Owning a house is a major financial investment. The
financial responsibility of owning a home and paying a mortgage is substantial
and rewarding. Over time, equity is built into a home by making mortgage
payments and seeing an increase in the market value of a home. Over time,
equity grows and becomes an important asset you can make work for you in many
ways. There are many circumstances that can arise that require a substantial sum
of funds. A home equity loan is one way GTA homeowners can acquire financing to
support these financial needs. Whether for education, future retirement
investments, home repair, debt repayment or other financial needs, there is a
way for homeowners to access their equity or borrow against what they have
already paid into their property through home equity loans.
For home equity loans, a lender provides a loan in which the collateral is
the equity of the borrower’s home. There are two main types of home equity
loans homeowners can consider when borrowing; a Home
Equity Line of Credit
(HELOC) and a Fixed Rate Loan. There are differences
in how lenders make funds available and the terms of repayment. HELOCs act in
the same manner as a personal line of credit and are a little more fluid than
fixed-rate loans, as they are not
locked into a fixed term. The loan operates more like a credit card than a
loan. The payment arrangements are dependent on the amount of money borrowed.
Payments are due when money is borrowed and is available when needed. A
fixed-rate equity loan is still borrowed against the equity on the home
available but is lent at a lump sum. Fixed, scheduled payments are expected
over an agreed-upon timeframe, or amortization period.
HELOC loans also allow homeowners to borrow at typically lower interest rates than
other loans or credit cards (although generally at a slightly higher rate than
a first mortgage). This provides a more manageable solution for common
financial demands such as house repairs, university tuition or medical
expenses. Whatever their financial situation, tapping into the equity
homeowners have built for themselves is an option to help manage finances
Another benefit of using this type of loan instead of a
fixed-loan is the flexibility borrowers have in setting up a repayment schedule.
This is dependent on the amount of money currently owing on the HELOC (or the
balance). A fixed loan or mortgage has a repayment schedule whereas a HELOC has
monthly minimum payment requirements, but clients can pay the minimum and any
additional sum without penalty. HELOCs
are designed to accommodate your financial capabilities. Whatever amount is
paid frees up future access to money for needs you may have.
Given this flexibility, HELOC loans
are more popular amongst equity loan choices in the GTA, but fixed-rate loans
do have their place for financial needs that require a large sum of money.
Whatever your choice, it is important to touch base with the right lender who
can help to meet your financial needs while giving you the best information on
how such loans will impact your equity and your financial needs while offering