A loan given against real estate is known as a home equity loan and is offered by lenders who offer registered mortgages. Equity is the measure of a home’s current value minus the value of debts in it. Providers of these loans do not place much importance of credit score and job history as banks and credit unions do. They have unique methods of risk assessment and our lenders have experience offering home equity loans in Oakville.
Payment Options and Terms for Home Equity Loans
A home equity loan is a second mortgage or first mortgage with a one-year repayment period and 7%-15% interest. This loan is open because the borrower has the freedom to end it early by paying a penalty of three months worth of interest. Paying early helps in improving one’s credit score and grants borrowers total peace of mind. You can use the money for personal matters because home equity lenders are more flexible than banks. Our loan experts are available to inform you about various options and customize a loan for you.
Popular Choices Include
- Construction Draw Mortgages – We pay your contractors for a construction project as they complete their work.
- Blanket Mortgages – A loan is placed on multiple properties at the same time as a way of securing better financing.
- Interest Only Mortgage – The principal here remains untouched as only interest is paid.
The mortgage agreement could also be further tailored to your needs and our consultants in the Oakville are happy to help you choose the most appropriate loan.
How Much Can You Borrow Using Home Equity
How much you can borrow is determined by the value of the home and that of existing debts. To assess the risk posed by a property, the home equity loan lender has to calculate its loan to value ratio. This metric better known as LTV is obtained by dividing the total debts by a property’s current price hoping to get a figure below 85%. Our home equity lenders in Oakville have a maximum limit of 85% LTV up to which they can lend. Equity lenders generally do not care about credit score but some lenders of this type of loans are sensitive to it.
How do People Use Home Equity Loans?
People are allowed to use home equity loans for any reason they deem suitable. There are many uses for these loans but most people we have encountered use them to repay expensive debt, investing in home improvements or a business venture. Less common uses for the loan money include vacation and car payments. The best way to use this money cannot be dictated by anyone because it is determined by preferences and personal needs.
- Debt Consolidation – Experts advise people to have one loan instead of several high interest loans that may be expensive to repay. A home equity loan can be used to pay off all other debts so you only have one creditor to consider monthly. This is both affordable and convenient for busy individuals.
- Education – You can use the money to keep your children in school.
- Renovation – The money could also be used for home repairs and upgrades.
- Business – Money can be used as capital for business or you can use it to meet inventory demands.
The loans we provide can also be used to remedy emergencies like foreclosure and a power of sale.
Differences Between Home Equity Loans and Home Equity Lines of Credit
Many confuse these two types of loans but they could not be more distinct. One is an installment loan and another is a revolving kind much like a credit card. A home equity loan has fixed payment terms including interest rates while the terms of an HELOC change from time to time. You can withdraw any amount of an HELOC but you should take care not to exceed the credit limit. For a home equity loan, you must understand that an initial lump sum is granted before you have to wait for new contracts in order to access more money. The home equity loan and home equity line of credit are different types of debt but in spite of this, they are both approved according to the LTV of the property.