This refers to a kind of loan whose collateral is a piece of real estate. The basis for approval for a home equity loan is equity or simply the value of a home without debts. Creditors issuing these loans hold a home’s equity in higher regard than they do credit score, income and job history. This enables people who wouldn’t get a regular mortgage to utilize their own assets in actualizing their financial goals. Our team of experts has years of experience in setting up home equity loans in Collingwood and other cities across Ontario.
Payment Options and Stipulations for a Home Equity Loan in Collingwood
This is usually given as the original or subsequent open mortgage on a property. Lenders charge 7%-15% interest on a standard home equity loan, which is given as registered mortgage. This means that the home equity lender has the right to sell a property in default. They charge relatively high interests compared with banks to try and recoup their investment before a borrower fails to repay. It is also an open mortgage which the borrower can finish paying before 12 months are over. If you do this, a penalty fee of three months interest will be charged by the creditor. Home equity loans are more flexible than regular bank loans and our customers are ready to discuss the best alternatives according to your needs.
The Popular Customized Loans Include:
- Blanket Mortgage: This customized loan accepts more than one property as security for the same loan.
- Construction Draw Mortgage: For this loan, we give you money to pay workers till a building project is completed.
- Interest Only Mortgage: As the name suggests, you only need to pay interest as the primary is unaffected.
Our home equity lenders understand that clients have diverse needs and will not hesitate to include your wishes in the agreement.
How Much do You Get Exactly
There isn’t a standard home equity loan amount as lenders decide that based on the debts on a property. By calculating loan to value (LTV) ratio lenders are able to decide how much to give which client and at what interest rate. This metric is obtained by dividing the debts by a property’s selling price. Our lenders in Collingwood will loan up to 85% LTV on a property but anything more means too heavy a risk to carry. While loan to value ratio is an important metric, some lenders will decide how much to give according to credit score, annual income and job history. Home equity lenders are generally very sensitive to risk and few if any will dare loan to homes with too little equity.
Common Uses for the Money
The loan may be used in any way without restrictions by the home equity lenders. We only seek an explanation for the records but our officers will not reject your applications over how you intend to spend the money. In our encounters with different clients, we have seen many uses for the loan including payment of other loans, home renovations, business investing and also payment for school fees.
- Renovation: This loan comes in handy when you need to make repairs or upgrade the home. Renovations are a great way of increasing property value for when you need a bigger loan.
- Debt Consolidation: This is where you take out a big loan to pay off high-interest debts. Debt consolidation is important for people who feel weighed down by multiple debts with high monthly rates.
- Education: If your salary is delayed, you may use a home equity loan as school fees for your kids.
- Business Investing: A home equity loan is a great source of capital for startup ventures. Some entrepreneurs take this loan to expand, buy inventory or finance a marketing campaign.
Whatever way you decide to use the loan, it is imperative that you honor the terms and conditions of payment as stipulated in the agreement.
Differences Between a Home Equity Loan and Home Equity Line of Credit
The home equity line of credit is much unlike a home equity loan starting with the fact that it has flexible rates. Like a credit card, the HELOC is a revolving type of loan that you can access at will but stay within a set credit limit. A home equity loan features fixed installment payments for a set period.