Some changes we embrace, some we rail against,
some require money to deal with, but be assured, things will change. You can
prepare for change, with a home equity loan that allows you to access the
savings locked in your home, whenever, or wherever you need money. Change is
unstoppable, but Kitchener homeowners can be ready for whatever life brings.
How Does a Home Equity Loan Work?
The lender registers a mortgage (a
claim) on your property. If you already have a mortgage, the new loan may be
used to pay off the old mortgage (called refinancing), or may be registered as
a second mortgage. The total amount you can borrow is set at 85% of the value
of the property being mortgaged. Other
conditions of the lender may include income or employment qualification, and a
recent home appraisal or survey. To find
out how much you can borrow, check out this handy online mortgage
Your Home Equity Loan
residential mortgages advance all the money at purchase or refinance date and
are used to buy properties, refinance existing debt or to advance funds for
other purposes. Interest charges begin immediately. Mortgages registered as a line
of credit allow the borrower to access only the funds they need, as they need
them, and pay interest only on the portion used. It works like a very high-limit
credit card with ridiculously low interest rates. Lines of credit are used for
debt consolidation, home renovations, and new projects.
Types of Home Equity Loans for
First Mortgages – hold first position or claim if the
property is sold. Commonly used for new home purchases offering terms up to 35
years, and interest rates that can be variable or fixed for 6 months to 10 years.
Borrowers must qualify along with the property; and monies are advanced ‘all at
once’, so interest charges begin ‘all at once’.
Second Mortgages – hold second claim, and are commonly
used to access equity in a home. Second mortgages can sometimes enjoy most of
the terms and rates of first mortgages, and again, borrowers and property must
qualify. Equity is commonly accessed for debt refinancing or new projects.
Private Mortgages – can hold first, second or third
position or claim on a mortgaged property. The lender is private, so lending
conditions might not be as strict as a bank.
Private mortgages are used for unusual properties or borrowers who may
not qualify under banking lending criteria.
Home Equity Line of Credit – can
be registered as a first or second mortgage, and enjoys the secured low
interest rates of a mortgage. Like any line of credit, it can be accessed or
paid down, anytime. The ‘available’ amount is always accessible by you. It’s
like having a pre-approved loan that you can access anytime. Plus, you only pay
interest on amounts outstanding, so if your project is over time, you can
access funds only when you need them, and incur interest only on monies you
TIP: The value of your home is based on
recent sales of homes like yours in neighbourhoods like yours. Contact your local Kitchener real estate
professional to get an idea of the value of your home, and check out a home
equity loan in with an experienced independent mortgage professional.