If you are a home owner, you have an extra source of fund you’re literally sitting on – your house. No, you’re not selling your house right now but tapping into its equity. The more useful renovations and improvements you have made into your house, the higher your equity is. You can use that as an extra source of fund through Home Equity Loan.
Also called second mortgage, this loan allows you, the homeowner, to borrow some money by using your home’s equity as leverage.
Home Equity Loan versus Home Equity Line of Credit
Home Equity Loan and Home Equity Line of Credit are often interchanged and interrelated to each other. They are, in reality, different. Home Equity Line of Credit, just like what its name suggests, functions much like a credit card. You use this line of credit to make purchases – very similar to how you would use a regular credit card.
Home Equity Loan, on the other hand, gains you access to a lump sum – an amount of money you can immediately get to use for other things like school fees or building a business.
Advantages of Home Equity Loan in Calgary
Home owners and lenders can benefit a lot from both Home Equity Loan and Home Equity Line of Credit. We’re singling out the benefits of the former though. Here are some of them:
1. The interest rate is lower for home equity loans in Calgary.
This is perhaps one of the main benefits of home equity loans. The interest rate that comes with it is significantly lower than other types of loans.
2. Home equity loan is flexible enough to be used as an emergency slush fund.
You can use your loan however way you want it. There’s so much flexibility in it. You can pull up this fund to make repairs or renovations in your home (thereby increasing your home’s value), or use it to fund a new business. If you don’t have a need for money, you can simply leave your home’s equity untapped until such a time you need it. Think of it as an emergency slush fund you can pull up in your time of need.
3. The interest rate for home equity loans never changes.
The difference between a home equity loan and a home equity line of credit is the stability of the interest rate. With the former, you can pull up the money and pay a fixed interest rate. With the latter, the interest rate is variable depending on the current financial index.
4. You can apply for a home equity loan in Calgary even if you have a bad credit score.
We know having a bad credit score can put you at a disadvantage to many loans. Home equity loans are typically more lenient because banks use your home as collateral. Even though you have a bad credit, you still have a good chance of being approved for this loan.
5. The lump sum is generally bigger than other types of loans.
You can borrow less than 85% of your home’s equity. It’s a significant rate and bigger than many types of loans out there.
Finding the Best Home Equity Loan in Calgary
There are always pitfalls when it comes to acquiring loans. Before you actually use this to your advantage, see to it that the money you are putting the loan into can benefit you or your home in the long run. You don’t want to tap into this financial resource only for temporary financial gain. Think about investing the money.
Also, you don’t want to transact with lenders that might cheat you out of the real value of your home. This is why it is important to look around and find the best home equity loan.
Do your research. Make sure you know the existing lenders in Calgary, their reputation and how long they have been in this industry. Only transact with reputable lenders offering transparent deals. You might also want to get yourself a mortgage broker who can help you find a good lender that can offer you the best rates.
Keep your credit score impressive. A good credit score will always be your leverage when you are borrowing money. You can get a great interest rate if you have a good credit standing.
Compare before settling. Before you eventually go for one lender, make sure you have done a comprehensive comparison. A mortgage broker can also help you compare rates as they are affiliated with different lenders.