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Home Equity Line Of Credit
Home Equity Loan Vaughan
Staycations and quality time at home have been a trend for Vaughan residents. For many people, this downtime has inspired them to dream of renovations or additions that would make their home more functional or more enjoyable. But, where do you get the money to make those investments?
A home equity loan will allow you to leverage your home investment. Over time, property values trend upward. As you pay down your mortgage and the value of your home goes up, you’re building equity. Equity is calculated by taking the current value of your home (not what you paid for it) and subtracting the amount you owe or any liens. You might consider the equity as the part of your home that you actually “own”.
For example:
The current value of your home: $600,000
You have $350,000 left on your mortgage
Your home equity is $250,000
You can use this equity as collateral to borrow money, securing a low interest rate.
Choosing a Home Equity Loan in Vaughan
There are many reasons why people choose to leverage their home equity to borrow money. It could be to complete the home renovation project we mentioned earlier or it might be for purchasing a vehicle, starting a business or paying tuition for your kids’ post-secondary education. A home equity loan can also be used to consolidate and pay off high-interest debt or settle unpaid property taxes. Whatever the reason, there are a few key factors you’ll need to consider.
Most lenders will let you borrow up to 80% of the equity you have built up. So, in our example where you have $250,000 equity, you would be able to borrow up to $200,000.
This type of loan requires a few extra steps which means it will take a bit longer to process than other types of loans. One of the key aspects required for a home equity loan is a property assessment. This will determine the current fair market value which is used to calculate the amount you are eligible to borrow.
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Home Equity Options
When it comes to home equity loans in Vaughan, there are three ways to take advantage of the value of your home.
A Second Mortgage: A second mortgage uses your home equity as collateral for the loan. It provides you with a lump sum that you can use for whatever you desire. You will then repay the loan (interest and principal) over a scheduled time.
Line of Credit: A line of credit that uses your home equity as collateral allows you to borrow up to a certain amount of money. It is flexible in that you can borrow as much or as little as you need at any particular time. Repayment is flexible as well and as long as you are under the capped amount, you can borrow and repay as needed.
Refinance Mortgage: Essentially, refinancing your mortgage means negotiating the amount you borrow for a higher amount. The new mortgage then pays off the original mortgage and provides you with a lump sum of cash.
The Best Rates for home equity loan in Vaughan
Before applying for a home equity loan, take some time to understand how you can get the best rates possible. Even small adjustments in interest rates can cost or save you thousands of dollars!
Check your credit score: Are there any errors that might pull down your score?
Rectify outstanding bills: Is your credit card maxed out? Are you behind on your taxes? Pay up and stay current.
Settle any outstanding debts. If you have smaller balances owing on other loans, paying them off can help get you a better rate. However, there are times when using home equity to pay off larger debts makes sense.
It may take a bit of time and patience, but these items can not only help you get a better rate, it helps your overall financial picture. Bumping your credit score from fair to good or good to excellent could result in thousands of dollars in savings!
How to get your Home Equity Loan approved even with Bad Credit?
If your credit score is poor and you can’t work on the above checklist before applying for a loan, it will mean a few more restrictions. But, not all hope is lost. Eligibility depends on a number of factors so it is worth discussing with a mortgage broker. They have detailed information about the process and can discuss your unique situation and determine the best approach.
Poor credit could mean you qualify for a smaller loan but because the interest rates for a home equity loan are typically lower than other types, it could still be a benefit to you to consolidate debt and pay it off through the home equity loan.
Using a Broker
Mortgage brokers are specialists in their field. Their knowledge and experience give them the expertise necessary to navigate the home equity loan process. They can take complex and confusing information and explain it in a way that makes sense to you.
A broker can ensure you understand the details and complete the appropriate paperwork. They will guide you through the process.
More choice means a better rate. Brokers can efficiently shop many lenders for the best rate - saving you time, aggravation and money. These lenders are competing for your loan and a mortgage broker can leverage their relationship with them to confirm the best rate for you.
Home Equity Loan in Vaughan - The Right Choice?
Using your house as collateral can give you access to funds with lower interest rates. But, you must remember that your house is your home. You need to make it a priority to responsibly repay the loan. If you run into trouble with repayment, you could lose your home.
However, this type of loan can save you a lot of money with low interest rates and favourable terms and conditions. If you have a steady, reliable income and are financially responsible, leveraging your home equity can work to your advantage.
This type of decision requires some research and consideration to decide if it’s right for you. Speak with one of our team members to discuss your situation. They will work with you to find a solution that works best for you and your family. Call today to discuss your options.