A home equity loan is a kind of loan secured by a piece of real estate. These loans are usually given as registered mortgages on a property and approval is based on the equity in the property. Equity is the value of a home minus the debts on it. Home equity loans are different from bank loans, which are approved based on credit score. Our team of experts have years of experience providing home equity loans in Toronto.
Payment Options and Conditions for Home Equity Loans
Standard home equity loans are usually one-year open first or second mortgage at 7%-15% interest. An open mortgage can be ended early if you are ready to pay the three-month interest penalty. The greatest thing about home equity loans compared with those from banks is that they are flexible enough to be customized to meet each client’s needs. Our loan professionals are available to discuss the best home equity loan solutions for you.
Common Tailored Options Include:
- Interest Only Mortgage – The principal is untouched as only the interest is paid.
- Blanket Mortgage – This is where a mortgage is placed on multiple properties at the same time to ensure secure financing.
- Construction Draw Mortgages – Construction contractors can be paid as the work progresses.
These are just a few of the custom options preferred by home equity borrowers. More custom options can be written in the agreement and our professional mortgage brokers in Toronto are happy to discuss your situation and advise on the best alternatives for you.
How Much Can you Borrow with a Home Equity Loan
The loan amount you can get depends on the value of your home and total debts on the property. Home equity lenders have to calculate a metric known as loan to value (LTV) ratio which is equal to the value of total debts divided by its current price estimate. Our network of lenders on will lend on a property with 75% LTV in Toronto. While some lenders will rely on LTV alone, others are also sensitive to a borrower’s employment history and credit score. Home equity lenders will lend on a property up to 75% of its appraised value. Home equity loan lenders give people a chance to access the equity in their property in exchange for money that can be used for development projects and tuition. You will be able to utilize assets that you already own for personal expenses even if you cannot get regular bank loans.
Common Uses for Home Equity Loans
You are free to use money borrowed with a home equity loan as you wish. Our company works with many people who use loan money to invest in home renovations, pay off expensive debts, higher education or fund a business project. Some people use their loans to pay for vacations, luxury cars or medical expenses. The best use of the home equity loan money depends on your financial needs in Toronto.
- Renovation – Making improvements or upgrading the property is an expensive project that can be financed using a home equity loan.
- Education – Keep your children in school using money from the loan.
- Business Investing – A home equity loan can be the best source of capital for your business.
- Debt Consolidation – You can use the loan money to repay high-interest debts and have only one low-interest loan to pay.
The loans we provide in Toronto can be used for other things like helping family members, stopping foreclosure and seeking emergency treatment.
The Difference Between Home Equity Loans and Home Equity Lines of Credit
People often confuse home equity loans and home equity lines of credit which are very different. HELOC is a type of revolving credit much like a credit card without a fixed number of payments. A home equity loan has a fixed rate as written in the agreement while for an HELOC it is a variable interest rate. With a Home Equity Line of Credit, the borrower can take out money whenever it is needed as long as they do not max out the credit limit. For a home equity loan, you initially receive a lump sum but a new contract must be written to let you borrow more money. While they are very different types of loan, the approval and interest rates are decided based on the LTV of your property. This helps determine risk and judge whether there will be enough to repay the loan if you default.