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Considering a Home Equity Loan in Brampton? – Here’s What You Should Know!

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With GTA property values at attractive heights, and interests rates holding steady at a very enticing level; this is an ideal time to be considering a home equity loan in Brampton or any of the nearby townships.
 
The decision to borrow against your home is never an easy one; but sometimes it’s the most prudent financial move a home owner can make. Most savvy home owners consider mortgage financing for the consolidation of expensive debts, financial investment, recreational or investment property, and even for the purchase of a new vehicle or home renovation.
 
Regardless of the purpose, before you meet with a financial professional, here’s a brief overview of what you should know:
 

Benefits of a Second Mortgage

 
Similar to a first mortgage, when you use a second mortgage to unlock equity in your property, the lending institution will register your loan using the home as collateral. Home owners benefit with this type of financing option when a longer term, lower payment is the priority. A recreational or investment property would be a good example of the effective use of a second mortgage since you’re purchasing an appreciable asset with home equity.
 
Second mortgages are often underwritten by smaller lending institutions and private lenders, so you should shop around aggressively or use a mortgage professional to scour the market for the best deals.
 
While interest rates for a second mortgage are generally higher than a first mortgage, most unsecured borrowing options carry a much higher interest rate and provide less security against swings in variable lending rates.
 
You can borrow up to 85% of the appraised value of your home, less the balance on your first mortgage.
 

Refinance Your First Mortgage

 
If you’re borrowing goal is longer term with low payment amounts, and your mortgage is not locked in and subject to penalties, you might also consider refinancing your first mortgage. You can borrow up to 85% of the appraised value of your home for a first mortgage and while there may be fees associated with registering a new mortgage, in many cases your savings will far outweigh the relatively low costs incurred.
 
Consider this option if your borrowing needs are long term in nature, and current market interest rates are the same or lower than your existing first mortgage.  
 

Fixed-Rate Loan vs. Home Equity Line of Credit

 
Much like a credit card, a home equity line of credit (HELOC) allows the home owner to advance or pay down their line of credit with flexibility and without penalty, at any time. Interest rates are attractive and fluctuate with market conditions.
 
There are two types of home equity loans: a fixed-rate loan and home equity line of credit. Both types of loans have a set term, but are structured differently. Your minimum payment amounts fluctuate with your outstanding balance and the current HELOC rate.
 
If you’re looking for stability in your payment amounts, then a fixed-rate loan would be your best option. By locking in the rate and term (up to 5 years), your monthly budget remains the same and you have the peace of mind knowing that economic fluctuations will not affect your loan.
 
For both options of your home equity loan, you can borrow up to 85% of the appraised value of your Brampton home, less your first mortgage balance.

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