You get a home equity loan when you decide to use a piece of real estate as security. Private lenders who unlike banks, do not rely on credit to approve or reject mortgage requests provide home equity loans in Peterborough. These lenders only need your equity to make an informed lending decision. We have a seasoned team of loan experts with unrivaled experience in the provision of home equity loans in this and other cities in Ontario Province, Canada.
Payment Terms and Rates for Home Equity Loans
A home equity loan terms include an interest rate of 7% to 15% and a payment term of one year. Since it is either the first or the second open mortgage on the property, it is possible to finish making payments before the due date. There are obvious penalties for this, the most significant if which is a fine of cumulative three months interest. You should not let the penalty prevent from repaying the mortgage before time, as it is an excellent way of improving one’s credit score. Many people would rather take a home equity loan than a bank mortgage due to flexibility. It is possible to have a home equity loan customized to your needs but with a bank loan, you often have to play to pre-defined terms and conditions. In recognition that clients have unique needs, our loan experts in Peterborough will spare some time to discuss preferences and design a suitable product.
Common Custom Loans Include:
- Blanket Mortgage – The borrower puts up several properties as security in the hope of getting the money needed.
- Construction Draw Mortgage – Such a situation has us paying your contractors to ensure smooth completion of your project.
- Interest Only Mortgage – As from the name, only interest is paid without affecting the principal amount.
More variations depend on the client and fortunately, there are no limitations as to what may be included. You need to discuss various options with our experienced officers to guarantee the best choice.
How Much Can you Borrow with a Home Equity Loan
Private lenders give substantial loans but only if the equity left on a property is satisfactory. To assess the risk posed by each customer a loan expert must obtain its LTV. This is a metric calculated by dividing total debts by appraised value of a property. Ideally, the result should not exceed 75% LTV and while this is the most important approval parameter, some lenders are sensitive to income and credit.
Popular Uses for Home Equity Loans in Peterborough
Home equity lenders know that the best decision on how to use this money is up to the clients. You have the freedom to utilize your loan for anything as long as it is repaid in full. On rare occasions, some people borrow to pay for luxuries but our professionals often encounter people who use it to settle bills, invest in a business, or pay school fees. Private lenders only need this information to update records as opposed to banks that might reject your application because of your reasons.
- Renovations – Many people renovate the property to improve its appeal and increase its market price. Some renovations like adding a bathtub might only increase comfort but it takes serious remodeling to increase its selling price. Adding an extra room or installing modern security features are some common additions.
- Debt consolidation – Taking several small loans could be detrimental as these often carry high interests. It is difficult to keep up with multiple payments so you might need a home equity loan to pay off those debts.
- Education – Take out a home equity loan to pay tuition fees when money is scarce.
Differences between a Home Equity Loan and a Home Equity Line of Credit (HELOC)
Approval for both these loans depends on equity but that is where the similarities end. People mix up the two but one has fixed terms while the other is a form of revolving credit. Interest rates for a home equity loan remain the same but for an HELOC they differ. You may also withdraw the line of credit whenever the need arises but not a home equity loan. Approval for this means that you will get a chunk at first but to access the rest, you must wait for a new contract. Besides LTV, some home equity lenders in Peterborough also base their decision on income and employment history. This is not mandatory but it could help in negotiating better interest rates.