchen renovation? You can start with the cabinets and lighting, perhaps even replace the backsplash if it looks too old. There are plenty of affordable kitchen solutions for countertops and cabinetry that won’t sacrifice on function and construction. You just have to look around!

Replace Fixtures

Okay, perhaps you don’t have that big of a budget to go on full room makeovers, but that doesn’t mean there is nothing you can do. By simply replacing fixtures such as cabinet hardware, doorknobs, faucets, light fixtures, and countertops, you can modernise your home with just a few hundred or few thousand dollars worth of cash. How’s that for a truly smart home renovation trick?

Plan for an Income Suite or a Basement Apartment

There are so many reasons why building an income suite or a basement apartment will increase the value of your home. One is that home buyers will see it as a bargain because they will be getting two properties for the price of one. Another is that an income suite will surely appeal to families that are looking for a home that offers them the opportunity to have a grandparent’s suite or an apartment for a child who wants to be independent but can’t buy a home yet. Let us also not forget that an income suite will help prospective home buyers pay off for the mortgage should they decide to rent it out.

Loving all the ideas for home renovation in here but don’t have enough funds to go forth with these ideas? Why not apply for a second mortgage as a smart way to afford a home renovation? You can use the funds from a second mortgage to make your home renovation dreams a reality. Contact us for details.

Smart Ways to Afford a Home Renovation

There is no such thing as cheap home repair or home renovation. Even if you’re the absolute best when it comes to seeking bargain deals, the cost is bound to be more than what most people can freely spend. There will be materials, labour, plus some other extra costs that are bound to be a part of having your home in tip top shape.

There is no denying it. A major home project like a renovation is worth a substantial amount of your yearly income; won’t you want to know ways on how can you fund it without letting go of the other things that you enjoy? Lucky for you, you’re at the right page!

Start a Savings Fund

This would be the most obvious in this list but we all know that a huge percentage of people dip into their savings fund and end with very little savings at all. For this to work, you have to set up a dedicated savings fund that is solely for home renovation projects. If you’ve got a little bit extra left from your weekly or monthly budget, this might be the easiest option to fo fund your home renovation.

Get a Personal Loan

A personal loan is an unsecured loan. This means that you won’t need to have any collateral for the money you borrow. Because the lender will be left with nothing if you fail to pay, the qualifications for this loan is often very strict. A personal loan also comes with a high-interest rate and a relatively lesser maximum amount compared to other options for financing.

It should be noted that a higher interest rate means that the overall cost of your home improvement projects will be increased by the same interest rate so choosing this option isn’t that attractive unless you can reap tremendous benefits from the home improvement. Be sure that the terms set by your lender will be compatible with your financial means.

Opt for Home Equity Loans and Lines of Credit

If you’ve already built up quite some equity on your home, a HELOC or a home equity loan would be a great way to use that to your advantage.

Home equity loans lets you borrow a specified lump amount from your equity. There will be terms of repayment that you will have to agree to, then you’ll be lent some money, and then you repay the borrowed amount according to the terms of the loan including the interest.

As for a HELOC, it’s like a credit card in the sense that it has a revolving line of credit. You can reuse or withdraw from the determined amount as long as you pay before the credit expires. If you need money now and is sure that you have some more incoming in the future, this might be worth looking into.

Just note that both home equity loan and HELOC must be fully paid back with the interest. The amount you pay will usually be set per month so you need to ensure that your cash flow will allow for this. Failing to pay on time can result in the lender foreclosing your home.

Interested in getting a HELOC or a home equity loan? Contact us so we can answer your questions and help you be on your way to a home renovation that you can afford.

Consolidate Your Debts with a Home Equity Loan

Having a lot of loans can be a pain to keep tab of when it comes to making sure that you’re paying them off before each of their monthly due dates; not to mention that each loan will have dizzying interest rates that will keep on eating on your finances if the loans are not paid off as soon as possible. This is why consolidating debt is an attractive aspect of debt management.

Managing your finances will be a lot easier when your debts are consolidated. Doing so will mean that you will have fewer things to mind when it comes to bills.

The thing is, consolidating debts usually means taking out another loan, using the funds from that to pay off your other debts, and ending up with just one debt to mind. Sounds easy but can be a bigger problem if you take the wrong kind of loan. You better do your research and know which type of loan is the most advantageous for your financial situation.

Home Equity Loan to help You Consolidate Debts

Taking a home equity loan can be a great solution for managing your debts. It is a type of mortgage loan that uses your home’s equity as collateral. The amount that you can borrow from this loan is determined by a percentage of your home’s equity and the terms of the mortgage company or private lender that will be providing you with the loan.

Because a home equity loan is a type of mortgage, the interest rates will be far better than other types of loans that you can get from a bank or other lenders such as a credit card, a personal loan, or an unsecured debt.

Will It Be Smart to Use a Home Equity Loan to Consolidate Debt?

As long as you can pay off the minimum payments set by the lender, you’re not in a hurry to sell your home anytime soon, and you’ve got considerable debts with huge interest rates that will benefit greatly from being converted into just one loan, then the answer is yes.

Think about it, if the interest rates of your existing loans are so expensive that you’re often simply paying for the interest each billing period, you’re basically throwing money away and will end up paying a total of twice or more the value of your original loan by the time you pay it off. That couldn’t be good. If you use a home equity loan to pay off your current loans, you will still pay some interest, of course, but it will be nowhere near what you are currently paying now.

There is one thing you have to be really sure of before getting a home equity loan. You have to be sure that the terms you agree to will give you a monthly bill that you can afford to pay. Note that failing to pay the minimum amount on time could mean losing your home to the lender. If used correctly, though, a home equity loan can improve your financial position significantly.

Interested in applying for a home equity loan but is not sure how to go about it? Contact us at Homebase Mortgages for professional assistance with your home equity loan application.

Improving Your Financial Position with a Home Equity Loan

Improving one’s financial situation is usually the farthest thing from a person’s mind whenever loans are mentioned, but not all loans are created equal. When you’re in a bind, having an emergency, or perhaps just out of luck, tapping into your home’s equity via a loan could help you out.

That’s where home equity loans come in!

But first, what is a home equity loan?

A home equity loan is a type of loan one can avail of against the value of the house one owns. The money from such a loan can be used to pay for emergency or extra medical expenses, needed house renovations or appliance upgrade, or for paying off tuition fees.

Although a home equity loan isn’t available in all parts of the world, the majority of developed nations have some form of it or another. It certainly is an option for you if you are from Canada and own your home.

Home Equity Loans in Toronto

There are two kinds of home equity loans that you can apply for if you’re from Toronto – Home Equity Line of Credit and Fixed-Rate Loans. These loans have become popular because of the type of advantages that they offer, namely:

  • You will have the option of getting quite a huge amount of money depending on how much equity you have in your home.
  • People with bad credit ratings are not excluded from those who can avail of a home equity loan.
  • Compared to other types of loans, the interest rate usually applied to home equity loans are quite small.
  • Payment can be tax-deductible.

There is one clincher to the advantages above…that is, if you fail to comply with the lender’s stipulations, then the lender will be free to sell your property. This is where mortgage professionals come in. They advise you on what you need to know so you won’t end up losing your home.

How to Get A Home Equity Loan The Smart Way

There are a number of lenders as well as mortgage companies that can help you apply for and get a home equity loan. The challenge lies in finding mortgage professionals that care about you and lenders who are not out to take advantage of your dire financial situation.

It would be best to do a bit of research before settling for a lender or a lending brokerage to help you out. Take note that some will not have your best interests at heart and will exploit you.

You may try for a second mortgage or go for a home equity loan line of credit depending on which one is more convenient for you to pay off and will meet your current financial situation.

Remember that what may seem like a great deal now can be tomorrow’s burden so plan wisely. Think of your financial situation a few months and a few years down the road, and make the best decision for yourself, not based on what someone else wants you to do.

Contact Homebase Mortgages for inquiries about Home Equity Loans and we’ll surely help you out.

Will Bad Credit Stop You From Getting a Home Equity Loan?

It’s no secret that getting a home equity loan can save your sanity when you need financial help for home improvements, managing your finances, or perhaps for emergency funds when getting these funds through traditional means is not possible.

Other types of loans usually come with a high interest rate or are relatively difficult to get, while a home equity loan is an easier option that comes with secure terms and friendlier interest. This is why a lot of people who need to get their finances in order opt to go for one, but what if you have bad credit?

Is it possible to get a home equity loan with bad credit?

The above is a common question, more so for people who have a lower credit score because of reasons such as having quite a lot of debt or being unable to pay some bills in the past. Bad credit will hinder you from getting other loans, but fortunately, a home equity loan isn’t off limits for people with bad credit.

Home equity loan lenders are often willing to accept applications from people with lower credit score or those who has a credit score that’s in the lower end of the spectrum.

What does this mean for you?

This means that if you’re looking for a loan provider to take care of existing debts, or you have other funding needs but already have quite a substantial debt, then you still got a chance to obtain some funding even though you have a low credit score.

Note that a source of income will have to be validated and your income should be of enough value to allow you to be able to afford paying off a loan. Having these will increase your chances of getting a loan as well as getting a favourable interest rate for your approved loan.

So how can you work on your credit score?

It often takes a few weeks to a few months for your loan to get approved, which means that you got some time to show that you are responsible enough to adhere to the terms of the loan when approved. You can try to pay off other debts to get an improved mark and improve your chances of getting approved.

How do you use your home equity loan wisely?

You can start by being extra cautious. Never take out more than you need and make sure that whatever you take can be paid off on time.

Keep in mind that your home is in line when you go for a home equity loan. No matter how small the loan is or whatever other financial issues you have to take care of, taking care of the loans that’s tied to your home should be your priority.

As for ustilising your home equity loan wisely, it can be used to:

  • Pay for home renovation or home improvement projects.
  • Consolidate debt
  • Take care of high interest loan
  • Pay off other loans or debts with a high interest rate

Curious about getting a home equity loan? We’ll be happy to assist you! Contact us today so we can tell you everything you need to know before getting a home equity loan.

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!