Any kind of a loan where a piece of real estate is used as security is a home equity loan. These loans are offered as registered mortgages on a property. Approval for a home equity loan depends on the equity in the property, which is calculated by price minus debts in the home. This loan is very different from a bank loan approved according to credit score. Our professionals have many years providing home equity loans in Kitchener and other cities in Ontario.
Terms and Payment Options for Home Equity Loans in Kitchener
A home equity loan is generally a one-year open first or second mortgage on the property. You can end the mortgage offered at 7%-15 interest early if you are ready to pay a three-month interest penalty fee. These loans are more flexible than bank loans meaning you can customize the terms to your needs. There is always a loan expert on standby at our company to help you decide the best options for you.
Common Custom Options Include
- Construction Draw Mortgages – We can pay the contractors as the work is finished.
- Interest Only Mortgages – Only the interest is paid and the principal remains untouched.
- Blanket Mortgage – this is a loan placed on multiple properties at the same time to help secure financing.
- Debt Consolidation – This is where a loan is used to settle other debts and avoid high interests often charged.
It is possible to add more custom options in the mortgage agreement to suit your preferences and our loan experts are always ready to discuss available options with you.
How Much Can I Borrow With a Home Equity Loan?
The amount an individual can borrow depends on the value of the home and that of existing debts. To assess these lenders will have to get a metric known as LTV or loan to value ratio by dividing existing debts with the current appraised value of the house. Our network of lenders can give money up to 85% LTV on properties in Kitchener. This might be the most important metric but some lenders also make their decisions based on credit score and employment history and other parameters.
Common Uses for Home Equity Loans
The money borrowed with home equity is spent as the borrower sees fit. The most common uses for the money our business encounters are investing and paying off expensive debts. Some people purchase cars and pay for vacations but the best use of the money depends on your personal needs.
- Home Renovations – Money used for upgrades and repairs to the home. Improvements may bring more comfort or increase the value of a property for when you need to secure more financing.
- Education – Pay tuition fees so your children can go to school. Accessing home equity is important during months when your paycheck is late to arrive as it prevents interruptions to your normal routine.
- Business Investing – Get the money to start that business you have been dreaming about. Business capital is hard to find but you can utilize assets that you already own to actualize your dreams.
- Debt Consolidation – You can also use the money to pay off other high-interest loans like credit cards. With only one loan to consider you will have more peace of mind and end up paying lower interests.
The money that we provide also has less common uses like paying for emergency treatment, stopping a power of sale, or helping loved ones.
The Difference Between Home Equity Loans and Home Equity Lines of Credit (HELOC)
These are two loans with stark differences. A home equity loan has a fixed number of payments and fixed interest because it is an installment loan. An HELOC is a kind of revolving credit like a credit card without a fixed number of payments. A home equity loan generally has a fixed interest rate stated in the initial agreement but an HELOC does not. You can withdraw any amount of the home equity line of credit as long as it is within the credit limit but things are different with the home equity loan. You get a large amount in the beginning then are required to draw up new contracts to allow access to more money. For both types of loans, interest rates and approval are based on the loan to value ratio of a property.