Getting A Line of Credit in Ontario Even with A Bad Credit

Things may be a bit challenging for some of our fellow Canadians even with things looking like we will be soon able to go back to normal. After all, financial responsibilities do not end and cannot be told to wait for better days. What can you do if you happen to have bad credit but is interested to get a line of credit in Ontario? Is this possible? What are the important things to know and be ready for?

How to be Approved for A Line of Credit with A Bad Credit?

Trying to get a line of credit from traditional lenders when you have a credit score below 740 is a huge challenge because most options for lines of credit are unsecured loans. It will be difficult to get a lender to let someone with bad repayment history borrow some money. However, things can change if you want to get a secured line of credit. If you are willing to use something valuable as collateral for your line of credit, then bad credit isn’t much of a hindrance because the main factor that the lender will consider for approving your loan is the type of collateral that you can provide. This is where getting a Home Equity Line of Credit comes into play. It is a secured loan that is guaranteed by the equity you have in your home if you are a homeowner. Other options require you to improve your credit score first or get a co-signer which will take more time and money that you may not have at the moment.

Use A Home Equity Line of Credit

With a HELOC or Home Equity Line of Credit, you can get access to cash even with bad credit. What’s more, is that you can use the money from the line of credit to fix your credit score by utilizing it to help pay some debts or consolidate debt if you are so inclined.

Lenders typically only look at the amount of equity for a HELOC. Your credit score as well as employment status are not very important considerations to get approved. If you do not have an idea how much your home equity is, you can have a rough estimate by subtracting all other debts and obligations on the home from the estimated current market value. Please note that a professional appraisal is often needed when applying for a HELOC so it is best to factor in that additional cost as well as other fees if you’re approved.

Get A HELOC With Bad Credit

HELOCs are the most flexible amongst all the home equity loans. Repayment is manageable as well as the interest rate. It lets you access the asset that you built in your home without having to sell your property. The downside is that you may lose your home if you fail to pay which is why it is important to negotiate payment terms before signing up for a HELOC. Different lenders have different loan terms and you will want a lender that can work with you so that you can achieve your financial goals.

Ready to apply for a line of credit using your home equity? Contact us now to send an application so you can get approved in as early as 24 hours!

Thinking of Getting A HELOC in 2021?

A HELOC remains popular in 2021 because it gives borrowers plenty of freedom as it functions like a credit card and has a variable interest rate that some borrowers may find attractive. It allows people to access a credit line that is tied to their home equity as needed and pay it back according to the terms of the loan.

How Does A HELOC Work?

The limit for a HELOC is based on the homeowner’s home equity. Once approved for a HELOC, the homeowner can draw money from it as needed within the draw period which typically lasts a few years. After the draw period expires, the repayment period begins and can last for up to 20 years. During this time, you will need to pay all outstanding balance as well as interest. It is possible to renew the credit line at this time.

What Determines a HELOC’s Rate?

HELOC rates are based on a benchmark interest rate. It goes up or down with the prime rate. Payments for the loan are based on how much money was borrowed from the HELOC as well as the current rate for each payment period. Know too that you may be able to negotiate a fixed rate with your lender.

How Can You Get A Good HELOC Rate?

Your HELOC rate will be determined by your credit score and your lender. A good credit score means that you are likely to get a lower HELOC rate of around 3-5% but a below-average credit score can mean that your HELOC rate will be around 9-10%. Since the average HELOC rate as of December 2020 is around 4-5%, any rate lower than this can be considered as a great HELOC rate.

Who Is Most Appropriate to Get A HELOC?

A HELOC is best for you if you have a recurring need for extra funds for the next few years and if you are comfortable with using your home equity as collateral for a loan. Since a HELOC will give you access to funds for several years, it is best to also spend it on some home improvement projects that will increase your home equity for years to come.

How to Qualify for A HELOC During COVID-19 Pandemic?

Your income, credit history, credit score, and other debts all factor in when you apply for a HELOC. Just note that banks might be overwhelmed due to the number of applications and their current working hours. With this said, now might be a good time to apply for a HELOC as interest rates are low and banks and lenders are still accepting HELOC applications. If you are worried about paying off your HELOC in the future, make sure to communicate concerns with your chosen lender so any questions that you have can be addressed as early as possible.

Get A HELOC in 2021

If you’re a homeowner and looking for a way to fund home improvements, medical expenses, education costs or tuition, important large purchases, debt consolidation, and more, consider applying for a HELOC now. Contact us if you want to qualify for a HELOC soon.

 

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Getting a Home Equity Line of Credit in Toronto

If you’re trying to use your home equity to get better financial flexibility, then a home equity line of credit could be a good option for you. A HELOC allows a borrower to get a loan at extremely low interest rates and allows the borrower to use the loan as a revolving line of credit, giving the borrower plenty of flexibility as well as friendly payment terms.

Benefits of A HELOC

Most people get a HELOC because they find that it as a good loan option for purchasing an extra property, supplementing their cash flow, making investments, or as a source of fund for a budding business. The interest is much lower than a business loan, a credit card, a car loan, or a personal loan. Other benefits include the following:

  • A HELOC is partly tax deductible. You can deduct the interest paid if you are using a HELOC to make investments.
  • A HELOC is friendlier to your monthly cash flow as there is nothing to pay if you haven’t used it and in case you used it, oftentimes you only have to make monthly payments for the interest while the principal is to be paid much later.
  • A HELOC gives you a revolving source of funds. As you make payments for your HELOC, you can keep reusing the credit until the end of the term or until the limit is reached. You can reborrow as needed within the validity period without having to apply for a new loan. This means plenty of flexibility while saving money on fees and interest as compared to other loans.

Things to Watch Out for with A HELOC

Some lenders may charge a higher interest and in some cases, a variable mortgage rate may be better than a HELOC’s because of lower interest and other benefits.

HELOCs are not created equal. Some lenders may reduce the amount of your available credit and some may need extra permissions that take time to allow you to access your credit. This means that a HELOC from such lenders is not a good source of funds for emergencies.

You may have challenges with collateral mortgage charge. This is because when a lender gives you a HELOC, a mortgage charge is registered on your property that is equivalent to the value of your home or more. This allows the lender to readvance more credit if needed or required. Having collateral mortgage charge means that your ability to borrow anything against your home will be limited and might incur additional fees. You must make sure that you are aware of things like this before signing up for a HELOC so that you can protect yourself better.

Do you have questions about getting a HELOC in Toronto? We are happy to help at Homebase Mortgages! Contact us if you need an assessment and expert opinion before you make a final decision with getting a home equity line of credit. An informed decision is a smart decision, after all. Once you are ready, you can apply for a HELOC with us.

 

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Key Differences Between A HELOC and A Second Mortgage

Both a second mortgage and a home equity line of credit (HELOC) are additional loans to your home that are taken on top of a primary mortgage. However, some people may be confused about what differentiates them since the term second mortgage is usually used to refer to a home equity loan as well.

The main difference between a second mortgage and a HELOC is how the loan is handled by the lender. A second mortgage distributes funds as a lump sum while a HELOC distributes funds as a revolving line of credit that is not dissimilar to how credit cards work.

How Does a Second Mortgage Function?

A second mortgage is a secured loan that is backed by home equity. It is named a second mortgage because it is a mortgage loan that goes on top of an existing mortgage loan or on top of the primary mortgage. A second mortgage allows you to borrow money from the value that represents what you still owe from your first mortgage subtracted from your home’s market price today.

Funds are released from a second mortgage as a lump sum at the start of the loan. The term of the loan as well as the amount to be paid are fixed amounts determined at the beginning of the second mortgage. Payments are done per month until the loan has been paid for. Once the second mortgage has been paid, you can get another second mortgage.

How Does a HELOC Function?

A HELOC is a revolving line of credit that can be reused as long as there is still some credit left in the credit limit. This loan is backed by home equity and so has a much lower interest rate than a credit card. Payments are only made on the amount borrowed and interest is likewise only charged for the amount used.

A HELOC typically has a 10-year draw period which is the span of time wherein the borrower can use the HELOC, pay, and reuse it again. After the draw period, any amount not paid goes into the repayment period which is usually about 20 years. If you never use your HELOC, you do not have to pay anything for it. If you only use it in the fifth year of your draw period, then you owe nothing for the first 5 years. Note that a lender may choose to freeze a HELOC if property prices start falling.

Is A HELOC or A Second Mortgage Better?

There is no straight answer to this question because what may be better depends largely on your specific circumstances. If you are on the fence about which one you should apply for, you must consider your cash flow, what you are borrowing for, and your other existing debts. We can help you assess which may be the right mortgage loan option for you at Homebase Mortgages. Contact us so we can discuss the pros and cons of a HELOC and a second mortgage as they relate to your needs.

 

A Primer on Getting a Home Equity Line of Credit

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

Types of HELOC

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

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

HELOC as a Stand-Alone Debt Product

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

Home Equity Loan VS Home Equity Line of Credit

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

Qualifying for a HELOC

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

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

When to Get a HELOC

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

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

 

 

 

Using a HELOC to Supplement Lost Income Due to COVID-19

COVID-19 has been causing fear and panic worldwide, making people shutdown businesses and go on a rampage at the stock market. It is no secret that millions of people are dealing with revenue and income losses. Aside from losing paychecks, people are facing overall financial uncertainty because health experts are warning that the current situation could last for months. Not having a current income and not having a lot of savings in the bank are legitimate reasons to worry, especially that there is no telling until how long the government’s help can last for those who can avail of it.

Why Use Your Home Equity as Emergency Fund?

Only a few people have emergency funds set aside, and even for those who have savings, the savings are usually just good for a few months. In the US, for example, about 39% are estimated to not have the cash reserves to be able to cover an extra $400 in expenses. It goes without saying that a higher percentage certainly do not have extra cash for bills for multiple months without income or reduced income. The good thing is that if you’re a homeowner, not having a paycheck is not a reason to panic just yet. If you own your home, you are sitting on a nest egg in the form of your home equity.

Get a HELOC Now

There are many reasons as to why a HELOC is a great way to tap your home equity during these financially trying times. One of the best reasons is that a HELOC gives you the flexibility to only use what you need and still give you access for more later. This means that with a HELOC, you can withdraw an amount you need to cover bills now and use it again to pay for other expenses in the future. If you end up not having to use your HELOC or end up only using a small portion of the approved funds for it, there are no penalties and you’ll only have to pay interest on the actual amount that you use. With a HELOC, if you qualify for a $100,000 HELOC and only end up using $3,000, you’ll only have to pay back $3,000 and the interest for the $3,000 you’ve used. You can access the other $97,000 when you need them as long as the HELOC is still within the terms. Because the funds are not given as a lump sum and instead, given as a line of credit, you’ll have more freedom and control over your expenses too.

Qualify for a HELOC

It is relatively easy to qualify for a HELOC although different lenders will have different requirements. Aside from having a certain percentage of home equity, the lender will also consider your credit score and other factors. You can call us at Homebase Mortgages for an assessment or consultation if you’re interested in possibly getting a HELOC to cover lost wages related to COVID-19. We’ll do our best to answer your mortgage-related questions and help you get through these trying times one smart financial decision at a time!

 

Important Things You Need to Know About HELOCs and Second Mortgages

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

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

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

You Can Lose Your Property if You Miss Payments

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

Second Mortgages and HELOCs Are Not Without Pitfalls

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

Home Renovations Remain a Favorite

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

Second Mortgages and HELOCs Also Require Financial Planning

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

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

 

 

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Pros and Cons to Using a HELOC as an Emergency Fund

Using a HELOC as a source of emergency funds during this COVID19 epidemic, has been a topic of debate for many. Just like any other home equity loan, a HELOC has its own set of advantages and disadvantages attached to it. These and the accompanying risks are things that anyone wanting to apply for a HELOC must consider. After all, getting a HELOC means accessing one’s stash of home equity, so a misstep can result to a homeowner losing one’s home.

Why Consider a HELOC?

We are facing a lot of uncertainty these days. Even for those who may have some savings, that money can be used for other big expenses such as paying for home repairs, medical expenses, or investments; thus, leaving a homeowner with no real funds for an emergency. By having a HELOC, a homeowner can feel free to use his or her savings for things that are needed knowing that there is another source of funds should the need arise. Note though, that only a few people may consider this financial strategy out of fear that they may lose their home if they end up dipping into their HELOC for things that are not needed and may risk losing control of their finances.

Who Should Consider a HELOC as a Source of Emergency Funds?

Should homeowners in a good financial position consider using a HELOC as a source of emergency funds? Aside from the temptation of using a HELOC for non-emergency expenses, people who are in a good financial position generally are not at risk of missing mortgage payments, making them good candidates for getting a HELOC. Being in a good financial position generally means that they got more control over expenditures, so they are not likely to go on a spending spree just because a source of funds is available.

The people who should take a step back from considering using a HELOC as a source of emergency funds are individuals who are not in a strong financial position. For individuals who are already having trouble making ends meet or already have a lot of debt to the point of missing payments, a time of increased unemployment and job uncertainty may not be the best time to tap into one’s home equity. A missed payment can mean losing one’s home and an even bigger financial problem than just needing some cushion for emergency funds.

Is it Difficult to Get a HELOC?

The truth is that individuals who do not have a good credit score, do not have a steady income, and do not have a stable job will face issues when trying to get a home equity line of credit. Banks and other lending entities will be a lot stricter with approvals and might demand payment anytime depending on terms. With this said, HELOCs are a great alternative source of emergency fund for those who plan to use their savings for other things and those who do not have savings. It is just that circumstances vary from person to person and getting a HELOC is not a one-size fits all financial solution.

If you are planning to apply for a HELOC in Canada now, it will be best to consult with professionals here at Homebase Mortgages. We will assess your situation and provide you with the information you need to make an informed decision on how to best tap your home equity to meet your financial needs. Contact us today!

Get a HELOC in Canada by Following These 5 Steps

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

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

Know Your Purpose for Getting a HELOC

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

Understand How HELOC Fees Work

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

Know the Minimum Home Equity Requirement to Apply for a HELOC

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

Learn More About What is a HELOC and Associated Rates

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

Find the Right Lender

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

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

 

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The Differences Between Home Equity Loans in Canada and HELOCs

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

How do Home Equity Loans and HELOCs Work?

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

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

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

Repaying a Home Equity Loan and a HELOC

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

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

Pros and Cons of HELOCs and Home Equity Loans

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

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

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

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