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.

 

Have a Bad Debt? Let a Home Equity Loan Take Care of It!

It is near impossible to get out of debt when you also have bad credit. Unfortunately, debt and bad credit is a common problem faced by a lot of Canadians these days. Some people are paying their bad debt with a home equity loan and it seems to be working so the question is, should you get a home equity loan to help you get out of debt?

Pay Your Debt with a Home Equity Loan

Is it a good idea to get a home equity loan to pay your debt? Yes, if you’re really strapped for cash and your loan is getting uncontrollably bigger because of interest. Note that it may not turn out well if you get a loan that proves to be even more challenging to deal with than your existing debt.

How to use a loan to pay for a debt, then? The smart way is to use a home equity loan for debt consolidation of high-interest debts. Generally speaking, home equity loans tend to have a lower interest rate as compared to other debts such as credit card debt, personal loan, and car loan so it makes sense to use it to help you save on interest. This way, you’ll be going for a long-term solution that will make handling debt a lot easier.

Use Your Money Wisely!

Most homeowners who are in debt do not know that they may not actually be in debt. How so? If you’re a homeowner who’ve built up some home equity, there is a possibility that the value of your assets may be substantially bigger than any debt you may have; hence, you’re not really in debt.

Use your money to work for you. By tapping into your home equity, you are actually tapping into the money you’ve accumulated in your home’s value. You have to be extra careful and know exactly where your money will be going so the first thing you should do is to assess your real financial situation. You can do this by listing all your assets and debts plus getting a credit report. This way, you will know exactly how much money you owe. As for knowing your credit score, this will come in handy when you need to determine what financial solution will work best for handling your bad debt.

Get Out of Debt by Planning Ahead

The last thing you want to do when you have a bad debt is to keep reborrowing in the future. This becomes very difficult to break once this evolves into a cycle. You need to plan effectively how you will use your home equity to pay off your debt. Do your research and weigh out the pros and cons of different home equity loans so you can make an informed decision about which type of home equity loan you should apply for. Don’t forget that aside from paying your bad debt, you also want to fix your credit score the best way you can.

Do you need help fixing your bad credit with a home equity loan? Contact us at Homebase Mortgages! Our staff will be happy to discuss how a home equity loan can fix both your credit score and your bad debt.  Call today!

 

Is It Easy to Get a Home Equity Loan in GTA for 2019?

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

But First, What Is A Home Equity Loan?

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

Payment Options and Terms for Home Equity Loans in the GTA

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

Is There an Upper Limit for a Home Equity Loan?

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

Why Get a Home Equity Loan?

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

Is a Home Equity Loan Different from a HELOC?

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

Is It Easy to Get a Home Equity Loan in 2019?

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

 

 

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The Differences Between Home Equity Loans in Canada and HELOCs

Home Equity Loans and HELOCs allow you to use your home’s equity as collateral when borrowing money. The borrowed money from a HELOC or a Home Equity Loan can be used to pay for college education, buying a new property, or used for home renovations and repairs. But is this all? Before borrowing any sum of money using your home’s equity, it is best to understand how specific loans work to protect yourself by understanding the disadvantages and advantages of these loans.

How do Home Equity Loans and HELOCs Work?

HELOCs and Home Equity Loans are both secured loans. You use your property’s equity as collateral for the lender to hold on to as they lend you money. Failing to pay the loan allows the bank or lender to claim your property.

For Home Equity Loans, you may borrow as much as 80% of your equity in one go. This loan usually gets a low interest rate and is affordable for most people.

For a Home Equity Line of Credit or a HELOC, you will be given a line of credit that is secured by the value of your equity. The ceiling amount for the HELOC is computed based on your home equity. This is the amount that is made available for you by the lender. You can borrow from this limited credit line in times you need cash and can pay according to set terms.

Repaying a Home Equity Loan and a HELOC

HELOCs usually come with repayment terms that range from 5 to 25 years. The amount borrowed should be paid after that term either as a lump payment or installment basis. During the term, the borrower can be charged interest on the borrowed amount and required to pay the said interest.

Repayment for a Home Equity Loan is usually a fixed amount per month or can also be variable depending on the agreed upon terms between the borrower and the lender.

Pros and Cons of HELOCs and Home Equity Loans

A huge advantage is the fact that both Home Equity Loans and HELOCs allow you to access a huge amount of money without having to sell your home. This gives you the flexibility to use your money as you need it. A HELOC will give you the freedom to use only an amount that you need for a given time, making it a good option if you have a few scattered recurring expenses here and there such as expensive medical bills and tuition fees. A Home Equity Loan, also called a Second Mortgage, is a great option for huge expenses such as a complete home renovation or buying another property.

A disadvantage that can’t be ignored is the fact that you can lose your home if you fail to pay your HELOC or Home Equity Loan. You really need to make sure that your financial situation isn’t stressed enough at time current time to afford repayment in the future.

Make sure that you’ve got help from mortgage professionals who will do their best to get favourable terms from your lender. Remember that you have to be smart and truly assess your financial situation before risking borrowing a home loan.

Are you ready to get a Home Equity Loan? How about getting a HELOC? Contact us so we can discuss which one will fit your needs best.

 

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.

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What You Need to Know About Using Home Equity to Borrow Money

Borrowing money by using home equity is nothing new, but many people are still misinformed about what they need to know about how to do it. Tapping your home equity for a loan is easier to get an approval of than trying to get other types of loans. Below are further details on this.

Computing Your Home Equity

Your home equity is the value that you own in your home. The more money you pay for your mortgage, the larger your home equity gets and the easier it will be to qualify for loans that use home equity as collateral. Your home equity can also get larger if real estate prices rise in your area. This is because home equity is computed as the difference between your home’s current market value minus the money you still owe in your mortgage.

Computing your home equity means that you have to get your home appraised to have an idea about the current market value. You need details on how much you’ve paid in total as well because the more information you have, the easier it will be for you to apply for a home equity loan.

Getting a Home Equity Loan

A home equity loan is a loan that is secured by your home equity. You will be lent a certain amount by the lender based on the value of your home equity as well as your perceived ability to pay. Below are 3 common types of home equity loans and some information about them.

  • A Mortgage Refinance means that you’ll negotiate a new contract with your lender after breaking your first mortgage contract. You may need to pay a penalty fee for your first mortgage but you’ll gain access to as much as 80% of your home equity. This can be helpful if you have a big expense coming up and you’re confident that you can take advantage of better interest rates to pay off this new loan.
  • A HELOC or a Home Equity Line of Credit is a revolving line of credit tied to a set value of your home equity. With a HELOC, you can access as much as 65-80% of your home equity at one time or little by little as needed. You can pay off a small amount and borrow again over and over just like what you do with a credit card as long as you pay the minimum payment required per month. A HELOC also has a lower interest rate than a second mortgage so if you’re looking for flexibility and a better interest rate, a HELOC could be for you.
  • A Second Mortgage is another loan that you apply for on top of your primary mortgage. By getting a Second Mortgage, you need to make sure that you’re able to pay off 2 mortgages at once. This can be a burden for those who are financially struggling but an advantage for those who just need access to a large amount of money as a lump sum.

Know that by applying for any type of home equity loan means that you’ll be using your home as collateral for a loan. Contact us if you have questions or if you need help assessing which home equity loan you should get and need help borrowing money.

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Handle a Bad Debt Using Home Equity

Getting out of debt when one has bad credit is one of the most common issues faced by Canadians these days. It may be quite easy to get out of debt if one has good financial records but for those with bad credit, this is a huge challenge to overcome.

Is it Smart to Get a Loan to Pay for Debt?

Most people who have bad debt are in such a situation because they’re strapped for cash; hence, the way to pay off a debt for them is to get a loan. This can be a good idea but can turn out to cause more problems if the new loan is more difficult to manage than the existing debts in the first place.

To effectively use a loan to pay for debt, the smart move is to consolidate high-interest debt with funds from a low-interest loan. This way, it will be possible to get out of the bad-debt-cycle that can result in bigger problems down the road if not dealt with promptly. The idea is to take the long-term approach in handling bad debt and to avoid falling into short-term band-aid solutions that only serve to make things worse later. Loans that can work for this purpose are second mortgages or home equity loans.

Are you Really in Debt?

If you’re a homeowner, you may actually be better off financially than you think. The reality is that your home, or rather, your home equity is a huge asset that can get you out of debt if used properly. You may think that you’re in debt but if you look at the big picture, you could not be in debt at all.

To pay off bad debts with your home equity, you need to assess your real financial situation by getting a credit report and listing down all your assets and debts. Find out how much you truly owe and your current credit score to give you a good starting point to determine which possible solutions can be the best for you.

Once you have a list of your debts and assets, take a close look at your credit report and your list to find any mistakes as well as prioritize which debts need more of your attention.

Plan Ahead to Get Out of Debt

You need to have a long-term plan to pay off debt to avoid reborrowing in the future. Your plan should include what percentage of your current income will go into paying debt as well as how to effectively use a loan to consolidate debt if applicable. If you’ll be using your home equity to pay for your debt, you need to look into which type of home equity loan will help you achieve your goals.

Remember that as you pay your debt with your home equity, you should do so in a way that will also help to fix your credit score. We can guide you with this at Homebase Mortgages. Call us today and we’ll talk about the details of getting a bad credit loan or using your home equity to pay your debts with you!

Using Your Mortgage to Build Assets

Most people wouldn’t think of their home equity as a form of savings that can be used just like cash, but if you know how to tap your equity, you can make it work for you and improve your financial situation.

Using Your Home Equity

Your home equity is the value of your property that you own. You can easily have an estimate of it by subtracting what you still owe from the current market value of your home. The better the market value of your home and/or the less you still owe in your mortgage, the larger your home equity!

A great thing about your home equity is that you don’t have to sell your home in order to access it. Once you have a good percentage of your home’s value as your equity, you can apply for a home equity loan and use the approved loan to improve your home’s value (with upgrades and renovations), to pay for a degree (to improve your income potential), or to invest in other opportunities.

The secret is in using your home equity in a way that helps you attain your financial goals. The 3 common ways to use your home equity for cash are through a HELOC, a second mortgage, or via mortgage refinancing.

Using a Home Equity Line of Credit (HELOC)

A HELOC is the secured loan you’ll want to get if you want to use your home equity for a recurring expense that you may not be able to finance just by trying to save for it (like tuition for university studies).

A HELOC is a revolving line of credit that allows you access to funds as you are able to pay them back until a time limit or value limit is reached. It is very flexible and is wallet-friendly considering that you’ll only have to pay interest for the amount you borrow. A possible issue is the fact that the interest rate is often variable too, leaving those who are not very savvy with money a bit confused come payment time.

Using a Home Equity Loan or a Second Mortgage

Although often mistaken to mean the same as a HELOC, a second mortgage is a totally different type of home equity loan. For one, funds are received in a lump sum and a one-time deal until the loan has been paid off. The monthly payments and interest rate are fixed amounts as well – which is the opposite for a HELOC.

A second mortgage is ideal for funding a very expensive home renovation or a much needed debt consolidation plan. Just like a HELOC, a second mortgage is paid on top of a primary mortgage; hence, having a clear picture of your financial situation is best before applying for one and risk losing your home for non-payment.

Using Mortgage Refinancing

A refinance means breaking your existing mortgage contract and creating a new one with the benefit of giving yourself access to your home equity while doing so. Another benefit is that a refinance allows you to get better terms although you’ll have to trade it with some of your equity. Not a bad bargain if you’re strapped for cash and need access to funds in a cheap and relatively easy way.

Building your assets can be a lot easier if you can make your existing assets do the heavy lifting for you. Contact us if you wish to discuss possible ways of using your home equity for investment opportunities. We’d be happy to help you apply for a home equity loan!

How to Use Your Home Equity for A Loan

Home equity is a huge asset that you can use to help you fund some projects, finance investments, or use as emergency cash with the help of a home equity loan. There no one specific way to best use a home equity loan but by understanding what it is, you’ll be better equipped to decide how to use your home equity.

Home Equity As An Asset

Oftentimes, a homeowner’s biggest asset is the value of the property he/she truly owns, otherwise known as the home equity. It can be viewed as a time deposit that the homeowner can access later in life to fund retirement or as an emergency piggy bank for when a sudden need for a lot of cash arises. It is therefore in your best interest to build your home equity while you can.

How to Build Home Equity

You can build your home equity by paying your mortgage or by improving the market value of your home. After all, home equity is computed as your home’s market value minus the amount you still owe. The pricier your property becomes and the smaller the amount you still owe, the bigger your home equity is.

Simply put, you can steadily build your home equity by going for home improvement projects that propel your home’s price appreciation up or by paying any loans you have on your house. .

Uses for Home Equity

Because home equity is an asset that is as good as cash savings, you can convert your home equity to cash that you can use to finance big expenses such as buying another property for investment with a home equity loan, funding your retirement with a reverse mortgage, and financing small expensive projects with a HELOC.

You can surely borrow against your home equity but you have to be sure that you understand the terms involved. Know that when you decide to borrow against your home equity, you’ll be risking your home to a foreclosure if you signed up for terms that are not within your means to fulfill. You have to communicate with your mortgage broker to ensure that any home loan you take is within your means to pay back or you might face losing your home.

Get a Loan Using Home Equity

Two popular ways to tap home equity is by applying for a HELOC and getting a home equity loan:

A home equity loan is given in a lump sum but will require you to keep paying a billed amount monthly. You won’t be allowed to take any new home loans on top of this until you’ve fully paid the amount you borrowed and interest is set from the start.

A HELOC is a line of credit from which you can borrow as little or as much as you need and as often as you want as long as within the set timeframe and limit. It is a great option for those who’ll have recurring big expenses. A bonus is that you only pay for interest on exact amount taken out and not the entire loan limit.

Both loans can prove to be beneficial as long as you honor their terms and make sure that you find a fair lender to borrow from. Ready to apply for a HELOC or a home equity loan? Contact us today so we can discuss what home equity financing option is best for your needs.