A home equity loan is a kind secured against a piece of real estate. Lenders provide registered mortgages based on the equity in a property. Equity is the current value of a house minus the debts on it. Banks rely mainly on credit score when approving loans but as the name suggests, you get a home equity loan based on equity left in the property. We have a team of experts who are proficient at providing home equity loans in Mississauga.
Terms and Conditions for Home Equity Loans in Mississauga
Home equity loans have a period of one year and are usually a first or second mortgage on the property. Open mortgages give the borrower an option to pay off the mortgage before the mortgage term ends but at a fee of three months interest. Many people choose home equity loans over bank loans because of the flexibility they provide. Our loan specialists are available to talk about your options for a home equity loan in Mississauga.
Common Custom Options for Home Equity Loans
- Construction Draw Mortgages – We can pay construction workers as they finish the job.
- Debt Consolidation – A loan may be used to repay high interest debts so you only have to focus on one loan. This is important as it reduces interest and ensures that the credit score improves.
- Blanket Mortgages – This refers to a loan secured by multiple properties at the same time for more secure financing.
- Interest Only Mortgage – For such a custom loan, the principal is untouched and only the interest is paid.
These are a few of the tailored solutions preferred by borrowers but others may also be included in the agreement.Our experienced experts can discuss your needs and give you advice on the best options for your situation.
How Much Can I Borrow With a Home Equity Loan
The home value is the most important metric to get your home equity loan approved. Equity is calculated by subtracting debts from a property’s price but to assess risk, home loans lenders must calculate loan to value or LTV. This metric is calculated by dividing debts by selling price of a property presented as security. Our network of home equity lenders in Mississauga will work with 75% LTV and nothing more. While LTV is the most important factor, some home equity lenders may also be sensitive to credit score and the borrower’s employment history.
Common Uses of Home Equity loans
Our business has seen people use the home equity loan in reasonable ways like tuition fees payment, home renovations or tax payments. Some people use it to purchase expensive cars or vacations but whatever you do with the loan is up to you. The money could also be used in less common ways like medical expenses, business capital and acquisition of property. The best use of home equity loan money depends solely on the financial needs of the borrower in Mississauga.
- Business Investing – The loan money can be used to fund a startup or business projects.
- Education – You can pay for children’s school fees to keep them in school even if your salary is delayed.
- Renovations – Home improvements are made to add value to property. The loan can be used to pay for changes in the house so that you can sell it for a better price.
In addition, the home equity loans we provide in Mississauga can be used to pay for emergency medical expenses, foreclosure or helping family members get you of debt.
Home Equity Loans vs. Home Equity Lines of Credit
Many people cannot tell the difference between these two types of financing even though they are very different. A home equity loan has a fixed interest rate but like with a credit card, the interest rates on an HELOC are subject to change. You can take out any amount below your credit limit for a home equity line of credit but for a home equity loan you get a lump sum of money. The only similarity between the two loans is that they are approved or rejected depending on a home’s loan to value ratio.