It is far from easy to meet all housing expenses + the mortgage payment month after month. A homeowner works hard to ensure that these payments are covered and that regardless of other monthly financial obligations, there is no lapse in the mortgage payment.
Let your hard work pay off; why not turn the table around and take full advantage of that hard-earned equity to help pay off some of your other debt obligations. Existing equity can quite literally ease the financial strain.
Now that you may be considering tapping into this added wealth, the question arises - What avenues are open to utilizing this equity? The answer is that there are several second mortgage loan options available to an Ontario homeowner.
Let the Equity in Your Home Work to Your Financial Advantage
To fully understand the distinct advantages of utilizing the equity in your home it is useful to be familiar with what equity is. In simple terms equity is the amount your house is worth subtracting what you still owe on your property. The equation look like this:
House Appraised value - $800,000
Mortgage amount owing - $500,000
Total equity to date - $300,000
This equity can be utilized by applying for a second mortgage on your property. There are different options available to a homeowner using existing equity:
Debt Consolidation loan
Home Equity loan
Home Renovation loan
Refinancing Principal mortgage - this option would not be a second mortgage
You may have also heard of Home Equity Lines of Credit which are referred to as HELOCs. Let’s take a closer look at this popular option.
A Home Equity Line of Credit (HELOC) - Revolving Funds To Ease the Financial Strain
This second mortgage option is a revolving line of credit enabling funds to be available as the balance is paid off, a homeowner only needs to pay the monthly interest on the line of credit.
A HELOC can be a great option for many homeowners because a homeowner can continuously borrow against a line of credit.
HELOCs - How Can You Benefit?
The HELOC is structured as an Interest only payment loan - Homeowners are required to pay the monthly interest payments; any payment amount above the interest payment goes directly to the principal amount.
What Is It Going To Cost You?
If a homeowner chooses to take out a HELOC through a bank, there will be rates attached as in all secured mortgage options. Typically the rates are higher than those associated with long-term amortized mortgages but do remain competitive.
If your bank declines your request, there are options with an Alternative Bank or a Private Lender for a HELOC. There are fees associated with using an Alternative Bank or Private Lenders as they must offset their risk; these fees are not out of pocket.