Home Equity Lending in Canada, is a general term that describes different types of loans in which the borrower uses the equity in their home, as collateral.
Home equity is the difference between what you owe on your home, and your home’s market value. Your home equity increases as you pay off your mortgage and as your home value goes up.
There are three different types of home equity loans in Canada:
- Home Equity Line of Credit
- A Second Mortgage
- A Reverse Mortgage
Home Equity Line of Credit (HELOC)
A HELOC is a revolving Line of Credit that is secured by your home.. It allows you to pay if off in full and then re-access funds without having to apply for new credit from your lender. On a home equity line of credit, you can get a maximum of 65% of your home’s appraised value. The more equity you have in your home, the more money you can borrow.
A home equity loan can be considered a second mortgage, if the home equity loan is in second position. The amount you can borrow will depend on the amount of your home’s equity.
- A second mortgage option is typically for people with low/no/unprovable income and/or low credit scores
- It can help to reduce interest payments if you have a lot of credit cards and other high interest debts.
If you are a homeowner in Canada and you are 55 years or older, you may qualify for a reverse mortgage. One of the most attractive benefits of a reverse mortgage is that you don’t have to make regular payments. You don’t need to pay off the loan until you sell.
Reverse mortgages are designed to increase your income, so that you can have a much more comfortable retirement.
Our mortgage brokers can produce and show you several different options so that you can select the optimal product for your specific needs. Working with a broker means you have someone on your side – always. Don’t hesitate, contact us today if you need assistance with gaining access to equity in your home.