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!

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.


Pros and Cons of Home Equity Loans

Getting a home equity loan is not a decision that can be taken lightly. As a type of second mortgage, applying for a home equity loan means borrowing against your home equity or getting a loan with your home as the collateral. Inability to pay back the loan can mean losing one’s home.

How to Get a Home Equity Loan

Because you will be borrowing against the home equity of your house, the first step is to have an idea of your home equity’s value. You can estimate your home equity by subtracting existing balances from the current estimated market value of your home. You can expect to access as much as 80% of your home equity if you’re approved but note that your application will be based on a professional appraisal of your house’s market value, your loan to income ratio, and other factors.

Pros of Home Equity Loans

There are many positives in getting this type of second mortgage. The interest charged for your loan can often be claimed as a tax deduction. You will also end up paying less in interest compared to other loans such as credit card debt and personal loan because this loan is secured by your home. If you have poor credit, you can still qualify for a home equity loan and get a substantial amount of money too, a lot more than if you choose a personal loan or a business loan. Perhaps the best aspect of this type of second mortgage is getting a lump sum of money once approved. For people who are good at managing their finances and planning how to use cash, a lump sum can offer the extra control that they might need.

Cons of Home Equity Loans

The biggest negative aspect of this type of second mortgage is a high risk of losing your home if you fail to repay according to the terms. Another con is needing to pay off immediately if selling the home and having to pay closing costs once approved. The loan will have to be paid off with fixed monthly payments as well that usually come with a fixed interest rate. In comparison with a HELOC that is more flexible, typically comes with a variable interest rate, and usually paid off later, a home equity loan can be difficult to manage for some people.

Applying for a Home Equity Loan

Before you apply with a lender, it is wise to compare the terms, estimates, and rates of a minimum of three lenders. You can try getting quotes from a broker, a bank, and a private lender to see which will be more beneficial for you. Note that applying for a home equity loan is not a one-day process. It can take several days for the money to be made available to you from the date of application because your requirements will have to be processed first, assessed, and approved. Starting with complete requirements will make the process significantly faster.

Overall, the pros and cons of home equity loans should not stop you from applying for one. If you meet the requirements and can find a lender with payment terms that you can manage, a home equity loan should work for you. We’ll be happy to assist get you approved for a home equity loan at Homebase Mortgages. Contact us at your earliest convenience.


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.



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.