Many 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!