If you need a steady flow of money but don’t want to go through the hassle of another mortgage, home equity loans is something that needs serious consideration. The costs of the loan can outweigh the benefits, so you’ll want to have a Toronto mortgage broker handy to help you understand the terms of your agreement. Most home equity loans will let you take out up to 75% of your home’s value.
What is a Home Equity Loan?
Most home equity loans will let you take out up to 75% of your home’s value. If your home is worth $100,000 and you can borrow 75% of the value, which means you can borrow up to $75,000. But if you already have a $10,000 mortgage (you’ve paid most of it off!) you’ll only be able to borrow $65,000. That’s the max; you may only be able to borrow only half to three fourths of that. Once you’ve found a good rate with your mortgage broker, you’ll have a line of credit that you can live with.
One thing to know about home equity loans are that depending on who you go through your credit rating may not matter as much with the loan amount. You may have a higher interest rate, but you’re using your home as collateral.
What Should You Ask When Shopping for a Home Equity Loan?
You need to ask if there are penalties associated with the home equity loan. Since this is one of the more creative loans out there for you to use, there may be tricky rules and terminology used in the contracts. Make sure you have a mortgage broker helping you shop for your home equity loan. Ask them if there is a prepayment penalty, and if you can pay it off within ten years or so. You don’t want to take too long to repay your loan, since even low interest rates can compound over time. Also make sure that you only spend what you’re going to pay back. You don’t always need to take out the entire credit limit against your home.
Is it Hard to Apply?
- Ask how much the fees will be to have your home appraised.
- How much will the application fee be, and will you be able to get it refunded if you’re rejected?
- Who pays the closing costs on the loan, what will the taxes be and who is paying the title company? Is it all included, is it split up into different sections (some things may be covered in the closing costs and the rest on you)
These are things you need to think about before you apply. This is why you need an experienced professional to help you through the process. Do you have relationships with the banks and know how to read contracts? Mortgage brokers will be able to help you navigate the muddy waters of home equity loans and get you the best outcome possible.