A home equity loan is a kind of loan where the security is a piece of real estate. These type of loans are given as mortgages registered on a property and the main basis for approval is home equity. Equity is simply the value of a home minus the value of existing mortgages on it. Banks approve or reject mortgage requests mainly on a person’s credit score but luckily people with poor credit but enough equity can also get approved for a loan. Our team has vast experience with getting home equity loans in Windsor.
Terms and Conditions for Home Equity Loans
This loan usually demands interest rates between 7%-15% interest for a period of one year. They are usually open first or second mortgages on the property, which the borrower can end early if they wish to. Doing so attracts a penalty fee of three months worth of interest but despite it is worth noting that these loans are much more flexible than ordinary bank loans. You must explain how you will use the loan to a bank and they will not approve unless they are convinced. Home equity lenders are very flexible that they will accept nearly any explanation for needing a home equity loan. One of our loan officers can talk to you if you need help deciding what the best option for you would be.
Popular Custom Options Include
- Interest Only Mortgage – This is where interest alone is paid and the principal remains untouched.
- Blanket Mortgage – This is one whereby many properties are used as security as an attempt to ensure good financing.
- Construction Draw Mortgages – Our company can pay your construction contractor as the job is finished.
Other custom options can be written into the loan agreement and our loan experts are pleased to discuss your situation in order to help you make an informed decision.
How Much Can you Borrow With a Home Equity Loan?
The amount you are eligible for depends on home and debt value. Lenders have to calculate the loan to value ratio (LTV) by dividing the total amount of debts by the appraised value of the house. Our network of lenders will generally give up to 75% LTV on homes in Windsor. While LTV is the most important value for a home equity lender, some in the city are sensitive to job history and credit score.
Common Uses for Home Equity Loans
There are many uses for money depending on the clients’ needs. We mostly encounter people who use the money to invest in a home renovation or pay off a high interest debt. Some people use it for higher education but a few simply use their home equity money to buy a new car or go on vacation. The best use for the money, of course, depends on you and your priorities.
- Debt Consolidation – This is where you use loan money to pay off high-interest loans.
- Business – Loans can be used to start a business or invest in an existing one.
- Education – Keep your kids in school using home equity loan money.
- Renovation – The loan can be used for repairs or home upgrades.
The loans we offer can also be used to stop foreclosure or a power of sale. In some cases, home equity loans are used to help family members or pay for emergency treatments.
The Differences Between Home Equity Loans and Home Equity Lines of Credit
A home equity line of credit (HELOC) and a home equity loan are very distinct. The latter is a type of installment loan with a fixed number of payment and interest rates while the latter is a type of revolving credit without fixed rates like a credit card. A home equity loan involves a lump sum at first then a client has to wait for a new contract whenever they need more funds. As a credit line, you can withdraw an HELOC whenever you like as long as the credit limit is never surpassed. While very different, these loans often cause confusion because approval for both is based on property LTV and not credit score that banks prefer.