A home equity loan is a type of loan where real estate is used as security. Home equity loans are extended as loans that are registered on a property. The main criterion for being approved for this loan is the equity or simply value of the home minus its debts. This is different from a bank loan because things like credit score and employment are considered less important. Our team of experts has many years of experience with setting up home equity loans in Kingston. We offer home equity loans in different cities including Milton, Ottawa, Brampton, Barrie, Toronto, and Richmond Hill.
Terms and Payment Conditions for Home Equity Loans
Standard home equity loans are usually one-year open mortgages with an interest of 7%-15%. As an open mortgage, there is an alternative to pay off the mortgage early by paying a three-month interest penalty fee. You shouldn’t be deterred by this penalty because besides giving peace of mind, early loan payments influence positively on your credit score. This type of loan unlike traditional bank mortgages can be tailored to customers’ needs. We always have a loan professional available to talk to you about the best home equity options so that you can choose one that is tailored to you.
Popular Custom Options Include
- Blanket Mortgage: Multiple properties act as security for the same loan in a borrower’s attempt to secure more financing.
- Interest Only Mortgage: The principal is untouched as only interest is paid.
- Construction Draw Mortgage: We can pay your contractors, as your project is complete.
More options can be written into the loan agreement and our experts are ready to listen to you and help you select a loan that is most suitable for you.
How Much Can I Borrow with a Home Equity Loan
The amount an individual can borrow depends on the value of a property and total debts on it. Lenders will calculate a loan to value metric better known as LTV to help them decide which borrowers qualify and who poses a high risk. LTV is the value of existing debts divided by a home’s market value and while it is the most important deciding factor, some lenders study credit history and consider income. A good credit score is not mandatory among home equity lenders in Kingston but you can use it to negotiate better interest rates and terms.
Common Uses for Home Equity Loans
Money borrowed with this type of a loan may be used in any way the borrower wants. Our company sees several uses of this money the best of which are paying off debts, investing in higher education or business capital. There are people who use it to pay for vacations or purchase cars. From the reasons, we encounter it is obvious that the best use of the money is upon the borrower to decide. It is important to utilize the money wisely to make sure that there is income generated to repay monthly fees on time as per the agreement.
- Debt Consolidation: You can pay off existing debts using the money. Experts concur that the best way to manage debts is by consolidating high-interest loans into a single mortgage to save both time and money.
- Business Investing: People often use home equity loans as capital for their businesses.
- Education: send your children to school using home equity money.
- Renovation: money is used for home repairs and home upgrades.
The home equity loans we offer have less common uses like stopping a power of sale, paying for medical treatment, and helping loved ones.
The Difference Between Home Equity Loans and Home Equity Lines of Credit (HELOC)
HELOC is an acronym for home equity lines of credit, which is a type of revolving credit. This means it has flexible terms and payment rates unlike the home equity loan, which is paid in fixed installments among other rigid terms. After the first payment, you must wait for another contract to approve more installments of the home equity loan. Different from that is the HELOC, which is accessible at any time as long as the borrower stays within the set credit limit. Many people only mix up these two types of loans because both are approved based on LTV on a property.