The kind of a loan where a piece of real estate is used as security is known as a home equity loan. Such loans are usually given is registered mortgages on a property. The main consideration for approval of a home equity loan is equity, which is simply defined as the value of a home minus all debts in it. It has disparities with a normal bank loan, which is lent according to credit score. To private lenders of home equity loans, credit and job history are not so important. Our company is a team of loan experts with years of experience in the provision of home equity loans in Tecumseh. We also serve other cities in Ontario including Gwillimbury, Lincoln, Orangeville, and Midland to name a few.
Stipulations and Options for Payment of Home Equity Loans in Tecumseh
This one-year open second or original mortgage comes with an interest rate of 7%-15%. Being an open mortgage the lender has an option to end the loan early by paying only three months interest as a fine. Home equity loans are much flexible, unlike regular bank loans which cannot be customized. There is always a loan professional available to discuss what the best options for you would be.
Common Customized Options
- Interest Only Mortgage: Principal is untouched and only interest is paid.
- Construction Draw Mortgage: This is a loan that is gradually given to finance a building project.
- Blanket Mortgage: This is given to multiple properties owned by borrowers who need to secure large amounts of money.
Other custom options may be added to your loan agreement. Our experts are happy to talk about your unique situation and the best loans for you.
How Much Money will Your Equity Get
Individuals qualify for varying loan amounts according to equity in the property presented as security for the loan. To make an informed lending decision, our home equity lenders must calculate a metric called loan to value (LTV) ratio. This is equivalent to debt value divided by a property’s appraised value. Our lenders are only ready to loan up to 75% LTV on properties in Tecumseh, Ontario. Loan to value ratio may be the most important metric but there are some lenders who are also sensitive to employment history and credit score.
Common Uses for these Loans
The money borrowed with a home equity loan may be used in any way you feel is ideal. The best uses seen by our company are to pay off debts, investing in renovations, higher education or as capital for a business. Some people rely on the loan to pay for vacations or cars. Ultimately, the best use of the money loaned depends on individual needs and priorities.
- Debt Payment: You are free to use this money to pay other high-interest debts.
- Education: You or your children can rely on home equity loans to pay school fees.
- Business Investing: Many choose this as the best source of capital for a business.
- Renovation: The loan can be used in home upgrades that ultimately increase its selling price.
Loans that we provide in Tecumseh have less common uses like paying for emergency medicine, helping family members, or stopping a power of sale.
Disparities Between Home Equity Loans and Home Equity Lines of Credit (HELOC)
Home equity lines of credit (HELOC) are different from home equity loans mostly because of the terms and conditions of payment. The home equity loan is issued with a set of rigid payment terms and interest rates. Things are different with a home equity line of credit whose rates and terms of payment may change with the passage of time. It is possible to withdraw an HELOC whenever it is needed as long as you do not exceed the set credit limit. For a home equity loan, an initial lump sum is given. Loan to value ratio is the common factor for approval of both an HELOC and home equity loan, which is probably the reason for so much confusion. Home equity lenders are indeed more lenient than banks but you must also honor your end of the deal to increase your chances of qualifying for better loans in future.