Home equity loans are secured by real estate by lenders who offer registered mortgages. To give this kind of a loan, the lender relies on equity in the property. To find the amount of equity, they must subtract the debts on a home from its most recently appraised price in the market. Home equity lenders do not place as much importance on credit score as banks do so they choose other parameters to measure risk. Our expert team has ages of experience in providing home equity loans in Ottawa.
Payment options and Terms for Home Equity Loans in Ottawa
Typically, a home equity loan is an open first or second mortgage with a one-year repayment term and 7%-15% interest rate. It is an open mortgage because a borrower can choose to end the mortgage before the expiry date. If you are ready to pay the three-month interest fee penalty, you can clear the loan and move on to other things. Doing this also helps to improve your credit score that banks rely on when issuing credit. You can use the money from your home equity to finance any personal matters, as creditors are flexible and always ready to customize products. Our loan professionals can discuss your best options so you can make an informed decision.
Popular Choices Include
- Blanket Mortgages – This is placed on multiple properties at the same time to ensure secure financing.
- Interest Only Mortgage – Here, the principal remains untouched because only the interest is paid.
- Construction Draw Mortgages – This is where we pay the construction contractors as they complete their work.
More custom choices may be written into the mortgage agreement and our consultants are happy to help you make the best choice.
How Much Can I Borrow With Home Equity?
The value of the home and the value of existing debts determine how much a person can get. Lenders have to calculate loan to value ratio, a metric obtained by dividing the value of existing mortgages by the current price of similar properties in Ottawa. Our network of lenders will loan up to 85% LTV on properties in the city but some are also sensitive to credit score and employment history.
How do People Use Home Equity Loans?
You may use the home equity loan as you like because lenders are more flexible than banks. Our company has met many people who use the money for important issues like paying off expensive debts, investing in home improvements, business, or higher education. Some people use their home equity loans for luxury items like cars and vacations. The best way to spend these funds depends on your priorities:
- Debt Consolidation– It is always wise to gather your debts in one place to reduce the risk of non-payments and high fees. A home equity loan could be used to pay off all debts so you only have one lender in mind. You will find it easier to make payments and follow up on the loan to avoid ruining your credit score.
- Education – You can pay education fees to ensure your children remain in school.
- Renovation – Use the money from a home equity loan to make improvements that could add value to your home.
- Business Investing – This loan may also be used to fund a business that you have been waiting to start.
You could also use the loans we provide to pay for emergencies like stopping foreclosure and stopping power of sale.
The Difference Between Home Equity Loans and Home Equity Lines of Credit
Many people confuse the two but they are distinctly different. An HELOC is similar to a credit card in that it is a revolving type of credit, which does not have a defined number of payments. Home equity loans have fixed terms and payments much like an installment loan. While an HELOC features a flexible interest rate, home equity interest remains unchanged. When you get a home equity loan, a large amount will be given to you and a new contract must be written so you can borrow more. For the home equity line of credit, you can withdraw any amount you like as long as you do not exceed the credit limit. Despite these differences, the approval for and interest rates for both types of financing are based on a property’s loan to value ratio (LTV).