Home equity loans are a type of credit that is secured by real estate property. Lenders extend a registered mortgage but only after ensuring that there is enough equity. Property price minus debts are enough to qualify or render you ineligible for an equity loan on your property. Those who offer this loan do not base their lending decision on credit score because they are in the real estate business where equity holds more value. We are a team of specialized loan experts with providing home equity loans in Niagara Falls, Ontario.
Payment Options and Terms for Home Equity Loans
A standard home equity loan is, in reality, a first or second open mortgage issued with unique terms. The interest rate usually ranges between 7% and 15% for a one-year term. It is an open mortgage because the loan agreement says that the borrower has the option to end it early. If you take this path, it will reflect well in your credit score but remember there is a fine of three month’s interest required. Despite this penalty, more people still prefer home equity loans than available options. This is simply because home equity loans’ terms are more flexible than traditional mortgages. Our vibrant officers are always set to respond to any queries; ensuring that you get the most suitable home equity loan in Niagara Falls.
The Common Custom Options Include:
- Interest Only Mortgage – The principal is untouched, as borrowers only need to pay interest on their loan.
- Construction Draw Mortgage – We pay all your service providers until your construction project is complete.
- Blanket Mortgage – This is a loan where multiple products simultaneously act as loan security. This is a tactic used to secure more financing from a home equity lender.
People’s needs are unique which is why our lenders take the time to provide customized products to satisfy each client.
How Much Can you Borrow with a Home Equity Loan
The loan amount is directly related to the equity available. Lenders are lenient when it comes to credit score but they know too well that little equity translates to a bigger risk. It is for this reason that they must calculate loan to value ratio, which gives them a clear estimate. Our home equity lenders in Niagara Falls are only willing to offer loans if they get a loan to value ratio of 85% or less. Loan to value ratio or LTV is a metric obtained by dividing the total of debts on a property by its current selling price. The lower the property loan to value, the bigger a loan amount you will get. Though not necessary, some lenders are willing to negotiate payment terms and conditions with borrowers with a good credit score or high annual income.
Common Uses for Home Equity Loans
Home equity lenders are guided by the mantra of borrower knows best’ when it comes to reasons for needing the money. They only demand an explanation for record keeping but private lenders do not restrict uses for the loan. Free rein means that property owners may use their equity for anything from school fees to credit card payments. This is a great opportunity to organize your finances and save you from a poor credit score. The home equity loans we give in Niagara Falls have helped in stopping foreclosures and activation of a power of sale for many in the city.
- Renovations – Home upgrades and repairs bring more comfort and if properly done, they could increase a home’s market value.
- Business Investing – You can take a home equity loan to pay for supplies, invest in a growing business or to fund an expansion plan.
- Education – Many people use these loans to pay school fees.
- Debt Consolidation – It is wiser to have a single large debt than a cluster of small debts with high fees.
Comparing Home Equity Loans and Home Equity Lines of Credit
A home equity loan has fixed terms, which is different from an HELOC with negotiable terms. You may also utilize the line of credit without hindrances but more contracts are required to release the extra money after the initial installment. The only likeness between a home equity loan and an HELOC is that lenders base approval decisions on equity.