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Do you own a home in Winnipeg? If so, you just might have a valuable asset on your hands that can provide you with access to borrowed funds.
Many consumers in Winnipeg turn to loans to cover an expense they may be responsible for. Luckily, there are plenty of loan options available in Winnipeg for consumers to choose from, and one of the more unique loan products out there are HELOCs. If you currently own a home, you may be able to use it as collateral to borrow extra funds against it.
What is a HELOC?
Also known as a type of second mortgage, a HELOC is a type of loan in Winnipeg that allows you to borrow against the equity in your home. If you have a certain amount of equity built up, you may be eligible for a HELOC. They’re referred to as second mortgages because they are often second in priority to your first mortgage on your home. That said, it is possible for HELOCs to assume first position in line.
Want to know how you can build home equity in Canada? Find out here.
An acronym for a “home equity line of credit,” a HELOC works somewhat like a credit card in that is it revolving credit. Your lender in Winnipeg will approve you for a specific credit limit which you can borrow up to, but no more than. Like a credit card, you are free to withdraw as much money as you need without exceeding your credit limit.
How Does a HELOC Work in Winnipeg?
For instance, if you are approved for a HELOC with a credit limit of $25,000, you would be able to borrow no more than $25,000 against the equity in your home whenever you have an expense to cover. Also like a credit card, you will only be charged interest on the amount of money that you withdraw, and not the entire credit limit.
Once you repay whatever you have borrowed, you can continue to borrow against the credit limit over and over again, as long as you repay the amount borrowed without exceeding your credit limit.
The great thing about a HELOC in Winnipeg is that there is always money readily available whenever the financial need arises. Rather than having to go through the loan application and approval process when you need funds, the money is always available with a HELOC.
The exact loan amount that you would be approved for will vary depending on how much equity you have built up in your home, among other factors, including your credit score and debt-to-income ratio.
HELOCs typically have higher interest rates, mainly because it’s assumed that they will be in second position. As such, they are considered riskier to the lender in Winnipeg. In case you default on the loan payments, the lender in second position won’t be repaid until the lender in first position is repaid, hence the higher interest rate charged.
What Are Some Common Uses of HELOCs in Winnipeg?
A HELOC in Winnipeg can be put towards a number of needs, including any one of the following:
- Make a home a improvement – Home projects can be expensive, and a HELOC can provide the upfront funds needed to pay contractors to do work on your home.
- Increase the value of your home – A home improvement project can, in turn, add value to your home.
- Pay for education – College tuition can be expensive in Winnipeg, and a HELOC can provide the money needed to cover such large expenses.
- Consolidate debt – If you have a lot of high-interest debt, the money you obtain from a HELOC can help you pay it all off, leaving you with just one, lower-interest debt that’s much more affordable and easier to manage.
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What’s the Difference Between a HELOC and a Home Equity Loan?
HELOCs and home equity loans are very similar, but they’re not exactly the same. They are comparable to one another in that they both involve borrowing money against the equity in a home. But they differ in how the funds are offered and how they can be used.
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With a home equity loan, the lender provides a lump sum of money that is taken from the equity in the home. Like a typical loan, those funds will then need to be repaid by a specific due date in installments.
On the other hand, a HELOC is revolving credit. While borrowers are free to borrow the entire credit limit issued by the lenders, borrowers can borrow as little or as much as they want or need, only paying interest on the portion withdrawn. As mentioned earlier, the money can then be borrowed repeatedly as long as the initial funds taken out are repaid.
Interested in applying for one of our home equity loan programs? Check this out.
Is it a Second Mortgage a Good Idea For You?
A loan can come in handy under a variety of circumstances in Winnipeg. But as helpful as a loan may be, it’s important that borrowers in Winnipeg take the time to assess their current financial situation and their ability to make loan payments before choosing to take out a loan.
A second mortgage is no different. Borrowers in Winnipeg should look at their situation and decide whether or not a second loan is a smart idea. Taking out a loan places the burden of having to pay back any money borrowed, plus interest, so you should determine whether or not you have the financial means to cover your payments every month.
Can’t make your loan payments on time? Look at this.
Not only that, but it’s also wise to think carefully about the reason for the second mortgage. There should always be a valid reason to borrow money.
However, there are plenty of times where it makes sense to take out a loan or second mortgage. For instance, an emergency situation may warrant a loan, as would paying for improvements that would increase the value of your home. Further, a second mortgage might also be warranted to cover the cost of something that will be put to good use.
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Are You Looking to Apply For a Loan?
If a second mortgage in Winnipeg makes sense for you, let Loans Canada help you find the right lender and loan product for your situation. Even if a second mortgage isn’t ideal, there are plenty of other loan products available for you to consider. Call Loans Canada today.