While a home equity loan can provide easy access to cash, not all uses for it are beneficial. Just because you qualify for one doesn’t mean it’s the right choice; misusing it could jeopardize your home. We recently asked a couple of Toronto’s leading home equity loan lenders, what are the top 5 reasons why people should seek a loan.
1. Increase Your Property’s Value with Home Improvements
“Using a home equity loan to fund home improvement projects is one of the best strategies to boost your property’s value. This could involve adding a room, renovating your kitchen or bathrooms, building a patio, enhancing insulation, or upgrading your home to be smarter and more energy-efficient. These upgrades often require less time than major renovations and can significantly enhance your quality of life while you live in the home, providing benefits even before you sell” says Danny Papodapoulis of Homebase Mortgages based in Toronto.
2. Consolidate Debt
“If you're juggling multiple high-interest debts, you might be paying a significant amount in interest. By taking out a home equity loan to pay off these debts, you can save money over time and simplify your finances by consolidating everything into one payment. With a home equity loan for debt consolidation, you’ll only have one bill to manage” says AJ Merkunnel with Mortgage Central Canada.
3. Invest in Opportunities
Home equity can serve as additional funding for your business or as a deposit for another property. However, ensure that the income generated from your business or investment can cover the home equity loan payments. Avoid using your home equity loan for ventures that create more liabilities than assets, as this could lead to further debt.
4. Fund Higher Education
You can utilize home equity loans to finance higher education, which can improve your long-term financial prospects by increasing your earning potential. Always aim to use your home equity for investments that enhance your life and provide lasting value.
5. Prepare for Emergency Expenses
Many families lack sufficient savings to support themselves if they lose their primary source of income for a few months. Unexpected large expenses, such as medical bills or the need for a new vehicle, can arise without warning. In such cases, your home equity can be a financial lifeline.
Are you ready to explore a home equity loan? Contact the mortgage professionals at Mortgage Central Canada for assistance, and you could have your loan approved in as little as 24 hours!
Applying for a Home Equity Loan
To obtain a home equity loan, you must start by applying with a lender. The loan amount will depend on your ability to repay and the value of your home equity. Here are the types of home equity loans you can consider if you meet the necessary criteria:
• Mortgage Refinance: You can renegotiate your current mortgage or break your existing contract to access up to 80% of your home equity. While this option may incur a penalty, it can be beneficial for those facing large expenses or seeking better interest rates.
• Home Equity Line of Credit (HELOC): This option allows you to borrow against 65% to 80% of your home equity, either as a lump sum or in smaller amounts over time. A HELOC offers the flexibility to reborrow or withdraw from your line of credit as you make payments on the minimum amount due. It typically features lower interest rates than other second mortgages, giving you greater control over when and how much of your equity you use.
• Second Mortgage: This option involves taking out a mortgage in addition to your primary mortgage. While you’ll need to manage two mortgage payments, a second mortgage can be a suitable choice if you require a significant lump sum of cash unexpectedly.
Keep in mind that applying for a home equity loan involves using the equity in your home as collateral, which means your home could be at risk if you fail to make payments. If you need assistance in determining the best option for borrowing against your home equity, reach out to a trusted home equity loan lender, who can answers all of your questions.
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