Borrowing Against Home Equity: The Facts

How to borrow against home equity is a common question from homeowners these days. In these trying times, homeowners are trying to find more ways to leverage their homes to cover their other financial responsibilities. One good way to accomplish that is to borrow against your home equity.

Although many Canadians have substantial savings, unforeseen expenses can come up and pose problems with a family’s cash flow. Tapping home equity is a good financial solution for those who have an immediate need to cover a large expense; provided that the homeowners familiarize themselves with the process to avoid potential pitfalls.

But, What is Home Equity?

As a homeowner, your home equity is the value of your home that you truly own. This represents the money that you’ve paid towards your mortgage. You can estimate it by subtracting what you still owe from the current market value of your home. The higher the market value of your home, the higher your home equity will be provided you follow your mortgage payment schedule.

Use Your Home Equity

Once your home equity has been determined with the help of a professional appraisal, you can apply for a home equity loan with the lender of your choice. Know that different lenders can have vastly varying requirements and that you’ll have to qualify with them to get approved for a home equity loan. This may also vary with the type of home equity loan that you are applying for. There are 3 common ways for you to access your home equity. You can try refinancing your mortgage, applying for a HELOC, or opting for a second mortgage.

A second mortgage will gain you access to up to 80% of your home equity. This is a type of home loan that will use your home equity as collateral; therefore, note that failure to pay may result in losing one’s home.

A home equity line of credit or a HELOC will allow you access to funds backed by your equity. It functions like a credit card with a high revolving limit. A HELOC is a great choice if you know that you’ll have plenty of small but recurring expenses that cannot be covered by your savings or income. Lenders are usually more lenient for those applying for a HELOC and oftentimes, you’ll only need minimum 20-30% home equity to qualify for one along with a good credit score.

A mortgage refinance can be a good option if you are willing to break your first mortgage and pay the corresponding prepayment fees. You may be able to recoup the fees with the savings that you can get from a mortgage refinance. Refinancing your mortgage typically means availing of a much favourable interest rate and better terms overall.

Using Your Home Equity Loan

Most people use their home equity loan to invest, fund big home renovation projects, pay for higher education, or to start a new business. With the right lender who won’t take advantage of you, you’ll be able to use your home equity to attain a better financial standing that you can enjoy for years to come. If you’re looking for an honest lender to borrow against your home equity, contact us at Homebase Mortgages and our mortgage professionals with assist you with what you need.

 

 

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.

Smart Ways to Tap Your Home Equity

Homeowners know that they do not need to sell their home these days to access some cash. There are ways to access home equity without passing ownership of the property via home equity loans and some can be very easy and convenient compared to other options. However, just because home equity is available doesn’t mean that one can simply withdraw money and use it for anything. Note that when you tap your home equity, you are borrowing against the value that you own in your home. This means that not paying can result in losing one’s home plus facing possible penalties and interest. So, what are smart ways to tap your home equity?

There are 3 Popular ways to access home equity via a secondary loan. They are as follows.

Second Mortgage

Typically referred to as home-equity loans, second mortgages are as structured as primary mortgages. The key difference is that a second mortgage is not the most prioritized loan in case of a default, and that the interest rate is higher than that of a primary mortgage. Second mortgages are often amortized and have a set term for payment such as 10 years or 15 years. The payment is set up like a primary mortgage in the sense that it is divided into interest and principal. Once used, they cannot be drawn upon again.

Home Equity Line of Credit or HELOC

Currently very popular, a HELOC is the most flexible type of secondary home loan and can be approved without any funds needing to be released. This loan allows a homeowner access to a line of credit whenever the homeowner may need it and comes with revolving credit, almost like having a credit card with a very high credit limit. Most HELOCs come with a debit card or a checkbook for easy access to funds. Borrowers only need to pay interest on the actual amount that has been drawn and do not come with closing costs. A HELOC is typically not for those who are not very financially savvy because it is easy to get by with paying only interest and then ending up with too much borrowed amount after some time. The convenience of accessing funds with a HELOC can be a problem for those who cannot limit their spending.

Cash-Out Mortgage Refinance

This option is often used by people who want additional funds or those who want to avoid primary mortgage insurance. This works by refinancing the home for a larger amount and then withdrawing or cashing out the difference in cash. This loan often comes with a high closing cost.

What is the Best Way to Access Home Equity?

Because of their pros and cons, each one of the ways of tapping home equity discussed above can be a smart choice for anyone depending on very specific situations. The key is to make sure that you consult a mortgage professional and be honest with yourself regarding your needs and financial capabilities to avoid making decisions that won’t be good long-term.

Using home equity to have access to funds is a smart way to have cash without selling one’s home and while avoiding high-interest from other loans. Contact us at Homebase Mortgages if you need some assistance to decide which home equity loan is best for your needs.

 

Should Banks Be Given More Power to Refinance Mortgages and Approve Home Equity Loans?

The COVID-19 pandemic has been going on for weeks and our economy has been taking the hit for the same span of time, but is there more that can be done to help people deal with job losses, decreased business revenue, and less billable hours at work? Experts fear that even if lockdowns and quarantine are to end soon, the near standstill of a few weeks will have long-term consequences for everybody’s cash flow. Businesses may continue to see decreased income for the rest of the year, how then will people cope with a reduction of income?

Time for a Change?

Some financial insiders are calling for easier ways for people to get home equity loans and refinance mortgages. Traditionally speaking, banks and other major financial institutions are very strict with their terms and often will not approve applications of people who are currently unemployed. Some banks also have limits on the maximum number of applications they can approve in a month and have specific standards when it comes to credit scores. Given that the COVID-19 pandemic caused a lot of people to lose their jobs and live off of their credit cards, a significant number of people in need not only have lost their sources of income, but now also suffer from less than attractive credit score. These people need a break now more than ever, so what is the solution? Perhaps banks could relax some of their requirements and opt to approve more mortgage refinancing and home equity loan applications for a limited period?

Will This Help?

It is no secret that lending requirements in Canada has been made stricter recently. This was to put in more checks in balances for the economy. However, with the COVID-19 pandemic, the current situation is entirely different and need special considerations.

The effects of recent mortgage restrictions have been truly felt by some in the past year, and no doubt felt by more who are affected by job losses and decreased income related to the pandemic. If big financial institutions will be allowed to be a little bit less strict these days, this will allow more people access to financial help that they need to get back on their feet. If the government can find a way to relax regulations, lenders can be exempted from some regulatory liabilities and have more freedom. Then perhaps a new category of home equity loans specific for COVID-19 response can be created for qualifying homeowners.

Is There Time Left?

The fact is that the economy will still face a slowing down whether the pandemic stops tomorrow, next month, or next year. The best time to think of financial solutions to prevent further damage to jobs and businesses is now. If home equity loans are easier to avail of and if there are simpler ways to qualify for a mortgage refinance, it will be easier for a lot of people to financially recover and help jumpstart the normalization of flow of resources once pandemic restrictions are lifted and people can go back to work again.

Are you a homeowner looking for a way to tap your home equity but have been turned down by banks for a mortgage refinance or a home equity loan? Contact us and let us tell you of the ways private mortgage lenders can help you at Homebase Mortgages.

 

HELOC-toronto

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!

Build Your Home Equity Faster Using These Tips

Because buying a home is oftentimes one of the most expensive purchases any homeowner can make, it should also be thought of as one of the biggest investments that should be nurtured and grown as part of your financial planning for your future. This can be done by building one’s home equity and making sure that the home’s value increase over time instead of depreciating. The good news is, home value appreciation happens on its own for most Canadian neighbourhoods. As one of the most progressive nations in the world, real estate in Canada continues to increase in value as is the trend for the past decades. But how can a homeowner help with building one’s home equity? Are there ways to fast-track this aside from making sure that mortgage payments are made on time?

Why Build Home Equity?

Home equity is like a specialized savings account. Once a homeowner has a certain percentage of home equity, the homeowner can access it to fund other investments such as paying for education, starting a business, placing downpayment on a rental property, or even for renovating the existing property to further drive up the home’s value. The higher the value of the home, the higher the value of the home equity built by the homeowners as well.

The first step in building home equity is to be aware of how much home equity you currently have. Bring out the calculators and see how much you have to better plan ways on building more home equity and see which of the tips below are applicable for your specific situation.

Tips to Build Home Equity Faster

Tip #1 – The first tip to building home equity may be a little too late but worth to note if you’re still planning to buy a home. You must try to make the biggest downpayment that you possibly can. With a big downpayment, your mortgage interest may turn out significantly lower and will allow you to make payments count more. Your downpayment is also your instant home equity.

Tip #2 – Get a short mortgage. If you are given a choice between a 30-year mortgage and a 15-year one, pick the shorter mortgage as long as you can afford the monthly payments. The mortgage may be higher but it also means you will gain home equity faster and save on interest.

Tip #3 – Just pay more on your mortgage. Depending on your mortgage, paying your mortgage as much as you want to pay for each month can work wonders. This is especially true if your payments are credited properly against your mortgage principal. You can pay more on your mortgage by allocating bonuses or any extra income for payments. You’ll be surprised at how big of an impact a few years of paying extra mortgage can make for your overall financial health.

Tip #4 – Spend on home improvement to increase your home equity. Remodeling and renovating can cost a lot, but because they add value to your home, they can drastically increase your home equity.

Once you’ve built-up your home equity, you’ll be in a better financial position and have easier access to funds should you need them. You can even use your home equity as a retirement fund! If you’re interested to know more about accessing your home equity in the future or further building your home equity now, do not hesitate to contact us at Homebase Mortgages.

 

 

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.

8 Affordable Home Improvement Hacks to Boost the Value of Your Home

Are you trying to find home improvement hacks that will help you sell your home, add value to your home, or perhaps just make your home a lot more enjoyable? We’ve got what you’re looking for below!

Front Door Facelift

A beautiful piece of hardware on your front door will elevate how it looks and add extra class to your home. Consider using this idea together with a front door paint job or if you’re not able to change your hardware, try painting your existing one with a faux brass finish. Instant facelift!

Amp Up Your Curb Appeal

You don’t have to have a green thumb to have a pretty lawn. You can simply have a professional install sod and perhaps plant a few low maintenance evergreen plants for you. Aside from keeping your walkways clean, a touch of well-maintained green is all you need for reasonable curb appeal.

Go for a Kitchen Update

A kitchen update doesn’t have to mean an expensive renovation. You can spend just a few hundred dollars for changing some light fixtures, painting the cabinets, and changing the hardware. If you’re willing to spend a few thousand dollars, you can get your cabinets and some countertops refinished too.

Add an Extra Bedroom

If you have an extra room for an office space or a den, you can easily convert that into a bedroom by installing or building a closet. An extra bedroom can significantly increase your home’ value and make it easier to sell.

Give Appliances a New Life

Do you know that you can order new face panels or doors for some appliances to have them all match? Matching appliances instantly upgrades a kitchen.

Invest in More Storage

Adding storage space and building extra closet are great ideas especially for older homes. With the right design, you can even make everything look like they were custom built with the home, increasing your property’s value.

Change Up the Lighting Fixtures

Switching to modern designs for lighting fixtures or adding a timeless chandelier can do wonders to any room of your home. Not to mention make your home a lot more appealing to buyers when it’s time to sell too.

Bathroom Update Is Always A Good Idea

Bathrooms bear the brunt of a home’s wear and tear so it follows that it will benefit the most for updates as well. New fixtures, new mats, and even a new toilet seat can go a long way without costing too much. Regrouting tiles may be a great idea too if budget permits.

Aside from the above home improvement hacks, cleaning your carpet or refinishing your old wooden floors will likewise give you plenty of returns for minimal investment. The secret is really just choosing the home improvement projects that your home truly needs and prioritizing the ones that will give you the most returns for your investment.

Want to consult with mortgage experts about the best ways to boost and use your home equity in the future? Contact us and we’ll be happy to talk to you about using your home equity for a loan. Our services include home equity loans, second mortgages, mortgage refinancing, and private mortgages.

 

7 Home Updates That Millennials Want for Better Value

If you’re a homeowner who has any plan of selling your home in the future, then it pays to know what your target market may look for when you’re finally ready to make a sale. If you own a mid-range home, then your most likely future home buyers will be millennials. This is an important detail to note if you have plans to renovate your home or update it before a sale. You’ll want marketable features that will make your home more attractive to your target buyers if you want to increase your home equity or go for updates with the best value. Below is a list of popular home updates that millennials are looking for.

Larger Kitchen Areas

Home buyers these days are a fan of the open layout concept. More so, the kitchen is no longer perceived as a private room of the house. It is now common for families and friends to use the kitchen as the main hub for gatherings. Making the kitchen more open and spacious is a no-fail home update, specially if wanting to sell to millennial home buyers.

Smart Home Features

If you’re looking for home updates that give a great boost for home equity, you can’t go wrong with incorporating smart home features. Not only are millennial home buyers a fan of this kind of home update, but you’ll also surely enjoy living in such a home before you sell.

Bathroom Makeover

The bathroom is usually how you can tell if a home is particularly old or dated. By updating the bathroom with either minor upgrades or a full renovation, you can change the look and feel of the entire house.

Home Office Space

You don’t need to have a closed off room to have a beautiful and functional home office. If you can dedicate a space for working at home and add more storage, this home update will surely attract future home buyers. In fact, you might never want to sell your home after!

Energy Efficient Features and Appliances

It might hurt your wallet to pay for home improvement more so when you will be using your home equity. However, going for energy efficient appliances and features is an investment that will pay for itself. It adds value to your home equity and helps you save money while the home is still yours.

More Storage

Most people do not think of adding more storage when trying to find home improvement ideas that provide the best value. A home with a huge storage capacity gets a bump up in home equity because built-in storage can make the home seem more spacious and refined.

Dedicated Laundry Rooms

Believe it or not, even those who are looking for smaller homes can appreciate a home with a dedicated laundry room. It keeps the whole home a lot more organized and better functioning overall.

Are you planning to use your home equity for renovations or just looking for home improvement ideas that provide the best value when building your home equity? If you’re a bit short of cash and need help with any of these, contact us today!

 

Is It Worth It to Pay Your Debt with Your Home Equity?

Trying to manage several debts can be a huge headache more so if you have to deal with debt collectors and are already financially stressed out. It might be best to consolidate your debt to make payments easier to manage as well as get rid of unnecessary stress. More so, debt consolidation can save you a lot of money on interest!

Pros of Using Home Equity for Paying Debt

If you’re a homeowner, the home equity you’ve built up over time is a huge asset that you can use to help you manage your debts. Using home equity for debt consolidation comes with a number of advantages such as:

  • Save on interest. Getting a home equity loan to pay for high-interest debts and thus, effectively converting them to a more manageable loan with a lower interest rate can save you upwards of tens of thousands down the road.
  • Pay your debts faster. Because more of your money will go towards the payment of your debt instead of going to paying for high-interest, you will be able to save not just money but also time on your road to becoming debt-free.
  • Manage monthly payments better. Fewer monthly payments to think of means that it is near impossible to forget paying certain bills. This also means less stress because you have fewer deadlines to think about and less possibility of being fined for paying a certain bill beyond the due date.
  • Get a bigger loan. You may apply for a personal loan to consolidate debt but if you already have quite a bit of debt, you may not get approved or will only be approved for a small amount of cash. If you use your home equity by getting a home equity loan, you can get access to as much as 80% of the value of your home equity. This places you in a better financial position to fix things and improve your credit score too.

Cons of Using Home Equity to Pay Debts

Nothing is without disadvantages more so when it comes to finances, and the same holds true for using your home equity for paying debts. No matter what type of home equity loan you apply for, it is still a ‘debt’ that you will have to pay later. It doesn’t make your financial issues go away, rather, it only makes things easier to handle. Don’t forget that a home equity loan uses your home as collateral. This means that failure to comply with the terms can mean losing your home. This is why it is best to consult with professionals regarding what type of home equity loan can help you meet your needs and borrow from a lender who’ll agree to terms that are within your means.

Are you shopping for a lender or not sure what home equity loan to apply for to consolidate your debts? Contact us today with your details and we’ll get back to you as soon as we can!