A home equity loan is a facility secured by the unutilized equity in the borrower’s main home, vacation home, second home, or other residential property the borrower owns. A home equity loan is available in many borrowing products or forms. You can borrow it as a first, second, or third mortgage, home equity line of credit (HELOC) or refinancing on a mortgage-free property. You can acquire a home equity loan from different lenders, including major banks, credit unions, monoline mortgage providers, private mortgage providers or other lenders that provide mortgage products. In typical situations, when a borrower says that they need a home equity loan, they mean tertiary or secondary lending alongside their first or second mortgage.
A borrower applying for a home equity loan usually seeks to obtain some cash from the equity of their existing home, cottage, or residential property.
Borrowers who apply for home equity loans Toronto use the funds for various purposes like debt consolidation, paying tax arrears, investing in another property, paying for tuition, solving cash flow problems, financing travel plans, paying off education loans and others.
The money given to the applicant is secured by the mortgage of their existing residential property. In most cases, a home equity loan is in the 2nd or even 3rd position behind the existing mortgage. Therefore, lenders, investors, and other institutions that offer home equity loans face a higher risk than 1st mortgage lenders. Due to their higher risk, home equity loans have higher rates than first mortgages besides other charges.
Home equity loans have a simpler and quicker application process because they follow an asset-based lending strategy, unlike a first mortgage. Individual investors and private mortgage providers usually use their personal funds when funding home equity loans, except for HELOCs, credit lines, and home equity loans issued by conventional institutional lenders.
When reviewing an application for a home equity loan in Canada, lenders consider the following factors:
Contrary to a common assumption, you can apply for a home equity loan soon after you purchase your home. Most people assume that you have to wait for six months to a year after purchasing a home before you apply for a second mortgage or HELOC, but this is not true.
A home equity loan Ontario can help you improve your financial situation. However, it could also ruin your finances if you don’t manage it properly. It is important for a borrower to have a solid plan for using, managing, and paying back the new funds available through a home equity loan.
You should seek the help of a knowledgeable and experienced mortgage broker to help you with this equation. A reliable mortgage broker in Toronto is willing to support you from the beginning to the end, helping you understand your financial situation and your future financial goals. The broker will also match you with a reliable lender who will provide you with the best interest rates and terms available in the market.
In recent years, especially with the onset of COVID 19, many people are borrowing against the equity available in their properties as a source of funds. People must remain home on lockdown, and businesses are closed; therefore, income is low. However, other expenses like property tax, rent, credit card bills, personal income tax, and other variable expenses remain unchanged. In such situations, people who own a home or other residential properties can benefit from the guidance of a mortgage broker in Toronto that specializes in home equity loans.
A home equity loan can help you rehabilitate your finances and continue investing in other properties. We work with homeowners across the greater Toronto area; we can help you irrespective of your income, debt level, and credit history. You can access up to 85% of the equity in your home to help you accomplish other needs. Below are some of the things you can achieve with a home equity loan Toronto.
Urgent Home Repairs — perhaps your HVAC has malfunctioned, or there are other structural damages in your home. A home equity loan will help you cover urgent repairs without worrying about your credit score or current savings. Taking a loan out of your home’s equity is an efficient, convenient, and fast way of accessing funds.
You can also use a home equity loan to pay other sizable expenses like a wedding.
If you are juggling multiple loan payments, home equity loans can help you consolidate the debts into a single, low monthly payment. You could save thousands of dollars by paying off high-interest-rate loans and credit cards. Debt consolidation can also help you reduce your monthly payment by up to 50%.
A home equity loan gives you the financial freedom to invest in real estate properties, including vacation properties. You will access funds at reduced interest rates. Owning a vacation property can serve as an extra source of income, given that you can always rent out the property whenever you are not using it. If the market becomes favourable, the equity in your vacation property will continue to grow, giving you extra equity to borrow against.
It can be challenging to obtain business funding from some lenders, especially if you are self-employed. You can borrow against the equity you’ve earned by paying off your mortgage to invest in your business and grow your profits. We understand the needs of business owners; we can help access the funds you need to invest in your business.
Perhaps you want to purchase a vehicle, but you don’t have enough money. Then, you have to weigh different loan options. Instead of obtaining a personal or car loan, you can apply for a more affordable home equity loan. In addition to having low-interest rates, a home equity loan has a straightforward payment process.
You might be planning to expand your investment portfolio, but you don’t have the required capital. A home equity loan provides an excellent low-interest solution to help you make a down payment. If your investment generates income over time, you will have enough money to cover your expenses. In addition, a home equity loan gives you the freedom to expand your investment, including acquiring a vacation property.
You can use a home equity loan to finance your education. Whether you are investing in your own education or sending your children to school, borrowing against your home’s equity is a viable low-interest solution. The cost of education in Canada continues to rise. If you are a homeowner, your expenses might be stretched to the limit. A home equity loan provides a quick and affordable way to finance your educational needs.
...pick the one thats right for you.
Below is a chart indicating some of the best home equity loan deals in Ontario to guide you through your search.
Prime + 0.20*
|Canadian Western Bank (CWB Optimum)||HELOC|
Prime + 0.50*
|B2B Bank||Home Equity Line of Credit|
Prime + .60*
|Manulife Bank||HELOC Account|
|5.99%*||Canadian Mortgages Inc (CMI)||Home Equity Loan as a second mortgage|
Prime + 4.00*
|Community Trust||HELOC in second position|
|6.99%*||Sequence Capital||Home Equity Loan as a second mortgage|
The leading benefit of equity loans is the fast application and approval of the loans. The process of applying for a home equity loan or a home refinance is much quicker than that of seeking a traditional mortgage. In many cases, institutions approve the loan within hours. As a result, you will have your loan funded within 48 hours, especially if you need funds urgently. A home equity loan is one of the best and fastest financial solutions available.
If you opt for a second mortgage, the repayment term/period is usually one year. If you choose a HELOC loan, the repayment term is open. Both a second mortgage and HELOC are beneficial depending on whether you intend to repay the loan in the short term or the long term. Repaying the loan in the long term means you will pay lower instalments but more interest, while repaying within a shorter term means you will pay higher instalments but lower interest.
Another main benefit of home equity loans is that you can access them from private lenders. Unlike conventional lending institutions, private lenders do not focus much on the borrower’s credit score and income while determining whether the borrower qualifies for money or not. Therefore, you need to have qualifying income to debt ratios and a minimum credit score if you want to access the best home equity loan rates. However, obtaining a home equity loan from private lenders is still easier than applying for a mortgage from a conventional bank.
A home equity loan can save you thousands of dollars or even more if you use the funds to consolidate other debts with higher interest rates. If you are struggling to meet your monthly loan instalments, you can use a home equity loan as a debt consolidation tool. You use the funds to pay off credit cards, home improvement store credit cards, and department store cards, which have higher rates than you could get with a home equity loan. Upon consolidating your debts, you will only pay one instalment per month instead of paying multiple instalments.
A home equity loan has much lower interest rates than a credit card. Therefore, using a home equity loan to consolidate credit cards debts will leave you with extra cash flow every month. With this extra cash flow, you can repay the principal amount of your loan much faster than you would have paid off the credit card debts. The average interest rate for credit cards is 20%, while home equity loans are available at 6-8%. It is obvious that you will save more money with a home equity loan.
Despite the many advantages of a home equity loan, it has some potential disadvantages. A home equity loan may have a higher interest than most traditional loans secured against the borrower’s home. Home equity loans come in second or third priority behind the first mortgage, second mortgage, or a home equity line of credit. Therefore, lenders of home equity loans face a higher risk or financial exposure on their investment than first or second mortgage lenders. Home equity loan lenders charge a higher interest rate to compensate for this risk.
A borrower also incurs additional lender fees, broker fees and legal fees while applying for a home equity loan. Due to the increased financial risk to home equity loan lenders, the lenders charge fees ranging between 0.5% and 10% to cover the extra risk they take.
In most cases, lenders do not pay the broker anything while issuing home equity loans. In some cases, the mortgage broker will add a fee, which could be as low as 0.5% or higher depending on the complexity of the loan. The broker fee will also vary depending on the loan amount. Usually, the broker fee percent decreases as the loan amount increases.
Without the proper planning and guidance, a home equity loan can put the borrower in a worse financial situation than before. Therefore, when applying for a home equity loan, the borrower needs to plan how to use the funds and repay them. The borrower also needs the guidance of an experienced mortgage broker in choosing the best home equity loan.
First National Financial
Street Capital Bank
|5 year variable||4.45% (prime - 1%)|
|3 year variable||2.1% (prime - 1.1%)|
|Line of Credit||Starting at 3.00%|
|Equity Loans||Starting at 5.99%|
|Private Mortgages||Starting at 4.99%|
There are two main ways of getting a home equity loan in Ontario. First, you can obtain the loan through a mortgage broker or going lender-direct. The process of obtaining a home equity loan is usually much easier and faster than going through the process of applying for a mortgage from the bank. Private lenders are the main providers of home equity loans. Unlike traditional lenders, private lenders are more interested in obtaining a high return on their investment. Therefore, they are willing to take higher risks, provided they compensate for this risk by charging higher interest rates and higher fees. Private lenders do not care much about the borrower's credit history, debts, income, balances on credit cards, and other financial details.
Private lenders mainly focus on the property and its value. The private lenders consider how fast they can dispose of the property at a fair market value in a power of sale situation. A power of sale situation arises when borrowers default on their mortgage payment obligations. In case the borrower defaults, the private lender will want to sell the borrower's home and ensure they have enough money to cover their initial investment and other costs and fees they incur in reselling the home.
Therefore, you can qualify for a home equity loan in Ontario even when you don't have a perfect credit score or income to debt ratios.
There may or may not be a minimum credit score when applying for home equity loans Toronto. Whether or not the credit score matters will depend on the type of loan you seek and the mortgage lender. If you obtain a home equity loan from a private lender who is investing their money into funding your loan, the lender may not require you to have a credit history at all. However, seeking a loan from a private lender will come at a higher interest rate than if you have to apply for a home equity line of credit from an institutional lender.
You need to have a minimum credit score of 680+ if you want to access a home equity loan with the lowest rates. With this credit score, you will qualify for a home equity line of credit from the financial institution with which you have your current first mortgage. For example, this will apply if you have a first mortgage loan with a bank that also provides HELOC products.
You can use several tips to ensure that your credit rating stays high to enable you to access the best home equity loans Ontario. First, ensure that you keep your revolving debt like a gas card or credit below 30% of the total limit. This means that if your credit card has a limit of $1,500, you should try to keep the balance on the card lower than $450 at all times. By doing this, you will improve and maintain a strong credit score. With a high credit score, you can easily access great credit products at excellent interest rates at all times.
Perhaps you are new to Canada and don’t have a credit history yet. You don’t have to worry; you can take advantage of the special new to Canada programs that many top-rated banks offer. These programs often come with some of the lowest mortgage rates options.
If you currently don’t have an existing mortgage, you can obtain a home equity loan from a bank in the form of HELOC or first mortgage as long as you qualify for one. To qualify for a first mortgage or HELOC, you would probably need to have a minimum credit rating of 600+ and a high income.
You could turn to a private lender if you didn’t qualify for a bank mortgage or HELOC. However, with a private lender, you should not expect the lowest rates as you could get in a conventional bank. A certified and licensed mortgage broker can guide you in the right direction. A mortgage broker has a network of many mortgage lenders, enabling them to guide you in choosing a home equity product that suits your needs and financial situation. Have a solid plan on how to use and repay the loan.
A home equity line of credit, commonly abbreviated as a HELOC loan, is almost similar to a regular line of credit. You can borrow money at any time you want, up to your credit limit. You can access funds from a HELOC whenever the need arises, pay it back, and borrow again. A HELOC is secured against your home. Interest rates on a HELOC facility are variable; the rates go up or down as the market interest rates change. When obtaining a HELOC loan, you may have to pay certain administrative fees like appraisal fees, legal fees, title insurance, and title search. You can obtain a HELOC combined with a mortgage or a stand-alone HELOC.
The primary benefit of a HELOC loan is that it is an open revolving loan. A HELOC allows you to make interest-only payments on the money that you use. A HELOC offers an advantage over the conventional first mortgage from a banking institution or a second mortgage. With a first or second mortgage, the borrower must take out all of the money at once, and as the borrower pays back the loan principal, they no longer have access to those funds. If the borrower needs to access some funds in the future, they would have to go through the full mortgage refinancing process. The borrower would have to take out an additional home equity loan as an alternative.
A HELOC allows borrowers to have an available loan limit that they can draw from and pay back whenever they need to. The borrower only has to pay interest on the outstanding amount of the actual balance. You can borrow as high as a $200,000 HELOC loan provided you qualify and avoid a full refinancing. You will not feel compelled to use a dollar unless you need it. Borrowers can draw from their lines of credit as much or as little as they would like, up to the given limit. They can draw from their limit as many times as they like while only paying interest on the remaining portion of the home equity line of credit.
With a home equity line of credit, the minimum monthly payment is much lower than the monthly payment the borrower would make for a traditional mortgage with a similar or even a lower interest rate than the HELOC loan. In addition, the monthly payments for HELOC loans are usually lower because they are only based on the interest amount, unlike mortgage payment that includes a combined payment of both the interest and the principal.
A HELOC facility from an alternative lender, which goes in the second position, is advantageous because it is easier to qualify for than seeking a HELOC through a conventional bank or lending institution. This type of loan is available through a private lender in most cases. With private lenders, the process of applying and being approved is usually easier, faster, and less of a hassle than seeking a more conventional mortgage of a home equity line of credit.
HELOC borrowers can take advantage of the lower interest rates and affordable monthly payments and use the funds available through a HELOC to pay off higher interest rate credit cards, student loans, car loans, and much more. HELOC loans are less expensive than taking out personal loans. Personal loans are more expensive given that they are less secured and riskier to lenders. HELOC offers lower interest rates than other types of loans, especially credit cards and unsecured loans.
A HELOC is flexible and can be set up to fit your borrowing needs. You can always pay the money you borrow at any time without incurring a prepayment penalty.
The main drawback of a HELOC loan is the fact that it has higher interest rates than a conventional mortgage. If you obtain a home equity line of credit from a bank, the interest rates are usually between 0.20% to 1.50% higher than the bank’s prime rate. However, with a conventional mortgage from the same banks, the rates start as low as 1.00% below the prime rate.
Obtaining a home equity line of credit from a traditional banking institution is disadvantageous because it requires a lengthier and more stringent application process, and it is harder to qualify for than a HELOC from a private lender.
Obtain a HELOC from alternative lending institutions like mortgage investment corporations (MIC’s), trust companies, or private lenders, usually individual investors. It will be much easier to qualify for a HELOC. However, you will incur a higher interest rate and additional fees. You can always contact the mortgage brokers at Certified Mortgage Brokers to get quotes and quick approval rates. You can contact us in person, online, or through Twitter, Facebook, or Linked In.
Another common disadvantage of a HELOC loan is that fewer lenders provide these home equity loan products in the second position after an existing mortgage. Therefore, if you need to access money fast, you would be better off going for a second mortgage loan with a more straightforward application process than a HELOC. Especially from conventional banks, HELOCs have a lengthier and more involved application process than a mortgage loan.
A HELOC requires discipline to pay it off because you only need to pay the monthly interest. The large amounts of credit available can make it easy for you to spend high amounts of money and carry debt for a long time.
If you need help with equity loans Toronto or borrowing equity from your home, we invite you to email or call the team at Certified Mortgage Brokers. We have a team of knowledgeable, professional, and friendly mortgage brokers who are always happy to help homeowners make the right decisions regarding home equity loans, mortgages, HELOCs, and more. Our mortgage brokers can help you get approved quickly and easily for a home equity loan Canada today if you are a homeowner.
Now is the right time to obtain a home equity loan Ontario or a HELOC, given that interest rates have been at a record low in 2021. Certified Mortgage Brokers provides fast and reliable services, low-interest rates, and a large network of more than 40 lenders. We will ensure that you get the best HELOC and home equity loan rates available in the market. In addition, we will contact different lenders for you and compare different mortgage options as you focus on other areas of your life. We make it our goal to provide the right home equity product that matches a borrower’s needs and their unique financial situation. This is our commitment to our esteemed clients.
We respect and treat all clients as if they are family. You will feel valued and appreciated within the first few minutes of interacting with one of our mortgage brokers. When you first call us or meet us in person, you will understand that we have your best interests at heart. We strive to help position our clients for a better financial future in whatever we do.
All our mortgage brokers strive to enhance the borrowing experience of homeowners. We are a customer service leader committed to providing a positive and seamless borrowing experience for our clients. Our commitment to always put our clients first has earned us one of the highest customer satisfaction ratings in the mortgage industry in Canada.
A borrower’s home equity loan can be denied when there isn’t enough equity left on the home to lend on, the home is located in a remote place, or the home is in an unliveable or poor condition.
Borrowers use home equity loans for many purposes, including debt consolidation, business capital, maintaining a business, and asset purchase.
Not all home equity loans require an appraisal; there are other ways of getting a property valuation. Even if most loans require an appraisal, some lenders simply do a walk-through or a video tour of the home to determine its value. Some lenders, especially those established in the mortgage and real estate business, have digital or online home valuation services that they use.
If you can’t afford to pay for a home appraisal, speak to your mortgage broker from Certified Mortgage Brokers to guide you. You can borrow from private lenders who simply view the property without requesting an appraisal. You can also borrow from institutions like banks that rely on online or software services to provide them with property valuations.
A second mortgage is a loan borrowed against a property already mortgaged, while a home equity loan entails borrowing against the equity available in your property.
A home equity loan enables borrowers to access a lump sum amount upfront, and the borrower makes fixed payments over the term of the loan. A HELOC allows borrowers to tap into their equity up to a set credit limit. HELOCs have variable interest rates, and their payments are not fixed.
When borrowing from traditional lenders, you need a credit score of 600+, but when working with private members, your credit score doesn’t matter much. This is because private lenders mainly focus on property value.
A borrower should have an existing residential property with available equity to access a home equity loan.
Yes, there are closing costs on a home equity loan. The costs will vary depending on several factors. The factors are the home’s location, the LTV, the loan amount, and whether a borrower is taking a HELOC, second mortgage, third mortgage, or refinancing the first mortgage.
You can access educational resources on mortgages and home equity loans online or through mortgage brokers. You can always check the Certified Mortgage Brokers website, where we have useful content, tools, and other resources for homebuyers and homeowners.
Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!
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I was renting an apartment for a long time and finally decided to take a big step - get a mortgage instead. Team at certified Mortgage Brokers laid out various options for me. The actual process went smooth and quick, happy with my new home.
My wife and I decided to refinance our mortgage and started looking for a mortgage broker in Toronto. There were so many options, so you can imagine how overwhelmed we got! After talking to Leon we decided to proceed with Certified, didn't regret that decision once. They always gave useful recommendations, were attentive, and constantly in touch. And most importantly (for us) they helped us to save some money!!
Vita was great. Helped my son with all the paperwork and got him very good interest rate. On the closing date called to follow up if everything went fine. Quite a pleasant experience. I would recommend this firm for anyone who is looking a mortgage broker.
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