As a homeowner, you should be aware of the importance of a home equity line of credit as it can be of great financial assistance to you in times of need. Commonly referred to as HELOC, Canadalend.com has been assisting homeowners across Ontario in utilizing their home equity to pay off various kinds of debts, fund home improvement projects and perform many kinds of repair work around the house that are usually difficult to finance within their monthly budgets. And most important of all, a HELOC is one of the most helpful solutions in case you are stuck in a situation that calls for a financial emergency.
You already realize that one of your most valuable assets is your home. As you make your regular mortgage payments, the amount of mortgage you owe goes down, which in turn means the amount of equity you have in your home goes up. Many homeowners don’t realize that they can tap into this equity to get a low-rate home equity loan. A home equity loan is another name for a second mortgage. It lets homeowners leverage the equity in their homes by borrowing money against this equity.
Types of Home-Equity Loans
There are two types of home equity loans, a fixed-rate loan and a home-equity line of credit (HELOC). Both have the same end result, but are structured slightly differently. Both types of loans have a set term and at the end of the term, the outstanding amount is due back in full.
With a fixed-rate loan, Canadalend.com gives you, the borrower, a single, lump-sum payment. This loan is then paid back to the lender by the borrower over a set period of time based on the interest rate in the market at the time. The main point to note is that your payment and interest rate will remain the same over the lifetime of the loan.
Think of a HELOC just as you would of a credit card. You have a predetermined spending limit, and you may use any amount up to this limit at any time. Your payments will be based on the amount and type of HELOC, and could also vary with the interest rate of the market at the time.
Understanding Home Equity Line Of Credit
Home equity loans are mainly in the form of loans with a fixed rate of interest and a HELOC. While both of these loans are refinancing mortgages, they have some basic structural differences. A fixed-rate loan allows a homeowner to avail a complete payment from the lender in one single transaction, which is then repaid over a mutually agreed time period and a fixed rate of interest. This type of home equity loan is ideal for you if you are in urgent and immediate need of funds, as you are able to get the whole loan amount in a lump sum.
The Basic Characteristics of HELOC
On the other hand, home equity line of credit basically works on the lines of a credit card and gives you more financial flexibility. A HELOC therefore comes with a fixed spending limit, which is mutually agreed upon when you take this kind of home loan on the basis of your property’s equity. The upside of using a HELOC is that it allows the borrower to spend any amount of money up to the predetermined limit at any given time, which can be paid back based on the current market rates of interest.
So the basic aspects of a HELOC are:
- Predetermined spending limit
- Flexibility of spending
- No Time-based limitations
Benefits of Availing a HELOC
As you can see, a HELOC allows you the liberty of spending money which is akin to using a credit card, but the most important benefit of opting for this type of home equity loan is that your rates of interest will be much lower than that of any credit card company. This is why if you are a homeowner with a very high credit balance, our team can help you to switch your loan to a HELOC through a very simple and convenient process. Canadalend.com has been working with homeowners across Ontario’s major cities and rural areas like Toronto, Brampton, Mississauga, Orangeville, Caledon, Kitchener, Waterloo, Barrie, Ajax, Pickering and Hamilton, to name a few, for years, and we have an in-depth knowledge of the very best home equity loan options that will be most suitable for our clients. So get in touch with us and we will help you find the most cost-effective home equity product by thoroughly reviewing your financial situation, as well as your budgetary requirements.
What’s in it for You?
The biggest benefit to you as a homeowner is that the interest rate you pay on a home-equity loan — even though higher than that of a first mortgage — is going to be much lower than what you would pay on a credit card or other consumer loans. So if you carry a large credit card balance each month, it may be worth your while talking to a Canadalend.com specialist to see how we can save you money on your monthly carrying costs. We can help you get a home-equity loan to consolidate your debts into a much lower single payment.
What to Watch Out for Before You Take Out a Home-Equity Loan
All too often, borrowers fall into a cycle of spending, borrowing, spending and then falling deeper into debt. If not handled carefully, a home equity loan could put you deeper into debt than before. In some cases, homeowners can end up with more debts than the value of their home, and that can possibly lead to a slippery slope towards bankruptcy.
Before you apply for a home-equity loan, take a reality check. Ask yourself: how you will use the money borrowed? Are you going to use it to pay off previous debts that have a higher interest rate, or are you going for that luxury item that you don’t really need?
At Canadalend.com, we will help you review your financial situation before you borrow any more money. We will evaluate the pros and cons of borrowing for your current situation and advise you in making the correct decision that works for you. Our goal is to make sure that you fully understand the terms of the loan and your ability to comfortably make the payments without compromising other bills.