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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.

 

 

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.

 

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.

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!

 

How Home Equity Loans Can Fund Hobbies For Seniors

A home equity loan is a type of loan taken on a home’s equity. It can be used by anyone who owns a home with substantial equity. Most people who have such equity are seniors who are in or near retirement age because they’ve been paying for that equity for quite some time.

When someone is in retirement age or have altogether retired, their income will not be as much as they were used to. This puts a halt on enjoying life’s simple pleasures such as traveling or investing in a hobby, but only if one has no access to any other source of funds.

The beauty of a home equity loan is that as a senior, you will have more reasons to look forward to retirement knowing that you’ll have something to fall back to should you have need for extra cash.

So Now You’re Retired!

Retirement gives you quite a lot of free time to do what you want such as pursue hobbies or activities that you’ve always wanted to. This is great, but hobbies and experience-enriching activities come with a price tag.

Of course some hobbies are next to being free such as watching the birds at the park, knitting, or starting a backyard garden. Learning to fly an airplane or sailing a boat aren’t. In fact, some of the most popular hobbies for seniors are a bit on the pricey side. Know more about them below!

Popular Hobbies for Seniors

Hobbies are no way frivolous. Each activity adds quality to one’s life and can improve health, both physical and mental. The most popular hobbies for seniors are as follows:

  • Boating and fishing – boating and fishing can go beyond the rent of a boat or the purchase of fishing equipment. Serious hobbyists buy their boats and that can also net a bit in terms of maintenance. This is really worth it though because you’ll end up saving in the long run.
  • Dancing – Unless you’ve been a dancer in your younger years, learning how to dance in retirement will mean taking a few lessons plus night outs with friends.
  • Hiking – Hiking would incur some traveling if you’re not anywhere near scenic spots or hiking trails. You’ll also need proper gear like shoes and gloves.
  • Hunting – just like any other hobby, hunting will need investment in both time and equipment. Guns and gear for practice and actual hunting may not be the same so you will have to purchase both and perhaps even start a small collection.
  • Traveling – By far the most popular and also the most expensive hobby for seniors, traveling will incur expenses even when you only choose to go for road trips and stay with friends. Overseas travel would mean a stay in a hotel or some form of paid accommodation.

How Does a Home Equity Loan Benefit You?

Applying and getting approved for a home equity loan will allow you to tap into your equity so you can enjoy more of your golden years without sacrificing anything, especially your quality of life. It is similar to taking a withdrawal from an investment that you’ve made throughout the years. You’ll be able to take out up to the limit a loan provider will allow. You can also stay in your home until a change of ownership occurs such as when you decide to sell or pass the property to someone else.

Excited to live the life that you deserve with the use of your home equity? Contact us and apply for a home equity loan today!

Got a Good Credit Score and Still Got Rejected for a Home Equity Loan?

There is a common misconception that a good credit score means that someone will surely be approved for a home equity loan. The truth is, rejection for a home equity loan isn’t exclusively for those with bad credit. A good credit score can prove beneficial and help someone get a mortgage approval but it is not a sure way to gauge whether you will be approved for a home equity loan or not. At the most, a good credit score is only one of the indicators that lenders use to determine if a potential borrower is capable of paying back a loan. If you have a great credit score and still got rejected for a home equity loan, any one of the following could be the culprit.

Consider Your Income to Debt Ratio

If you are not making a lot and racked up a significant amount of debt, then this could be why you got rejected for a home equity loan. Lenders will want to make sure that you can afford to have more loans given your current income status. They often have minimum and maximum requirements for debt in relation to income. Note that most lenders have a limit of 43% to 49% debt to income ratio.

Having Low or Unreliable Income

If you are self-employed or have a highly fluctuating income, some lenders will be very wary of lending to you as well. Traditional lenders see each loan as an investment. An investment that won’t pay off or may have problems is a bad investment for them. This is why lenders don’t just ask for existing bank balance or a statement of account these days, they want a solid proof of income that goes back months or even years more so if someone has an inconsistent or unreliable income source.

History of Bankruptcy or Foreclosure

Do you know that your credit score will be affected for a period of 6 years since the date your bankruptcy was completed? More so, filing for it twice will mar your credit report for around 14 years. This is why it is possible to get rejected for a home equity loan even though bankruptcy or foreclosure may have happened to you so long ago in the past and things are all going well now.

Get Approved for a Home Equity Loan

With the above factors said, you can still get approved for a home equity loan even when you’ve been previously declined provided that your financial situation improves. For example, once your credit score goes to between 300 and 900, it can show that you are capable of getting bills paid on time. Your odds will improve by a lot once your credit score reaches 680 because that is the minimum score most lenders go by. Note that an application denial and a repeated checking of your score have no impact on your actual credit score. You are free to apply again when you’re ready.

Are you unsure about applying for a home equity loan because of a previous denial? Contact us at Homebase Mortgages! Talk to our Canadian mortgage professionals so we can assess how to best assist you as well as what can be done to increase your chances of home equity loan approval.

 

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!

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.

 

Home Equity Loans in Canada

Living on a fixed income can be very difficult for a lot of Canadians, more so for retirees or those nearing retirement. Financial stress is no joke when you consider rising prices of basic needs, possible health issues with expensive treatments, and other unexpected expenses that may come up. It is no wonder that more and more homeowners are finding it necessary to tap into their home equity to help manage their financial situation.

Why Use Home Equity?

Home equity is the value that a homeowner owns in his or her home. It is computed as the difference between the home’s current market value and any existing debts on the property. As a homeowner pays the mortgage on his or her property, home equity is built larger and can be later accessed via home equity loans when needed. Homeowners may choose between a HELOC, a second mortgage, or a reverse mortgage as types of home equity loans.

What is a Home Equity Loan?

Any home loan that uses the home equity as collateral can be called a home equity loan. In Canada, home equity loans usually offer lower interest rates than unsecured loans and allow the borrower to borrow more since the loan is secured by the home’s equity. Oftentimes, a home equity loan also has flexible repayment options and are easier to qualify for than unsecured loans.

To get a home equity loan, you may apply to traditional lenders such as banks or find a mortgage professional to help you connect with private lenders. Note that loan requirements may vary widely depending on the type of home equity loan that you want to apply for. Most people apply for a HELOC or a second mortgage.

What is a Second Mortgage?

Any home equity loan taken on a home with a primary mortgage can be considered as a second mortgage. The amount that can be borrowed on a second mortgage is limited by several factors, the primary one being the value of the home equity.

For a second mortgage, the borrowed equity is given as a lump sum and paid off over a set period of time. The interest rate can vary greatly depending on the lender and the exact circumstances of the loan.

What is a HELOC?

A HELOC is a home equity loan that is taken on a loan with an existing mortgage and is granted as a revolving line of credit. With a HELOC, the homeowner can reuse the funds as it gets paid and only gets charged interest on the actual amount used. HELOCs are usually approved for people with solid income and a good line of credit.

Uses for Home Equity Loans in Canada

Most Canadians use home equity loans for debt consolidation, home renovation, and higher education. Some use it to have a more enjoyable retirement or to give financial assistance to family members who are short on cash. Some people use home equity loans to fund a business or for investment purposes.

No matter what use you may have for your home equity loan, you must make sure to borrow only from lenders who won’t take advantage of your financial predicament. If you need help securing a home equity loan, contact us at Homebase Mortgages.

 

Should You Apply for a Home Equity Loan or Get a Line of Credit?

Making the choice between getting a line of credit and applying for a home equity loan is a tough decision to make. Both will be tapping into your home equity, which means that to get either loan, you’ll be using your home as collateral. However, getting a home equity loan or applying for a line of credit is certainly smarter and easier than getting a personal loan. If you need money to pay off high-interest credit card debts, send your child to college, finish your basement, renovate your home to bring up its value, or invest, using your home equity by accessing it through a loan can really give you the breathing space you need with your finances.

Why is choosing between a HELOC and a home equity loan such a challenge? Since both loans tap home equity, shouldn’t they be basically the same? The reason why it can get confusing to pick between a home equity loan and a HELOC is because both of them have a lot of benefits, but which one will be more beneficial is based on case to case scenario. Their key differences are explored below.

Interest Rates

A HELOC typically has a variable interest rate that is dependent on a prime rate. This means that if the prime rate goes down, the payment you need to make also goes down. If the prime rate goes up, then you’ll have to pay more per month.

A home equity loan has a fixed interest rate that takes away the surprise of getting charged more on certain months. You won’t get shocked with higher billing when market rates change. A lot of people find this very comforting and allows them to manage making payments easier.

The rates for both HELOCs and home equity loans are about 50-66% lower than credit card rates. That’s a lot of savings!

Payment Schedule

A HELOC usually has a variable payment schedule or amount. Each month, you will be charged a minimum payment based on your balance. The due date differs by each month too.

A home equity loan follows a monthly payment schedule that has been agreed to in advance. You’ll know exactly when the bill will be due months in advance because it is stipulated in the agreement.

Use of Funds

Lines of credit are used by companies and people to help them cope with erratic cash flow. The flexible lines of credit serve as bridges to fill the timing gap between sources of funds and expenses.

Because funds are given as a lump sum for a home equity loan, the money can be used to fund one-time big expenses such as a wedding, extensive home renovation, property taxes, and consolidating debts.

Do you have more questions that were not addressed above? Contact us to get answers before applying for a home equity loan or a line of credit. Our mortgage professionals will be glad to help and tell you more about ways to use a HELOC and ways to use a home equity loan.