Home equity loans are a great way to tap into your home, but here we’re going to talk about the ugly side and how to avoid it by working with one of our Toronto mortgage brokers. But what are the stumbling blocks? Are HELOCS and other forms of equity loans doomed for failure? Are the cards stacked against you from the start? It really depends on who you choose to do business with! Let’s get started and talk about everything you need to know before you get started.
Home Equity Loans Start Off Easy
One of the best things people love about home equity loans is that the payments in the beginning are really easy to handle. Even if you don’t work with a Toronto mortgage broker like us, you’ll generally enjoy easy payment terms in the first half of your HEL or HELOC. You won’t have to worry about balloon payments – but the interest payments will rack up. More and more as time passes the trouble will brew. If you didn’t get the most favourable repayment terms from the start of your mortgage you’re going to end up in trouble.
And Then the Payments Get Bigger
After the fun first half where things are going well, the payments will grow. More and more of your monthly payments are going to go to interest instead of the principal, or original debt, and then you’ll end upside down on your mortgage. The payments get larger and larger over time until a balloon payment to close out the mortgage comes do – if you can’t pay it you can always refinance… but then you’ll end up back at the start again. You’re on a debt treadmill and if you want to keep your home you’ll have to keep running.
Can You Keep Up?
Getting upside down is the worst outcome that can happen. But if you don’t know what you’re getting into when you take out a home equity loan it’s going to happen. That’s why you need to talk with a Toronto mortgage broker like us before you get started. We’ll be able to help you understand what a home equity loan or second mortgage will mean for you and your financial future.
Getting the Deal You Deserve
It all starts by having a plan for the future. If you’re able to plan ahead and know what you’re spending your second mortgage on, you’ll be able to budget and get the best deal. We’ll negotiate on your behalf with your lender or another that gives you a better deal; we’ll work with them to make sure that your monthly payments stay manageable and that you get the best interest rate over the life of your loan. Why pay more than you should when you can get the deal that’s right for you? Working with Toronto mortgage brokers like us will help you understand your options and if now is the right time to borrow.