Using Your Home Equity Loan to Pay for a House Remodel

There are many preparations needed to make sure that things go hitch-free when listing a home for sale. One of the best ways to prepare a home for sale is to remodel it before listing to ensure a good price. What makes this not possible for a lot of people is because of how much cash is initially needed to pay for a house remodel. Paying for a house remodel is not easy to pull off for those who are in a limited income or on a tight budget; hence, the rising popularity of taking a home equity loan to pay for it.

Why Use a Home Equity Loan?

Loans come in various forms and with a range of interest rates. Those that have more manageable interest rates are secured loans. A home equity loan is a secured loan that uses the value that the homeowner owns in the home as collateral. Not only does it usually come with a lower interest rate than unsecured loans, it is generally easier to get approved for compared to other secured loans because real estate property holds more value than other possessions.

Using a home equity loan to pay for a house remodel is generally a smart way to make sure that a property stays in tip top shape on a limited income. By keeping a property well maintained, value is preserved and improved. It is an investment that must be done periodically to avoid having to sell the home for lower than the price it was bought for in the future.

When is the Ideal Time to Use a Loan

Ideally speaking, paying cash for home improvement and repairs is the best option. However, for expensive repairs and home improvement projects such as what are needed for a house remodel, it is better to use cash that is not from a source that is needed for day to day living. This is the beauty of using a home equity loan for paying for home repairs and improvement. There is no need to save up or use part of the monthly budget, and instead, simply access the home equity to reinvest back in the home. Yes, using your home equity to improve your home should truly be viewed as an investment and not an expenditure. When done right, it can significantly improve the value of the home and make it more attractive for future buyers should the homeowner decide to sell in the future.

What You Should Note

Remember that there are many factors that can affect a property’s value. Home repairs and home improvement can affect it but location, style, neighbourhood, and floor plan are things to be considered as well. With this said, repairs and home improvement projects or a full house remodel can definitely increase the value of a home, definitely a win!

If you’re considering tapping into your home equity, do not hesitate to contact us at Homebase Mortgages. We will be happy to answer your questions and assist you in picking which home equity loan options might be best for your needs.

Is It Easy to Get a Home Equity Loan in GTA in 2021?

Getting a home equity loan if you’re from the Greater Toronto Area shouldn’t be much of a hassle if you own your home and willing to work with lenders other than banks. It will help a lot too if you have some assistance from mortgage professionals in the GTA like us at Homebase Mortgages.

But First, What Is A Home Equity Loan?

Getting a home equity loan means applying and getting approved for a secured loan that uses your home equity as collateral. To be approved, the homeowner will have to meet the minimum home equity requirement. Banks have very stringent requirements and will usually reject a home equity loan application from homeowners that they don’t think can pay or have a property that is not in a desirable location. For this reason, home equity loans from private lenders are gaining popularity in the GTA and Ontario as well as the rest of Canada more so that they don’t usually scrutinize homeowner details other than the amount of home equity.

Payment Options and Terms for Home Equity Loans in the GTA

A typical home equity loan comes with a 1-year open first mortgage or second mortgage that charges between 7% to 15% for interest. An open mortgage has an option allowing you to pay early without incurring huge penalty fees and can be tweaked to fit your specific financial situation. Your mortgage professional can assist you with getting terms that are unique for your circumstances.

Is There an Upper Limit for a Home Equity Loan?

Your home’s value plus any existing debts you have on your property determines how much you can borrow with a home equity loan. Expect that your Loan to Value Ratio will be calculated by lenders to determine how much they can lend you together with other metrics that they may use.

Why Get a Home Equity Loan?

There are many uses for home equity loans. You can use the money to consolidate debt by paying off your smaller loans with huge interest, saving on interest payments down the road. You can use the funds to renovate your home, set up a business, or pay for expensive higher education. There is no real right or wrong reason to apply for this type of home loan as long as you are not planning on using the money on frivolous things.

Is a Home Equity Loan Different from a HELOC?

Yes. Although both loans use your home equity as collateral, a HELOC is an installment loan that works almost like having a credit card with a huge credit limit. On the other hand, a home equity loan often has a fixed rate and has to be paid within a shorter time period.

Is It Easy to Get a Home Equity Loan in 2021?

Yes and no. Getting approval can be challenging if you go the traditional route by applying to banks. An approval is much easier if you work with mortgage professionals who have the right connections to private lenders who will be more understanding of your financial plight. Contact us today!

 

 

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Are You A Canadian Homeowner? Use Your Home Equity Now!

Owning a home is great! When you own your home, you also build home equity over time as you pay more towards your mortgage even before it is paid in completion. Your home equity is like a timed savings fund that you can tap into once it reaches a certain percentage or value.

How to Know When You Can Use Your Home Equity?

Your home equity is the value that you own in your home if your mortgage is still ongoing. You can estimate it by taking away all debts from the current market value of your home. For example, you have a home that is worth $900,000 on the market if you were selling right now, and you still owe $135,000 on it. That means that your home equity is $765,000. The bigger your home equity is, the more that it proves how responsible you are with payments and so it can allow you to qualify for various home equity loans.

Why Use Your Home Equity to Secure A Loan?

Using your home equity to secure a loan is a smart way to increase your chances of getting approved plus save a lot on interest. Because using your home equity for a loan makes that loan a secured loan, you will enjoy lower interest rates as compared to non-secured loans. Oftentimes, a secured loan also means that you can borrow more, therefore giving you more flexibility and freedom for the uses of your funds.

Should You Get A HELOC or A Home Equity Line of Credit?

If you prefer a revolving line of credit as a way to access your home equity, then a HELOC could be the option you’ll want to go for. A HELOC will let you repay and reuse the amount available in its line of credit until the end of its term. The ceiling amount of the credit line is typically 60-80% of the home’s lending value so it is a significant amount. Another good thing about a HELOC is that you will only pay for the interest of the amount you used plus the fees that are stated in your agreement with your lender at the end of the term. The downside of this is that there will be months wherein you will have a bill and months wherein you may have none which can be confusing for some people.

Should You Get A Second Mortgage?

A second mortgage is the home equity loan option for you if you prefer to get cash in a lump sum for a one-time big expense. Because the funds are fully given to you at the start of this loan, the payment that you need to make each month is a fixed rate as everything has been computed and agreed upon beforehand. This home loan gives you no surprise bills and can make it easier for you to plan ahead.

Have you decided to access your home equity by applying for a home equity loan? Contact us at Homebase Mortgages to send an application as soon as possible. Your application will be processed and approved in as little as 24 hours!

 

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!