A home equity loan is a great way to get cash quickly, but not all of its uses are good. It doesn’t matter if you’re eligible for a home equity loan. Misusing the money could put your house at risk. Recently, we asked two of Toronto’s top home equity lenders what the five most important reasons are for people to seek a loan.
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Improve the Value of Your Home with Home Improvements
Home improvement projects funded by a home equity line of credit are a great way to increase the value of your home. It could be adding a new room, renovating the kitchen or bathroom, building a deck, improving insulation or upgrading your house to make it more energy efficient. “These upgrades can improve your home’s value and quality of life, even before it is sold” says Danny Papodapoulis of Homebase Mortgages based in Toronto.
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Consolidate debt
If you have multiple high-interest loans, you may be paying significant interest. You can consolidate all your debts into one loan and save money in the long run. “With a home equity debt consolidation loan, you will only have to deal with one bill” AJ Merkunnel of Mortgage Central Canada.
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Invest in Opportunities
Home equity can be used to fund your business, or even as a deposit on another property. Ensure that your income from business or investments can cover the payments on the home equity loan. Use your home equity loan to fund ventures where you have more liabilities than assets. This could lead to additional debt.
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Fund Higher Education
Home equity loans can be used to fund higher education. This can increase your earning potential and improve your financial future. Use your home equity to make investments that will enhance your life, and have lasting value.
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Prepare for emergency expenses
Most families do not have enough savings to sustain themselves in the event that they lose their main source of income. Unexpected expenses can occur, including medical bills and the need to purchase a vehicle. Your home equity could be your lifeline in such situations.
Are you interested in a home equity line of credit? You could get your loan approved within 24 hours if you contact the Mortgage Central Canada professionals.
How to Apply for a Home Equity loan
You must first apply for a home equity mortgage with a lender. The amount of the loan will be determined by your ability to pay and your home’s equity. You can choose from the following types of home equity loan if you meet all the criteria.
- Refinance Mortgage: You may renegotiate or terminate your mortgage contract in order to gain access to up to 80% equity. This option can come with a fee, but it is a good choice for people who are facing high expenses or want to get better rates.
- Home Equity Line of Credit: You can borrow up to 80% of the equity in your home, either as one lump sum or over a period of time. HELOCs allow you to borrow again or withdraw money from the line of credit as long as you pay the minimum amount. It usually has lower interest rates than second mortgages and gives you more control over how much equity you can use.
- Second mortgage: In this option, you take out a second mortgage on top of your primary mortgage. A second mortgage will require you to make two mortgage payments. However, it can be an excellent option if you need a large lump sum of money.
Remember that if you don’t make your payments, your home may be put at risk. Contact a home equity lender for help in deciding the best way to borrow against your equity. They can answer all your questions.
