If a home renovation or debt consolidation is your top
priority, taking out a home equity loan on your Oshawa home may help you unlock
the funds you need.
Home Equity Loan vs.
Home Equity Line of Credit
Home equity loans and home equity lines of credit are
similar since they both provide cash based on the difference between what you
owe on your mortgage and the market value of your home. This difference is
referred to as equity. If you’ve been paying your mortgage for years, you may
be surprised to find out how much equity you’ve built in your home.
With a home equity loan, you get a lump amount of cash that
you can use for anything you want. In return, you agree to pay a fixed amount
each month for an agreed-upon term. The interest on your loan never changes – a
real benefit if you lock in at a low interest rate. This allows you to plan
your budget since your monthly payment never changes.
A home equity line of credit (HELOC) is like a credit card.
As long as you make your monthly minimum payment, you can continue to withdraw
funds until you hit the maximum. A HELOC doesn’t have a fixed payment; it
varies depending on how much you owe, the current interest rate, and whether
you pay interest only once or more each month.
One of the advantages of a home equity line of credit is
that, as long as you’re below your limit, you always have money available in
case of emergency – and that money is available at a much lower rate than on a
credit card or store credit card. A disadvantage is that the bank can lower
your line of credit maximum or even cancel it without much notice.
If you’re looking for debt relief but don’t want to incur
the penalties that come with refinancing your mortgage, a home equity loan or
line of credit may be for you.
Benefits of a Home
Home equity loans are great for accessing cash for a
one-time expense, such as buying a car or paying for a home renovation. Since
the loan uses your home as collateral, you get a lower interest rate than you
would on most loans. That means you can consider renovating your almost perfect
house so it transforms into your dream home, or you can try that cruise you’ve
never been able to book in the past.
If you decide to consolidate your debt, you will get a lower
interest rate, especially if you’re transferring your debt from high-interest
credit cards. This translates into lower monthly payments, so you’ll have extra
money to pay down the principal faster or to help with your monthly bills. Debt
consolidation lets you combine multiple monthly payments into one easy-to-track
monthly payment. When you unlock the home equity in your Oshawa home, you can
use a home equity loan to help you afford life’s extras or for debt