As the name suggests, home equity loans are a special kind that is lent according to equity as opposed to credit scores. Private lenders mainly offer it as their main line of business is in the real estate sector. The value of a home minus its debts is sufficient for them to make a clear lending decision. We have a team of experts with unmatched experience issuing home equity loans in Niagara-on-the-Lake.
Terms and Conditions for a Home Equity Loan
Lenders extend this as an open first or second mortgage on a property for one year. Interest rates range between 7%-15% but you can take a penalty and pay the loan early. Home equity lenders prefer a registered mortgage so that they are able to sell off properties in default. In spite of the strict terms and rather high rates, people are more attracted to home equity mortgages as they are more flexible than regular bank loans.
Our lenders are ready to discuss your special circumstances and create a mortgage agreement accordingly.
Common Customized Loans Include:
- Interest Only Mortgage: Only interest is needed for the principal never changes.
- Blanket Mortgage: You are allowed to front multiple properties as security for the same loan.
- Construction Draw Mortgage: We pay your workers to finish a construction project without a hitch.
Our lenders are ready to include more alternatives in the mortgage agreement, knowing how vast the clients’ needs are. The result is always a unique loan that serves your needs and one that you can afford to repay.
How Much Can You Get with a Home Equity Loan
The amount a lender will give depends on how much equity is in a property. Home equity lenders may not think much of a credit score but they are still wary of risk. It is for this reason that they must calculate a loan to value ratio. Property with a heavy debt burden will show a value higher than 85% and our lenders are only willing to go lower with the loan to value ratio. LTV is calculated by dividing the total of a home’s mortgages with its price and while it is important, some lenders also refer to credit history to make a choice. The reason why lenders must see sufficient equity is because even with a registered mortgage, there may not be enough left for them after other lenders have been compensated.
Ways to Use a Home Equity Loan in Niagara-on-the-Lake
Our officers can attest to the fact that home equity lenders have many uses. Information collected over the years shows that most people have serious uses for the money while some simply use it to furnish life’s luxuries.
- Renovation: Money is commonly used to repair or upgrade a property. This is often done when a property owner needs to sell at a higher price or get better funding in future.
- Debt Consolidation: Money can be used to pay off existing loans that are difficult to manage month after month.
- Education: Home equity loans are often used to pay school fees.
- Business Investing: Home equity loans can be invested in a profitable venture.
We understand that no borrowers have the same needs and therefore do not dictate how the loan is used. Institutional lenders often reject loan applications simply because the lender was not clear about why they needed it. Due to a home equity loans flexibility, people have used it in rarer ways like stopping a power of sale, helping loved ones or paying for emergency treatment.
Differences between a Home Equity Loan and Home Equity Line of Credit (HELOC)
There are many disparities between them but people think a home equity loan and home equity line of credit refer to the same type of credit. This is because the loan to value is the basis of approval for the loans but that is all the likeness between them. A home equity loan is paid in fixed installments while for an HELOC the rates and interest fees are dynamic. As a holder of an HELOC, you can withdraw as much money as you like at any time, bearing in mind the credit limit.