A home equity loan is a type of loan that enables homeowners to borrow money using the equity they have already built up in their property, or in other words, through using their home as collateral.
While these loans are often used to fund home renovations and repairs, there are actually a number of other purposes that home equity loans can be used for to help Ontarians breathe a little easier, financially speaking.
From consolidating debts to financing new business ventures and investing in your continued education, a home equity loan can be a truly valuable tool to bring you closer to achieving your goals, without the added financial stress of interest charges or the hassle of other common types of loans.
In this article, we will go over the six common alternative uses for home equity loans beyond the usual home renovations, improvements, and repairs.
The Common Alternative Uses for Home Equity Loans:
1. Consolidating your debt
In Canada, home equity loans are most commonly used for the purpose of consolidating one's debt. This is because accessing home equity to borrow money comes with considerably lower interest rates when compared to other loan types, such as personal loans or credit cards.
Through tapping into home equity for debt consolidation, Canadian homeowners are able to cut costs on interest charges, as well, and can cut down on their monthly bill cycle.
2. Paying off your CRA tax debt
Owing a lot of tax debt to the Canada Revenue Agency (CRA) is never a fun position to be in. Fortunately, in many cases where homeowners owe a considerable amount of tax money to the CRA, a home equity loan can be used as a short-term loan to pay back these taxes and get out of the debt.
However, note that this will only be feasible in cases where there is enough room to pay off the CRA debt or when the amount of debt is not too large.
3. Starting a new business
A lot of capital is needed when you are starting a new business. Fortunately, tapping into existing home equity will allow many homeowners who want to embark on a new entrepreneurial journey to access these critical funds with much more ease than with other common loan types.
Moreover, these home equity funds can even be used to pay for a business loan.
4. Financing post-secondary or private education
In Ontario, post-secondary education programs or private schools can be very costly, and setting aside money for tuition is easier said than done for many homeowners.
This is why people who are considering personally returning to school for advanced education, or alternatively, who need to pay for their child's post-secondary education, can feel good about using a home equity loan for this purpose.
5. Covering a spousal buyout following a divorce
If you happen to be going through the process of concluding a marriage, then a spousal buyout may be a necessary course of action. This is generally applicable in cases where both spouses are not in agreement to sell the house and one spouse is unable to obtain another place of shelter.
In such difficult situations, a home equity loan can be used as a way to cover the costs of "sending off" a spouse. In fact, this is not an uncommon financial route.
6. Paying for unexpected emergencies
As the well-known saying goes, "When it rains, it pours." Canadian homeowners with equity built up in their homes should feel secure in case an unfavourable (and costly) event ever presents itself.
Last, but certainly not least, home equity loans are also often used to help cover unexpected expenses resulting from any type of emergency, such as a dental or medical emergency, an auto repair emergency, or other types of unfortunate incidents.
Access Your Home Equity Loan With Canadalend
Fortunately for homeowners in Canada, Canadalend.com can provide a high standard of service and more financing options compared to large banks. Since our professional team consists only of independent licensed mortgage experts, we also have access to hundreds of different reputable lenders, many of which are non-traditional or regulated on a federal or provincial level.
With that being said, if you are a Canadian homeowner looking to take out a home equity loan for any reason, whether that be to fund a home renovation or any of the above purposes and beyond, then a home equity loan broker on our team would be happy to meet with you. We will provide you with a thorough evaluation and go over all your options to ultimately help you find the right lender to suit your unique financial needs.