Canadian Home Equity Loans

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Some Canadian lenders allow you to use the equity you have in your house as collateral for a loan. How do you calculate equity? Simple: Equity equals the value of your home minus the amount owing on your mortgage. If you have sufficient home equity, a private lender will be happy to offer you a short-term loan.

Because Canadian home equity loans are typically approved and processed quickly, homeowners are able to access them when they need them. Even if your credit rating is battered, a private lender will often provide you with financing based on your home equity.

Interest rates on home equity loans are usually much lower than those charged by credit card companies, so these types of loans are often used to pay down debt. When used properly, Canadian home equity loans can be a great option.
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Canadian Home Equity Loans

 

There are certain situations in which accessing a home equity loan makes a great deal of financial sense. These include:

  • Renovations before resale
  • Paying down credit card debt
  • Financing a child’s university education
In each of these scenarios, the borrower needs a short-term injection of cash to solve a temporary financial challenge. Because home equity loans are reasonably easy to access, it’s tempting to use them for other purposes. Around the middle of February, for example, the urge to take out a loan for a trip to sunny Hawaii is almost irresistible! But, there are some dangers inherent in the home equity loan, so it’s best to use it only when approved by your financial advisor or on the advice of an experienced mortgage broker. One of the pitfalls of this type of loan is that when there is a change in the housing market, your home equity changes. In fact, to take an extreme example, it’s possible that you will still be paying back the loan after selling your home.
 

Finding a Lender

 
You can get home equity loans from traditional lenders such as banks, or from a private lender. If you will be using a private lender, you will need to work with a private mortgage broker, who will help to package your proposal and match you with a compatible lender.

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