Compare and Save With Loans Canada
Written by Bryan Daly
Best HELOC Ontario (Online) January 2021
Ontario is one of Canada’s most popular provinces to live in and a lot of its citizens need mortgages to pay for their houses. Housing prices have been on the gradual rise in Ontario over the past few years and a typical mortgage can cost hundreds of thousands of dollars in principal, interest, and other fees. Not to mention all the home-related expenses that every homeowner must deal with. However, there is a silver lining as you go about paying down your Ontario mortgage, you can use the equity you’ve built up to take out a HELOC.
Using Your Home Equity for a Second Mortgage
Your home equity refers to how valuable your house is on the real estate market, as well as how much of your mortgage you’ve managed to pay off. In order to access it, you’ll need to have your property appraised to determine its market value and must have at least 20% equity to receive approval. You can then apply for one of two types of credit product, known as a home equity loan and a HELOC.
Wondering how you can access your home equity in 2018? Find out here.
Before we move on to a discussion of those two products, it helps to gain a basic understanding of why they are referred to as “second” mortgages. This idea can be confusing because neither product really qualifies as a mortgage in the typical sense of the word. Whereas your primary mortgage sits in first claim position while you’re in the process of amortizing it, home equity loans and HELOCs in Ontario initially come in the second position and can be acquired through a secondary lender if you wish.
Interest rates for second mortgages are often higher than first mortgages because the secondary lender is taking on a heavier risk by approving a borrower who already has one mortgage on their property. However, you can have your home equity loan or line of credit moved into the first position once your primary mortgage is fully paid, which may help you secure a more reasonable interest rate when the time comes.
Ever wonder how much it costs to buy a house outside your city? Check out this infographic.
Home Equity Loans in Ontario
- Are deposited via lump sums directly into your bank account.
- Are given a specific payment term and due date of around 10 years following approval. The loan is then paid back through equally timed installments (monthly, bi-monthly, week, bi-weekly, accelerated, etc). To learn more about these mortgage payment options, take a look here.
- Each payment is accompanied by a “fixed” interest rate (the rates for your payments don’t fluctuate during the payment term).
- Might be a more beneficial payment choice when you’re trying to consolidate a large amount of debt in one go.
Try clicking here if you’re thinking about applying for an installment loan in Ontario.
HELOCs in Ontario
- Are a form of revolving credit, similar to a credit card.
- Have a specific credit limit, which varies in accordance with how much equity you’ve built up. You can borrow from your limit whenever you need and pay it back through monthly payments.
- An “adjustable” interest rate (rates fluctuate along with the Bank of Canada’s prime rate) accompanies the amounts you’ve borrowed.
- Have potential for longer payment terms, sometimes 20 years.
- Might be a more beneficial payment choice for ongoing expenses, such as household renovations, maintenance, and other home-related costs.
Interested in applying for a fixed or variable rate mortgage? Look here to know how.
Both Products Can Be Used For
- Consolidating most forms of debt.
- Dealing with unexpected costs (medical bills, car troubles, job loss, etc.).
- Covering the cost of someone’s education (tuition, books, etc.)
- Increasing the value of your home (renovations, additions, repairs, etc.).
- Other necessary expenses (not consumer goods or other unnecessary costs).
- Refinancing your primary mortgage.
- Improving your credit health through timely, full balance payments.
Click here to see how your payment history affects your credit score.
What are the different types of home equity lines of credit?
What types of fees are associated with a home equity line of credit?
How do home equity lines of credit work?
Loans Canada Is Go-To Source For HELOCs In Ontario
Searching for the right HELOC in Ontario can be a tough and time-consuming task, especially when you’re already in the middle of your primary mortgage. Loans Canada can help match you with the second mortgage lender you need, fill out an application today.