Use Your Home Equity to Get a Loan in 2021

Building your home equity comes with owning property in Canada. As you pay mortgage for your property, you build equity that can grow big through the years. Add to this the fact that your home equity will also rise together with any increase in property value. How can you benefit from this? How can you use your equity without having to sell your home?

Check How Much Equity You Have

The first thing that you should do is to verify that you do have home equity. This could come up as a no-brainer for someone who owns a property but know that the amount of your home equity plays a big role in determining the ways that you can access it and to what extent.

The most accurate way of determining your home equity is to have your house appraised and then subtract all existing debts from the appraised value. You need the appraised value because home equity is computed as the home’s current market value minus all the existing liabilities on the property which includes debt. If your home’s appraised value is $1,000,000 and you owe about $350,000 left for it, then your home equity is $650,000 which may qualify you for a variety of home equity loans.

You can access your home equity without selling your property or liquidating your assets by getting a home equity loan or by applying for a second mortgage.

Why Use Your Home Equity?

Your home equity is one of the biggest assets that you have. It is a big nest egg of money that you can access in times of need or if you want additional funds to further improve the value of your home.

With a home equity loan, you can:

  • Pay for home renovations
  • Get needed home improvement features
  • Pay for a new car
  • Finance your children’s schooling expenses
  • Channel more money into your business
  • Consolidate your debt to save money

Anything that would need a big chunk of money can be a good reason to access your home equity. There are many smart uses of home equity loans.

Ways to Access Your Home Equity

You can get a home equity loan in the guise of a HELOC or a second mortgage. You can get a home equity loan wherein you borrow money by using the value that you built in your home as collateral. It is easier to get approved for this kind of loan because you are offering security to the lender as compared to simply trying to get a personal loan from a bank.

You can get a HELOC which is a type of home equity loan if you want a revolving line of credit with a high ceiling value. This will give you a lot of flexibility in terms of only using the amount you need and only paying interest for the amount you actually use.

Another option is to get a second mortgage which will allow you to access a chunk of your home equity as a lump sum. This is a good choice if you have a one-time big expense that cannot be covered by savings alone.

Contact us if you have any questions about applying for a home equity loan. Do you know that you can get a home equity loan even with no income? Talk to us and we will help you use your home equity soon!

 

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!

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!

Getting A Home Equity Loan with No Income

A lot of people have lost their jobs or source of income during the pandemic. If you are a homeowner, you can use your home equity to access some cash; but is that possible with no income? Can an application get approved?

Is It Possible to Get A Home Equity Loan with No Income?

The quick answer is yes. You can definitely get a home equity loan with no income. How so? Lenders evaluate home equity loan applications based on the value of the property being used as collateral for the loan. Because of this, income is not a big factor if someone will get approval or not. This is one of the reasons why a home equity loan is popular for self-employed homeowners and retirees who need to borrow some money.

But what makes a home equity loan different from other loans with strict requirements? Home equity loans are secured loans. Lenders know that if the borrower fails to pay the loan, they will still get repaid with the home. This is the reason why lenders for home equity loans are more relaxed and charge lower interest rates. They know that there is less risk of default compared to non-secured loans.

Get A Home Equity Loan with No Income Verification Needed

Because income is not a huge factor when applying for a home equity loan, no income verification is needed. You can simply state your income when asked by the lender or write it in your application form. This is also the case for ‘stated income home equity loan’. It simply means that no income verification is necessary and that your word is taken as is. You do not have to worry if you have irregular income or have no income. If you are unemployed, someone who earns on commission, a freelancer, or someone who has multiple jobs and side gigs, it doesn’t matter to the lender.

Benefits of Getting A Home Equity Loan if You Have No Income

Most people may think that a loan is a bad idea for someone with no income and that is true in most cases. A home equity loan is different though. For one, it allows a homeowner to use their home equity without having to sell the home. As long as the homeowner is paying the loan and adding to the equity, any value is added to the homeowner’s wealth and not vanishing into thin air. Another benefit is that it allows a homeowner to borrow a larger loan amount, up to several hundred thousand dollars or perhaps millions based on the value of the home equity. As a secured loan, it also enjoys lower interest rates and often flexible payment terms. These benefits are on top of a relatively easy application and approval process.

Get A Home Equity Loan Now

Whether you have no income now in between jobs or projects, you can apply for a home equity loan at Homebase Mortgages. Our offices are open and approving applications within 24 hours or 1 business day. Contact us today if you have any questions!

 

Home Equity for Bad Credit Debt Consolidation Loans

One of the most valuable tools for managing debt that homeowners can enjoy is using a home equity loan for debt consolidation of bad credit. When you have bad credit, the effects can follow you for years and across multiple areas of your life. The faster you can get rid of bad credit debt, the better it will be for your finances and that’s where using home equity can come to your rescue.

Benefits of Debt Consolidation for Bad Credit

You can use your home equity to get a debt consolidation loan to allow you to combine your smaller bad credit debts into just one monthly payment that you can manage with better ease. With fewer debts to keep track of, you are less likely to miss payments and incur penalties. If you can stay organized and pay on time, your credit score will soon improve and will be a lot better in the long run. You will be able to pay off your debt much sooner and be less stressed as well.

How Difficult Is It to Get A Debt Consolidation Loan for Bad Credit?

Lenders want to know that you can pay before they give you any loan. If you have bad credit, then it means that you have trouble paying debt. This does not make you look like a good borrower from a lender’s perspective. This is also why most options for debt consolidation loans charge high interest rates. Lenders want to make sure that the risk they are taking by lending to you will be covered by the extra fees. While this makes sense, it can be a source of frustration for those who want to fix their bad credit using a debt consolidation loan. Higher interest means a longer payment length and if the interest is too high, it can defeat the purpose of trying to consolidate the original debt. A way to get around the high interest rate for debt consolidation loans is to use a secured loan with your home equity.

Borrowing against home equity for debt consolidation comes with a wallet-friendly interest rate. It uses your home equity as collateral and allows you to temporarily tap into your home equity to pay your bad credit debts without having to sell your home.

Home Equity Loan for Debt Consolidation When You Have to Deal with Bad Credit

A home equity loan can help fix our bad credit via debt consolidation and offer some benefits. It provides you with an easy application process that usually just takes days. It doesn’t look into your credit history as much and the main consideration is how much home equity you own. Because this loan is secured by your home equity, the interest rates are much more reasonable. It helps you pay off multiple debts that are eating up your earnings through interest and other fees. It is easier to manage than other types of debt.

Ready to use your home equity to consolidate your bad credit debts? Contact us at Homebase Mortgages today!

 

What Are The HELOC and Home Equity Loan Requirements in 2021?

One of the smartest ways to fund financial projects is to use home equity if you’re a homeowner. You can convert your home equity into accessible cash to pay for debt consolidation, home improvement, or other large expenses by applying for a HELOC or a home equity loan. Below are what you may need to borrow from your home equity in 2021.

Requirements to Borrow Against Home Equity in 2021

Both HELOCs and home equity loans got their own set of advantages and disadvantages that you should consider to see which would be a better fit for your financial needs, your budget, and your lifestyle. With this said, their requirements are nearly the same although there will be slight variations by lender. Generally speaking, you will need a reliable payment history, sufficient income to cover what you will borrow, good credit, a good amount of equity in your home, and a low debt-to-income ratio.

A Reliable Payment History

A reliable payment history tells lenders that a borrower has a lower chance of defaulting compared to other people. Lenders may look at how often bills are paid on time and not just focus on the credit score. Late payments and a history of non-payment will make it quite difficult to borrow.

Have Sufficient Income

Not all lenders will have specific income requirements to qualify for a certain loan but most will take your income into consideration when evaluating your application. You can improve your chances of getting loan approval by boosting your income a year or at least half a year before applying for a HELOC or home equity loan. Make sure that you can verify your income too.

Attractive Credit Score of About 600 or Better

Above 700 will be the best number but there are instances wherein scores of 621 to 699 breezed through application as well. It is possible to qualify with a lower score but that usually requires a higher income and more home equity. Note that the higher your credit score, the more negotiating power you may have for the interest rate charged to you.

Home Equity of Around 15% to 20% if Not More

Your home equity is the percentage of the value you truly own in your home. It is the difference between your property’s current market value minus all existing debts you have on it. The higher your home equity is compared to the current market value of your home, the better your chances of getting approved for a HELOC or a home equity loan because lenders want to lend to someone with a better loan to value ratio.

Lower Than 43% Debt-to-Income Ratio

A low DTI or debt-to-income ratio is desired. This number varies from lender to lender, with some requiring that debt payments should be less than 36% of someone’s monthly income. Other lenders can tolerate as high as 50% but the sweet spot is around 43%. To estimate your DTI, you need to add up all your monthly debt payments and divide the sum by your gross monthly income. If you find that your DTI is too high, you can improve that by paying off as much debt as you can with a focus on debts that charge the highest interest rates.

Should You Get A Home Equity Loan or A HELOC in 2021?

You may qualify for both, but one will be better than the other. If you are not sure what to use, contact us and we will answer any questions that you may have so that you can make a better-informed decision to access your home equity in 2021.

 

What It Means to Build Equity In Your Home

Each payment you make towards your mortgage as a homeowner goes into building your home equity, making it a powerful financial asset that is just waiting for you to tap at the right time. As you make more payments, your home equity grows, same as it grows when property values increase in your area. But what does it mean to build equity in your home? What are the benefits of building home equity? What good can this do for your finances?

What is Home Equity?

Your home equity is the value or the portion of your home that you own. It is calculated by subtracting your mortgage debt from the current market value of your property. For example, if your home is currently worth $1,000,000 and you still owe $290,000, then your home equity is $710,000. This value is what you own and can access via a home equity loan if you choose to tap your home equity.

What Are Ways to Build Home Equity?

The main ways to build home equity are to decrease your mortgage debt or to increase your property’s value. You can achieve these by the following:

  1. Starting with A Big Downpayment

What you pay as a downpayment will instantly boost your home equity. Yes, there are ways to own a home with as little as 0% to 3% downpayment but if you plan to access your home equity soon, starting with a downpayment of around 20-30% can help you achieve that.

  1. Pay More of Your Mortgage

Although mortgage payments typically come with a schedule, there is nothing wrong with paying more when you can afford it. Just paying off an extra month every few months can make a huge difference because you will keep decreasing the amount that you still owe. You can also opt to pay on a bi-weekly basis instead of monthly. This way, payments will be more budget-friendly while making it easier for you to pay off more of your mortgage faster.

  1. Increase the Property Value

Your home is an investment in itself. Anything you do to improve the property will increase the home’s market value and build home equity. It may not be possible to get the same exact returns as what you invest but living in an improved home can also improve your life and work performance, therefore helping you achieve more and thus, still gain wealth overall. If the value of possible returns is a big concern, it is best to consult with a real estate professional to determine which home improvement projects can increase home value the most and go from there.

  1. Refinance Your Mortgage to A Shorter Term

Making your loan term shorter means that you pay more per period. It also means that more of your payments go towards the principal every pay period.

Use Your Home Equity

Once you’ve built your home equity, you can choose how you want to use it and access it. One good way is to get a home equity loan. With a home equity loan, you can use your home equity without having to sell your home. Contact us at Homebase Mortgages when you are ready to use your home equity!

 

5 Home Remodeling Ideas that Increase Home Value for Better Home Equity

Improving your home’s value is something you should always have in the back of your mind when you’re a homeowner. Better home value means you will have an easier time selling when you decide it is time to let go. It also means increasing your home equity so that you can tap into it in case you need some extra cash in the future. More so, do you know that you can use your existing home equity to fund home remodeling ideas? That’s investing back in your home! Below are some home remodeling or home renovations ideas that you can go for if you want to increase your home equity.

Bathroom Upgrades and Addition

Building another bathroom can add a huge value to a home, but if you cannot do this, adding upgrades such as new cabinetry or overhead storage can be great as well. Sometimes refinishing a bathroom is all it takes to add great value to a house especially if it is the master bathroom or the guest bathroom downstairs.

Kitchen Makeover

A kitchen remodel doesn’t have to mean spending so much money on appliances and finishes that look like they should be in magazines or fancy hotels. A little paint goes a long way, as well as resurfacing old counters or replacing outdated hardware. Just changing the lights and other fixtures can be friendly on the budget and still have a huge impact not just on aesthetics but also on function.

Room Reinvention

Building a new room can be very expensive but you can achieve almost the same results and add value to your home if you convert an unused room into a more functional one or decide to divide a huge room into two (or combine small ones too by knocking down partition!). If you got some unfinished attic or basement space, you can convert those spaces into an office, an additional bedroom, or a family room that you can enjoy.

Go More Energy Efficient Windows

Energy bills are usually expensive. This is why savvy homebuyers look for homes with energy efficiency built-in and are willing to pay more for such home, bringing the value of homes that are energy efficient significantly higher. Some people may balk at the idea of spending $7,500 to $10,000 to replace windows with more energy-efficient ones but the expenses can be easily recouped because not only does it add to the home’s perceived value, it also saves homeowners a few hundred dollars per year for an average home.

Update Insulation

Good insulation can save homeowners a few thousand dollars a year in power bills. More so, bad insulation will be noted by home inspectors in their reports and will bring down the value of the home. By making small changes to improve home insulation such as adding extra insulation in the attic for a couple of hundred dollars, you can save hundreds to thousands of dollars a year plus make your home more attractive to potential buyers when it is time to resell your home.

Improving your home value doesn’t have to cost a lot. Think of it as an investment towards your home equity that you can tap if a need arises in the future. If you want to use your existing home equity to pay for home remodeling, feel free to contact us and we’ll be happy to assess what we can do for you.

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.

How to Finance Home Improvements to Improve Home Equity

Home improvement projects to improve home equity brings in good returns, however, they come at a cost too. Luckily for homeowners, they can take out a line of credit, get a home equity loan, or try a refinance to fund such projects. If you’re wondering what financing option would be best for you, read on below!

Home Equity Loan

A home equity loan gives you access to a lump sum that is taken against the equity if your home. This has a lower interest rate than the other financing types mentioned below (generally speaking) and gives you the financial power to fund extensive or expensive home improvement projects.

Home Equity Line of Credit

A HELOC is a way to get access to a considerable amount of cash for a set period of time known as the draw period. After the draw period, you’ll be paying what you owe during the repayment period (which will usually be more than a decade) which will give you ample time to prepare your wallet and budget for payment. This also means that if you use the funds from a line of credit in improving your home, you’ll be breaking even by the time payment is due.

Mortgage Refinance

The beauty of a mortgage refinance is that it will allow you to sort of re-do an old mortgage that was made a few years ago if current market rates are lower. This will result to lower interest and lower monthly payments which will no doubt be easier on your budget and will help free up some funds for other use.

Another type of refinancing is a cash-out refinance which will let you get cash from your home’s equity, as much as 80% of your home’s equity. This is tempting for sure but be warned that this is a bigger loan wherein you’ll be using your home as a collateral so you might end up losing your home if you’re not careful; however, a cash-out home refinance can still work in your favor if you use the funds to significantly improve your home’s value through smart home improvement projects.

Personal Loan

If you have the capability to pay back a loan ASAP and don’t want to use your home as collateral, then a personal loan might be the right option for you. It is easier to get if you have a good financial record though the interest rates are often much higher than the other types of loans mentioned earlier; however, you’ll get better control.

Credit Card

If you really cannot use savings to finance a home improvement, then using your credit card could be an option. The interest rates will be really high compared to the types of loans mentioned earlier but you can work your way around this by using cards that offer great perks or rewards for every dollar spent, better yet, use your card to buy home improvement materials in stores that have a rebate system.

Increasing your home equity can be done with some smart decisions. Unfortunately, even smart decisions cost money. If you need help tapping your home equity to finance home improvement projects, we might be able to help. Contact us today!