Can you really turn your home equity into cash? This is a popular question that has been getting a lot of attention recently as more Canadians are becoming aware of the benefits of using their home equity as a source of cash in times of need. The short answer is yes. This can truly be done and approval can be as quick as within 24 hours. Keep on reading to find out more.
Why Use Home Equity as Collateral for A Loan?
There are two ways to access your home equity to turn it into cash. One is by selling your home and another is by applying for a home equity loan. For those who do not have any plans of moving, using their home equity as collateral for a loan is made easy with the help of a second mortgage or a HELOC. These types of home equity loans allow the homeowner to borrow money from a bank or a lender with their home equity as collateral. The result is an easier to qualify for a loan with a much lower interest rate compared to using a credit card or getting a personal loan. By using your home equity as security when borrowing money, you can qualify for a loan even when you are unemployed or have a bad credit score.
How Much Money Can You Borrow with Your Home Equity?
The answer to this varies by a lot. The amount you can borrow is dependent on the value of the home equity that you have on your property. You can estimate this by subtracting all existing debts on your property from your home’s current estimated market value. The amount you can borrow is typically up to 80% of your home equity. Before applying for your loan, you will have to get your home professionally appraised as well as have copies of personal information that the bank or lender will verify before approving your loan.
Should You Get A HELOC or Get A Second Mortgage?
If you need a lump sum of cash, it is smarter to apply for a second mortgage. If you need varying amounts for several instances in the near future, then a HELOC could be better for you. Each one comes with pros and cons that will work for your financial situation. The key is to ask the right questions from mortgage professionals before committing to one to avoid wasting your fees if you decide that another option is better for you. A HELOC typically has variable payment as well as interest rate while a second mortgage has a fixed payment amount that is billed to you per month. You will have to take a long and hard look at your financial situation before objectively deciding which one will be better for you.
Why Use Your Home Equity Now?
The conditions are favourable as of now with easier requirements to meet as well as relatively cheap interest rates. If you’re planning to use the funds for home renovations or to pay for higher education, then it is better to start that as soon as possible for you to enjoy the benefits of your investments sooner as well. Contact us at Homebase Mortgages if you have further questions and we will get back to you as soon as possible!