Home Equity

Home Equity is value of your home, minus any liens or charges against the property. A mortgage is considered to be a charge. Liens can be for anything from back taxes to unpaid work that was performed for the home. In order to refinance or sell your home, the liens are required to be paid out either before or at the time of the transaction.

To calculate your home equity use the following formula: Take the value of your home and deduct any charges or liens against it. For example, if your property is worth $200,000 with a $130,000 mortgage charge against it, your home equity would be $70,000.

You can increase your home equity faster by making lump-sum prepayments on your mortgage. All prepayments go directly to your principal, thereby saving interest charges. Your home equity could also increase or decrease depending on how the real estate market fluctuates - in other words, the value of your home constantly moves as the market moves.

Home Equity Loan

A home equity loan is a mortgage that is refinanced to utilize the existing equity in the home for any purpose. You can refinance up to 85% of the value of your home when you are a salaried employee and up to 80% of the value of the home if you are self-employed.

Obtaining Your Home Equity loan

You can choose to take your home equity loan as a refinance of your first mortgage, as a second mortgage, as an equity line Visa card, or even a home equity line of credit. Every clients situation is unique, so it's best to have a professional speak to you so that you can make an informed decision. Apply now to have someone assist you today!

Home Equity Loan Payments

In most cases interest rates are fixed on Home Equity Loans. You can obtain a variable rate if you refinance the mortgage as a new first mortgage or if you take a home equity line of credit. When the interest rate is fixed, the payments are the same through the entire term. When you are on a variable rate, the payment is still fixed but the portion going to the interest and principal changes with fluctuations in the Prime Rate, which is determined by the Bank of Canada.

Interest Rates for Home Equity Loans

Home Equity Loan interest rates vary depending on which product you choose. Using interest rates from November 2010 for example, we can show you how interest rates differed that month depending on the product.

• You could refinance your first mortgage for as little as 3.5%.
• You could obtain a home equity line of credit at the same rate of 3.5% fixed or Prime - 0.6% variable.
• You could obtain a second mortgage at 6% or obtain an equity line Visa card at 5.99%.

Each option is available to suit each person's specific financial situation. What's good for one person may not be what's best for you! Apply now to have your personal situation assessed.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit (HELOC) works like regular line of credit, but with one difference - it is secured by your home. If you fail to make the agreed payments, the lender has the right to come after the property for the payments. You can borrow as much as 80% of the value of your home as long as the equity is there. You can think of a home equity credit line as a regular credit card. You can borrow, pay back and borrow again. A home equity line of credit can be arranged in 2 days to 2 weeks depending on how quickly the documentation can be provided. HELOC interest rates are calculated similarly to a credit card.

Interest Rates on a Home Equity Line of Credit

Home equity credit lines have higher interest rates than regular mortgage rates, but are still lower than credit cards. This is because it is a completely open loan and can be paid off at any time without a penalty. Rates change daily for HELOC's. Consult today with one of our mortgage brokers for an accurate, up-to-date rate!

Renewing your Home Equity Line of Credit

In most cases a HELOC renews every 5 years. In some cases your HELOC will renew with your mortgage. If your HELOC is coming due for renewal, call Mortgages Canada now for the most competitive HELOC rates in the industry.

Documents Required for a Home Equity Line of Credit

The documentation for a HELOC usually consists of the same documents required for a mortgage. In some cases, additional documentation may be required. This will occur when the HELOC is used to pay out other bills. If your debt service ratio is too high, the lender will ask that they pay and close out some accounts upon sending you the funds. In this event, the lender will require the statements for all the bills that will be paid out.

Loan Interest Rates Today

Click here to check out today's interest rates.

Mortgages Canada also offers various calculator tools (home equity loan calculators, mortgage payment calculators, etc). Check out our helpful, easy-to-use calculators.