A homeowner’s guide to home equity loans at Alpine Credits
Getting loans are considered a normal part of the financial journey for any Canadian. You’ll need a mortgage for a house or a personal loan to finance a vehicle. Normally, loans are received from major financial institutions, but their funds are not always available to everyone. When that’s the case, alternative lenders like Alpine Credits are the solution to get those funds with ease by providing you with a home equity loan.
What are home equity loans?
Home equity loans are secured loans, which means they are lump sum loans that have collateral attached to them. The value of the sum depends on how much of your mortgage you’ve paid and how much your property is worth. As such, getting approved is a smoother process than if you were applying for an unsecured loan because your financial history doesn’t play a significant role in the approval process.
Home equity loans can be used for multiple reasons, but the main one to relieve financial stress from smaller benefits or inadequate savings. Unpredictable situations are no longer as stressful because home equity loans can cover that expense. By getting a home equity loan, borrowers can boost their financial position because the chances of getting approved are increased.
Other reasons to get a home equity loan include:
- Home renovations and improvements
- New vehicles
- Tuition and educational expenses
- Debt consolidation
- Extra property down payments and mortgages
Home equity options available at Alpine Credits
The main thing that is offered at Alpine Credits is a home equity loan. While home equity can be accessed in different methods such as a home equity line of credit (HELOC), Alpine Credits specializes in home equity loans that come in the following forms:
- Second mortgages — another name for traditional home equity loans is second mortgages. Lenders calculate the equity stored in your property and lend out an equal or lesser value to you in the form of a loan.
- Cash-out refinancing — a common occurrence among homeowners is to switch lenders when their mortgage term has come to an end. Cash-out refinancing is different from a second mortgage because instead of only borrowing money from your equity, you replace your previous mortgage entirely. It can become a completely new agreement with your lender, including different terms and interest rates.
Home equity loans vs lines of credit
Home equity loans
- Lump sum loan
- Large amount potential
- Good for emergencies
- Better for over-spenders
- Fixed payments
- Fixed interest rates
- Relatively lower interest rates
HELOCs
- Revolving loan
- Line of credit with a higher limit than credit cards
- Interest only applies to amount spent that month
- Better for renovations
- Flexibility with borrowing
- Variable rate options available
The application process at Alpine Credits
While the banks need to know everything about finances and credit history, the opposite is true when you apply for a home equity loan at Alpine Credits. The application process is much simpler because all you will need is to provide a few documents that demonstrate that have built equity in your property.
- Identification — to receive a loan, you have to be at least 18 years old, and you have to have citizenship or permanent residency in Canada. Passports and drivers’ licenses are valid forms of ID.
- Proof of property ownership — because loans from Alpine Credits are based on your ownership or real estate, you’ll have to provide evidence of that. 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 mortgage to be qualify for a loan from Alpine Credits. You can demonstrate how much you have covered by showing statements of your mortgage balance.
- Home appraisal — this document will always be required for a loan from Alpine Credits. Companies across Canada provide home appraisal services, and you can determine what the value of your house is. When you do, provide the results with your application for a home equity loan.
Because the application process and requirements are simple, you can be approved for a loan within 24 hours at Alpine Credits. It doesn’t take as long as traditional lenders because the standards are more flexible. As long as we see that you have paid at least 25% of your mortgage, you could be eligible for a loan.
How home equity is calculated
Determining how much home equity you have built is a straightforward calculation. You can do it yourself by using an online home equity calculator.
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 environment. You’ll also need to know how much of the mortgage there is still left to pay; 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 to be $500,000, your equity could be worth $700,000. The more you have paid towards your mortgage, the more equity you have access to.
To get a more exact number, you can approach your bank or an alternative lender to calculate the difference for you.
How much can be borrowed in a home equity loan from Alpine Credits?
A homeowner’s equity can reach hundreds of thousands of dollars. With Alpine Credits, you are allowed to access up to 80% of what your equity is worth. Using the above example, if your equity is estimated to be $700,000, then the maximum amount you can borrow would be approximately $560,000. The minimum loan amount is $10,000, so whether you need just a small amount or $100,000, you can get what you need from Alpine Credits.
Eligibility requirements are different at the bank
Alpine Credits is an alternative lender, meaning you can find the same opportunity to access your home equity with traditional lenders, the banks. However, getting approved for a loan from them can fare to be more challenging. The banks set different terms and conditions when you apply for a loan with them, and you’ll have to provide the following to prove your eligibility.
- Credit score — at traditional financial institutions, your credit score plays an important role when applying for a loan. They will review your credit reports, so their ideal borrowers would have a minimum credit score of 650.
- Debt-to-income ratio — with a good credit score, comes a good ratio. Banks want to see that you can manage your outstanding balances well. Other than credit score, they examine the ratio between your debt and your income, and they demonstrate it by a percentage. They would like to see a percentage of no higher than 36%, the lower your percentage, the better your chances of approval.
- Employment and income — additional to having a good payment history, the banks will verify that you’ve been making steady income for the past few years. In general, banks have preferred giving loans to people who are making regular income rather than those who are self-employed.
- Equity in home — additionally to all the above requirements, your need to have built enough equity in your property to qualify for a home equity loan from major financial institutions.
Benefits of a home equity loan from Alpine Credits
- Pay less towards interest — many other lenders have high interest rates because they prescribe a rate based on an applicant’s credit history. Home equity loan interest rates are different with Alpine Credits. They are usually fixed rates, and they are comparatively less than interest rates from traditional lenders.
- Build your credit score — many Canadians use a home equity loan to consolidate their debt and get their finances back on track. Alpine Credits doesn’t report to the credit bureau, so your home equity loan doesn’t affect your credit score. Instead, the bureau will see that many if not all of your outstanding debts are paid, and you can focus on repaying your one home equity loan.
- Have more flexibility — getting a home equity loan is easier to access compared to an unsecured loan and compared to getting them at the bank. Not only that, but home equity loans also have significantly higher value than any kind of loan.
Are there downsides to a home equity loan?
As with any loan, there are some considerations you should make before you decide if home equity loans are the solution to your financial situation.
- Closing fees — all of Alpine Credits’ closing fees are disclosed as loan examples.
- Negative equity — this is an economic event in the housing market that occurs when there’s recession or a depression. It’s not an immediate concern for most homeowners but knowing about it is good. Normal circumstances would have homeowners build equity as they continue to pay the mortgage, and the value of the property stays the same or increases. If the value of the property decreases, they generate negative equity as they continue to pay the mortgage.
- Foreclosure — because your property acts collateral, defaulting on the loan results in surrendering the property to the lender. Foreclosure is a legal process conducted by the lender to gain back what they are owed.
Home equity loan alternatives
Home equity loans can apply to anyone in any financial situation, but sometimes Canadians want to see other options, such as
- Personal loans — the most common type of loan is a personal unsecured loan. They are the most similar to home equity loans as they are also lump sums that get deposited into a borrower’s bank account. However, they don’t usually allow for higher funds.
- Credit cards and lines of credit — applying for credit cards means that your financial history will be checked. The application process is more complex.
The above are good options is you have a high credit standing or don’t need to borrow a lot of money. While these options are available outside of Alpine Credits, they generally have higher interest rates and have higher demands as they are unsecured debt.
Repayment options for home equity loans
With loans in Canada, borrowers always have the option to choose how often they want to pay and what kind of interest rate will best suit their finances. With Alpine Credits, borrowers can choose to pay monthly, bi-weekly, or so on. Monthly payments are the most common choice.
For interest rates, borrowers can choose between fixed rate and variable rates. Because variable rates fluctuate with the housing market, many borrowers prefer to choose predictability with fixed rates. First mortgages also have different rates than second mortgages do.
Frequently asked questions
Home equity loans can have multiple purposes; they are the most adaptable of all types of loans. When you receive the funds, you can then use those finances towards debt consolidation, home renovations, or any other financial goals you have in mind.
Only you as the borrower can discern if taking out the equity in your house is a good idea. 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. HELOCs and cash-out refinancing are other options that you can consider to be good ideas.
In short, yes you can take out your equity without having to refinance your home. Traditional equity loans are examples of accessing your equity without refinancing.
Conclusion: Getting a home equity loan from Alpine Credits
Your own 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 all types of financial backgrounds. There is less pressure to prove your creditworthiness, and you can get the application results much sooner.
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 offers comparatively better interest rates.