Home Equity Loans

Why do homeowners want to borrow equity?

When you borrow home equity, it comes at a very low interest rate, making it one of the cheapest loans available.  Common uses include:

Renovations

Car/truck purchase

Debt consolidation

Down payment on a second home

Investing

How much equity can you borrow from your home?

You can borrow up to 80% LTV

Example

Your home value
Max loan to value ratio
Max loan amount
Your mortgage balance
Amount of equity you can access
$550,000
80% 
$440,000
$300,000
$140,000

Ok, how do we get the equity of out?

You can access that equity in two ways:

Home equity loan at a glance

  • You must apply and then qualify to obtain a home equity loan
  • It’s a lump sum payment
  • Amount borrowed is added to your original mortgage
  • You pay interest on the entire amount
  • The more equity you have in your home, the more funds will be available to you
  • It can be a fixed or variable rate
  • As you pay down, you are not able to re-borrow. (Not revolving)

What is a home equity loan

A home equity loan is a lump sum payment instead of a revolving line of credit. 

If you’re borrowing $100,000 in equity, the lender will deposit that money into your bank account. VEGAS HERE WE COME! 

Just kidding, don’t go to Vegas, that place is evil!

The loan will be added to your existing mortgage amount or be a separate mortgage segment attached to your original mortgage.  Either way, your monthly mortgage payment will increase.

On a home equity loan, you start paying interest on the entire amount as soon as it is advanced to you- whether you use it or not.

Does it cost me anything to get a home equity loan?

Yes, just like the HELOC there will be costs associated with setting this up.  You can discuss this with your mortgage broker or bank to determine the exact amount.

How do I apply for a home equity loan?

Contact your mortgage broker or bank to start the process.

Home Equity Line of Credit (HELOC) at a glance

  • It’s a revolving line of credit
  • The more equity you have in your home, the more funds will be available to you
  • It’s a variable interest rate
  • You must apply and then qualify to obtain a HELOC
  • You only pay interest on the portion used

What is a home equity Line of Credit

A home equity line of credit (HELOC) is a revolving line of credit that can be used and paid back whenever you like.

How does a home equity line of credit work?

If you have available equity in your home, the lender will set you up with a line of credit that is attached to your mortgage. 

It can be set up so that every time you make a mortgage payment, you have more money available to you in your HELOC.  You only pay interest on the funds that you borrow- but at a much lower interest rate than a credit card. 

It’s quite typical for the interest rate on a HELOC to be about 1% higher than mortgage rates.  The interest rate on your HELOC, just like any line of credit, will be a variable interest rate.  

Why do lenders offer this product?

Lenders use your home as security.  Just so you know, since the HELOC is attached to your mortgage - if you default on your home equity line of credit, the lender may force you to sell your home to satisfy this debt. 

Does it cost me anything to get a HELOC?

Yes, at the very least, your lender will charge you for the cost of the appraisal of your home.  Depending on your current mortgage product and where you are in your mortgage term, there could be other costs associated with setting it up as well.  Your mortgage broker or bank will be able to help you determine the actual cost. 

Perfect! How much home equity do I have?

Use our home equity calculator to determine how much equity you have.

Looks promising, what do i do next?

Speak to your mortgage broker or lender to discuss your options.  You’ll have to supply documents and go through the application process.

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