Monday, August 17, 2009

Home Equity Loans Provide You With Financial Resources

By Brian B King

Home equity loans are calculated based on the equity in your home, and they come in several forms, including home equity lines of credit and second mortgages. Many homeowners take advantage to:

* Help relatives pay for education costs
* Complete renovations and home improvement projects
* Pay down other debt
* Cover the costs of owning and operating a business
* Develop investment portfolios
* Prepare for emergencies

Because of the numerous types of home equity products, it can be difficult to assess which one would best suit your financial circumstances and your needs. If you are looking to benefit from your home equity, an accredited mortgage consultant can help you decide which product would work best with your budget, and help you strategize an effective repayment plan.

Second Mortgages as Home Equity Loans

A second mortgage simply refers to a loan taken out against the same property as the first mortgage. But a second mortgage does not replace or override your first mortgage, and it will be structured in a similar way. Because a second mortgage holds more risk for lending institutions, the interest rates are often higher than those on a first mortgage.

However, there are independent brokerage firms that are able to offer lower interest rates and flexible amortization periods. And while many traditional lending institutions place a 30-year cap on second mortgage repayments, there are also private firms that can extend that for another five years.

The Home Equity Line of Credit (HELOC)

When applying for a home equity loan, the loan amount a borrower is entitled to is based on the portion of the home already owned by the borrower; therefore, you can borrow against the amount you have paid off on the first mortgage. A home equity line of credit is similar to any other line of credit, but it offers the advantage of having lower interest rates than credit card advances and personal loans.

And again, where many banks and traditional lending institutions will only offer loans based on 75% of a home's value, there are independent firms that offer special loans that let you borrow up to 100% of the value of your home. But as with any loan, this percentage is based on your financial situation, and the amount of equity accumulated in your home.

No matter what route you decide to take, the best place to begin is by talking to a mortgage professional. Many independent full-service firms will be happy to assess your financial situation, give you access to financial, legal, and accounting advice, and help you decide the best lending solution for your situation.

For information on acquiring a Toronto home equity loan or a second mortgage speak with a professional at Canadian Mortgages Inc.

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