A loan secured by real estate and offered without regard to credit score is known as a home equity loan. Lenders of such credit consider home equity in higher regard than credit score, the basis upon which bank mortgages are approved. Equity is the measure of all debts on a property and its current price in the market. We are a team of experts with years of experience providing home equity loans in Cornwall.
Payment Terms and Options for a Home Equity Loan in Cornwall, ON
The loan is typically offered as a first or second mortgage against a property. Home equity loans come at an interest fee of 7%-15% and payments must be completed within a year. The interest rates for a home equity mortgage are quite high but that is only because the stakes are higher. Banks deal with customers that have a good credit score but home equity lenders offer loans to people with less than average credit, which is a dangerous move as such borrowers have a tendency to default on loans. Unlike regular bank loans, these can be customized to the user’s specifications. There is always a loan officer available to speak with you and choose the best options for you.
Popular Choices Include:
- Interest Only Mortgage: This is where only the principal remains and only interest is needed.
- Blanket Mortgage: A loan is placed on multiple properties, to secure more financing.
- Construction Draw Mortgage: The loan is given to pay all contractors on your construction to make sure it is completed without a hitch.
How Much Can I Borrow
The exact amount you receive is dependent on the equity in your property. By dividing the debts by a home’s current price, lenders get a metric known as loan to value ratio to help them make a conscious decision. The result should not be above 85%, the optimum LTV to which our home equity lenders in Cornwall can loan. LTV is the primary approval factor for home equity loans but som lenders rely on employment history and credit score to make an informed choice.
Common Uses for Home Equity Loans
Money borrowed with a home equity loan can be used in any way you feel like. Banks might base their decision on your explanation but private lenders are more lenient, only asking to update their records. Many people pay school fees, invest in a business, and pay off expensive loans but there are some who use this loan to pay for expensive cars or vacation packages.
- Renovation: Renovations money is used to repair and make upgrades to a home. While some upgrades simply add comfort, many people renovate their homes to sell them at high prices.
- Debt Consolidation: Finance experts advise that it is better to have one loan that you can easily manage than multiple, high-interest loans whose monthly payments you can’t keep up with.
- Education: Rather than shelve your dreams, it is possible to pay school fees using a home equity loan.
- Business Investing: People use home equity loans to expand their businesses or buy inventory to meet demand.
Our professionals can write numerous options into the agreement as they try to deliver a fully custom home equity loan. Our loans have less common uses such as helping the family, stopping a power of sale, and paying for emergency treatment.
Differences Between a Home Equity Loan and Home Equity Line of Credit
With a home equity loan, you can get a lump sum as stated in the initial mortgage agreement. As an installment loan, it has fixed terms and conditions which must be met. For a home equity line of credit, the terms may change to match your circumstances and without consequence. You can withdraw the home equity loan at any time to furnish your business or personal dealings. The only reason why people confuse the home equity loan and loan equity line of credit is because both are approved based on the equity in a property. Good credit and a high annual income may help you negotiate better interest rates and terms but home equity lenders in Cornwall do not require them.