Home equity loans are a type of loan which is secured by real estate.
Private lenders rely on equity to make informed decisions, not on a borrower’s credit score, for these loans. Equity is the value of a property minus all debts. We have a network of lenders with years of experience giving home equity loans in Ajax, Ontario. We also serve other cities in the region, including Pickering, Milton, Brampton, and London.
Terms and Conditions
A typical home equity loan is a first or second mortgage provided for one year. Interest rates range from 8% to 12%, and the mortgage agreement allows borrowers to end payments early if possible. There is a penalty in interest fees for early repayment, but it can be worthwhile for the peace of mind and potential improvement in credit score. Despite the higher interest rates compared to other products, people still seek more flexible home equity loans. With help from our friendly loan officers, you will surely find a home equity loan in Ajax to suit your specific needs.
Custom Options Include:
- Interest-Only Mortgage: The principal is untouched as only the interest is demanded.
- Blanket Mortgage: For this option, you can front multiple properties to secure more financing from one lender.
- Construction Draw Mortgage: Your service providers will get paid as the project is completed.
The mortgage agreement can feature any variation you want to ensure that you get the best loan with assistance from experienced professionals.
How Much Can You Borrow
A home equity loan lender determines the loan amount by looking at the value of your debts and property. Using these two numbers, they calculate a metric known as the loan-to-value (LTV) ratio. The goal is to achieve a result below 75% by dividing the value of debts by that of your home. A 75% LTV or below indicates that you have enough equity to act as security for the loan. While the LTV is a key factor, some lenders also consider other factors, including credit score.
Common Uses for a Home Equity Loan
Before handing over the loan money, home equity lenders might ask why you need it. This shouldn’t worry you as it is only for record keeping. Once approved, a loan may be used in any way you like. Having been in the industry for years now, our lenders have encountered several uses including renovations, business investing, and education and paying off debts. A few people use it to furnish luxuries like vacations and cars.
- Renovation: The money can be used to repair or upgrade your property, often adding value.
- Business Investing: Home equity loans can be a good source of capital for your business.
- Education: Many people access home equity to pay college fees.
- Debt Consolidation: A home equity loan may help you get out of expensive credit card debt.
The loans we offer in Ajax have less common uses like stopping foreclosures or power of sale activation, which could lead to loss of property. There are no spending restrictions on home equity loans but you must repay as agreed to avoid losses.
Differences Between Home Equity Loans and Home Equity Lines of Credit
A home equity line of credit is a type of loan with dynamic terms, much like a credit card. This is different from a home equity loan with rigid interest rates and payment terms. From this, it is easy to determine that a HELOC is a revolving type of credit while home equity loans are an example of installment loans. When the HELOC is approved, you are free to withdraw without seeking additional approval. For the home equity loan, you get an initial chunk of money but have to await approval any time you want to access more funds. Home equity loans and lines of credit are both approved based on home equity; that’s their only connection.