23 Dec 2019 Home Equity Loans
In Canada, “home equity loan” is an all-encompassing term used to describe various loan types which use the borrower’s equity in their home as collateral. With a home equity loan, homeowners can generally borrow up to 90% the value of their home.
Different formats of home equity loans include home equity lines of credit (HELOC), second mortgages, reverse mortgages, or refinancing a first mortgage with another lender, to name a few. Each of these loan types offer borrowers different means of obtaining financing by leveraging their home equity.
How to get a home equity loan?
Getting a home equity loan can be broken down into 5 key steps, explored in detail below.
1. Determine your borrowing capacity
Understanding the amount of financing you’re eligible to borrow will help determine if a home equity loan is right to fulfill your needs. Borrowing capacity is established by evaluating the current value of your property, minus any balance owing on your mortgage. Again, the maximum you can borrow up to is 90% of the value of your property.
2. Research various home equity lenders
With so many lenders and mortgage brokers offering similar services, it’s important to choose a partner who will work to get you the best deal for your needs. Set aside some time to research different lenders and brokers offering home equity loans. Online user reviews, social media channels, word of mouth – be confident you’ll be working with someone knowledgeable in the space and has your best interests in mind. Don’t hesitate to set up phone calls or meetings with several different lenders or mortgage brokers to get a personal feel for each option.
3. Prepare personal and financial documents
Lenders will also be doing their due diligence on you, the borrower. Expect to have the following information and documents readily available while going through the home equity loan application process.
4. Conduct credit check & home appraisal
As home equity loans are largely based on the value of your home, lenders will want to have an appraisal ordered to determine value. Secondly, expect to have your credit pulled to establish what interest rate you’ll pay.
5. Decision time
Finally! Once credit check is complete and application has been submitted to the lender, you’ll receive your home equity loan terms and rate from your lender. At this point it’s up to you decide if the presented financing meets your costing expectations and borrowing necessities.
At Rateco we aim to put the power back in the borrower’s hands. Our unique auction system enables lenders to bid against one another to obtain your business. You’ll have the advantage of receiving multiple offers on your home equity loan, ensuring you receive the best rate on your loan at no cost to you.