Home Equity Loan Canada
If you are a homeowner looking to obtain a loan, a home equity loan Canada is a great option. Thousands of homeowners in Canada have taken out home equity loans each year. Find out what a home equity loan is, how it works and why homeowners use it to achieve their financial goals.
What is home equity?
Before we go into home equity loans in Canada, it’s important to learn what home equity is. In simple terms, home equity is the difference between your home’s market value and the money owed on the home, including any outstanding balance on your mortgage and other loans secured against the home. It represents the value of your financial interest in your home.
As an example, if your home is worth $1,000,000 and you have an outstanding mortgage balance of $500,000, without owing any other loans, you have $500,000 in home equity.
Your equity can increase as the value of the property rises or when you pay down the outstanding balance on the mortgage on your home.
Over the past few years, there’s been some rise in the value of Canadian residential properties. There’s also a forecast of increased property values in 2024, above 2023 prices.
So, how can you benefit from this since this financial value isn’t readily available in cash?
Borrowing on home equity
You can get a loan secured against your home equity that you can use for several purposes. These types of loans are referred to as home equity loans. Typically, interest rates on these loans are lower than other types of loans because they are secured against your home.
The two main home equity financing options are home equity loan Canada and home equity lines of credit. Read on to learn about the differences between these two options.
What are home equity loans Canada?
A home equity loan gives you an upfront lump sum that you can repay in fixed payments. It is a great way to tap into the stored economic value in your home.
As mentioned earlier, the loan typically comes at lower interest rates than unsecured personal loans and can be used for purposes such as consolidating debt, renovating a home, and other expenses.
To unlock the financial value in your home, you can take out some cash from your home in the form of a home equity loan Canada. If you have owned your home for a few years or more, chances are that you have built up some equity. Reach out to one of our Financial Solution Specialist to guide you. Approvals take only 24 hours.
Call us: 1-800-587-2161
Taking a home equity loan
Meet Olivia for instance, she bought a beautiful home six years ago with some savings from her job as a marketing manager at a design agency. It’s a spacious home in an older part of town close to a picturesque and serene beach. Needless to say, it’s a dream home in a dream location.
Just one thing missing. She wanted to build a rustic balcony to get an idyllic view of the ocean.
To completely finish her dream home, she needed some money to build this balcony. However, her savings weren’t enough to cover the costs, so she decided to talk to her lender. But she couldn’t get the amount needed because of some issues with her credit score.
Fortunately for her, a friend at work introduced her to Alpine Credits and told her about how they assist many homeowners in her situation.
A Financial Solutions Specialist at Alpine Credits provided Olivia with the help she needed. They supported her in investigating how much equity was available in her home and discovered that there was a good amount of equity available.
Her home was valued at about a million dollars, and the home equity was worth $400,000, allowing her to borrow up to $250,000 for her use. She obtained the loan to cover the cost for her new balcony and also consolidate her existing loans to improve her credit score.
Everyone’s situation is unique. If you want to know how much you could access from your home, our Financial Solution Specialist can support you too.
Call us: 1-800-587-2161
How much can be borrowed in a home equity loan in Canada?
You can access up to 75% of your home’s value. If your home’s value is estimated to be $400,000 like Olivia, the maximum amount you can borrow would be $300,000. The minimum loan amount is $10,000, so whether you need a small amount or more, you can get what you need.
Benefits of a home equity loan in Canada
Already, you might have realized some of the benefits of home equity loans. For one, it’s much more flexible to use than other types of loans. Some of the other benefits include
Lower interest rate — unsecured loan options tend to have a higher interest rate since they might provide the loans based on an applicant’s credit history. Home equity loans are different – they are secured against your home, which means they have interests comparatively less than unsecured loans like credit card debts.
Build your credit score — you can use a home equity loan to consolidate debt and get your finances back on track. Since interest rates are relatively low, Canadians obtain this type of loan to pay off all other loans to streamline monthly payments.
Have more flexibility — home equity loans can be used for several purposes to achieve your financial goals.
There are even more uses and benefits.
The application process for a home equity loan in Canada
The application process for a home equity loan can be simple and short when you use the right lender. While banks might need to know everything about your financial and credit history, the opposite is true when you apply for a home equity loan at Alpine Credits.
Here are a few documents that may be required for a home equity loan:
Identification — to obtain a loan, you must be at least 18 years old. Also, you need to have citizenship or permanent residency in Canada. Passports and driver’s licenses are valid forms of ID.
Proof of property ownership — since home equity loans are based on your home equity, you’ll have to provide evidence that you own a home. Proof includes your property title and utility bills with the address of your property.
Proof of insurance — to be eligible for a home equity loan, your property must be insured.
Mortgage payment history — you’ll need to have paid at least 25% of the property’s value to qualify for a loan. You can demonstrate that by showing statements of your mortgage balance.
Home appraisal — you can receive support for this from the right lender.
Because the application process and requirements are simple, you can be approved for a loan within 24 hours at Alpine Credits.
Call us: 1-800-587-2161
Home equity loans vs lines of credit
A home equity line of credit (HELOC) is a revolving credit financing, like a credit card, that you can access as you choose. There are several differences between home equity loans and lines of credit; some of them include
|Home equity loans||Line of Credit|
|Gives you an upfront lump sum||A revolving line of credit, like a credit card|
|Has a fixed interest rate||Has a variable interest rate|
|Fixed payments for the loan term||Payments are not fixed|
|Fixed payments make it easier to budget||Variable interest means payments fluctuate|
How home equity loan is calculated
Determining how much home equity you have built is a straightforward calculation. First, you’ll need to know how much the appraised value of your property is. You don’t need an exact number, as you can estimate it based on the province you live in and the current housing market.
You’ll also need to know how much of the mortgage there is left to pay down; you can also estimate this value, or you can calculate your monthly payments.
Next, all you have to do is determine the difference between the two values. If your property is estimated to be $1,200,000 and the outstanding mortgage is $500,000, your equity could be worth $700,000.
|Home equity||$700,000 ($1,200,000 – $500,000)|
|Amount you can borrow (75% of equity)||$525,000|
Home Equity loan pros and cons
There are several advantages to home equity loans. A few of those advantages include access to a lump sum of money to use for several purposes, predictable payments and lower interest rates compared to other personal loans. One obvious downside of a home equity loan is that you need to be a homeowner to qualify for it.
Getting a home equity loan from Alpine Credits
Your property is one of the best resources to get a loan, and when you need to quickly access money, a home equity loan is one of the best solutions. The application process is more accommodating to everyone with different types of financial backgrounds. There is less pressure to prove your creditworthiness, and you can get the application results much sooner.
See how Alpine Credits compares
Though there are several options available to get a loan, compared to others, Alpine Credits makes the application and criteria straightforward.
You can get approved if you own at least 25% of your property’s value. Alpine Credits’ application can be made online or through the phone. Not only can you be approved within a few hours, but you could also receive the money within a few days.
Credit cards come with high interest rates, so using them to consolidate debt or pay for a renovation can result in a large portion of your monthly payments going towards only the interest. Also, using more than 30% of your credit limit is unhealthy.
A line of credit is an option, but getting approved for them by traditional lenders requires a solid financial history. Lines of credit also have other fees, and the total amount will depend on how much of the costs you’re willing to pay.
You can contact a Financial Solutions Specialist today and apply for a home equity loan. Alpine Credits is the best alternative to the bank when you need a loan. The requirements are not as demanding and offer comparatively better interest rates.
Frequently asked questions
One of the benefits of home equity loans is that they can be used for several purposes. When you receive the funds, you can use the funding towards loan consolidation, home renovations, or to achieve any other financial goals you have in mind.
Home equity loans can provide various benefits and can be helpful in your goals, but you’ll also have to consider if it’s the right choice for you.
In short, yes, you can take out your equity without having to refinance your home. Home equity loans allow you to turn your equity into cash without adjusting the terms of your primary mortgage loan.
One obvious downside of a home equity loan is that you need to be a homeowner who owns at least 25% of their property to qualify for it.
You can borrow up to 75% of the current value of your home, minus your outstanding mortgage balance. The loan is secured against your home equity.