Unlock the equity in your home to enjoy more flexible life choices!
A Simple Guide to Home Equity Takeout in Canada
Home equity takeout involves taking out a new loan secured against the equity built up in your home.
Estimate Your Home Equity
1. Determine your home's current market value.
2. Calculate your total loan balance.
3. Subtract total loans from the current value
What are your options for a Home Equity Takeout?
Second Mortgage: Access a Lump Sum
A second mortgage can provide a large lump sum of money by tapping into your equity as collateral. You take out an additional loan behind your existing first mortgage. Lenders will permit borrowing up to 80% of your home value minus your first mortgage balance.
HELOC: A revolving credit
A home equity line of credit (HELOC) works similarly to a credit card or personal line of credit, providing flexible access to funds against your home equity. You're approved up to 65% of your home value. You can draw money as needed until reaching your limit and pay interest on the amount borrowed.
Home Equity Loan: One-Time Cash Options
Home equity loans are best for large, specific borrowing needs. They provide a one-time lump sum of cash, up to 80% of your home value, with fixed monthly repayment installments.
Reverse Mortgage: Special Option for Seniors
Reverse mortgages allow homeowners aged 55+ to access tax-free funds against home equity without making monthly payments. Reverse mortgages permit borrowing up to 55% of your home’s appraised value, which allows seniors to access equity without repayment burdens.
Borrowing against your Home Equity with BestMO
Our simple approval process makes borrowing against your home equity straightforward:
1. Meet with our mortgage experts to evaluate your goals and options.
2. Confirm your property's value and available equity through an appraisal.
3. Check your credit score - we can advise ways to improve it.
4. Choose us as your lender and provide the required documents.
5. Complete a detailed application for review.
Tapping into your home equity can provide access to funds when needed. However, there are multiple options, each with unique pros and cons. Consider all alternatives and weigh the risks before choosing the best home loan or line of credit for your situation.
FAQs about Home Equity Takeout
How much home equity can I borrow against?
You can typically borrow up to 80% of your home’s equity value. The amount will depend on your credit score, income, and mortgage balance.
What are the risks of borrowing against home equity?
Risks include accumulating more debt against your home, potential foreclosure if you can’t repay, and less equity available later for other needs.
Where can I get a home equity loan or line of credit?
Major banks, credit unions, mortgage lenders, and brokers offer home equity lending options. Compare rates and terms across multiple lenders.
Why might I be rejected for a home equity loan?
Low credit scores, high debt levels, insufficient income, and lack of adequate home equity are common reasons for denial.
When should I tap into home equity?
When you need a large lump sum for expenses like home renovations, debt consolidation, major purchases, or personal investments.
Do home equity loans have early repayment penalties?
Most lenders don’t charge prepayment penalties on home equity loans or lines of credit but check the terms first. Paying early can save on interest.
Can I get a home equity loan with bad credit?
While ideal credit scores are 700+ for the best rates, you may still qualify for a home equity loan with a score of around 580-630.