There are many kinds of risky loans that you can take out against your home; like with everything else in life, the risk is only there when you don’t know what you’re doing. You’re going to need to understand how equity works, how much you should borrow versus how much you can borrow, and you need to know if it’s the right lending choice for you. Here we’re going to go over everything you need to know about home equity, and we’ll help you decide if it’s the right choice for your financial future. Don’t get a home equity loan without consulting a mortgage broker first!
What is Equity Anyway?
The most important thing to know about HEL loans is the equity part. Equity is the true value of your home minus any mortgages or liens you have against it. So if you have a $200,000 home and you have $100,000 in mortgages against it, you only have $100,000 in equity. You may borrow up to 70% of your true equity stake in your home, but lenders rarely give this much to anyone regardless of their credit. You’re going to want to be careful about borrowing against your home. While the money may be easy to get, it can be hard to repay. This is why you need a Toronto mortgage broker who can help you get the right one for you.
How do HEL loans work?
HEL, or home equity loans, work by using the equity you have in your home has collateral. You’ll be able to get the money you need much faster than you would with a second mortgage, but you’re using your home to get the money instead of your credit. Home equity loans sound a bit scarier than a traditional mortgage, but it’s all pretty much the same thing. You’re going to need a mortgage broker to get the help you need to get a good loan.
Everything starts with the application! You’ll need to have all of your ducks a row before you apply, and a mortgage broker is going to be able to help you do that. If you don’t have enough credit to apply or not enough money in the bank to cover your closing costs, they’ll advise you as to how much money you’re going to need. They can recommend credit repair procedures that you can do and they’ll help you know what kind of loan you can expect to get.
Do You Need Good Credit for a HEL?
You don’t necessarily need great credit for this kind of loan, but you will want decent credit to get a good interest rate. Even private lenders that accept poor credit will look to it to give you an interest rate. With interest rates in Canada at all-time lows, you’re going to want to apply as soon as possible. Talk to your Toronto mortgage broker and see what kind of home equity loan you can get.