When it comes to turning the equity in our home into cash (without selling anyway), a home equity loan takes the cake. It allows you to draw on all your hard work and pay down debts, work on your home or maybe just send your kids to uni. Whatever your plans are, you’re going to want to make sure you have a plan. The internet is littered with sad stories from former homeowners that didn’t know what they were getting into until it was too late! Here we’re going to talk about the dangers of home equity loans and how you can make sure you get the deal that works best for you.
What is a Home Equity Loan?
A home equity loan is just like any other loan you get – but you’re putting up the equity in your home as collateral. No equity, no home equity loan! If you’re not sure how much equity you have, you’ll want to take the most recently appraised value for your home and subtracting any mortgages or liens you have and then you’ll know how much equity you have in your home.
Most borrowers will want to have at least 50% equity in their home before they think about taking on a home equity loan. If you are not there yet, don’t worry! Just keep in your mortgage and you’ll be there in no time.
Why are They so Dangerous?
They’re dangerous because many people aren’t ready to take on this kind of debt. You need to know that you’re a really good place before you get a home equity loan. Many homeowners end up underwater on their mortgages – meaning that they owe more than the home’s worth, and eventually lose their homes altogether. No one wants to be in this situation! Talk to a Canada mortgage broker, your lender, or another finance expert to make sure that you’re ready to take the leap.
Always Know Your Terms
You should always know your terms! Even if your mentor has explained your terms deal, you should take this to a mortgage lawyer and see what they have to say. It’s not uncommon for your mortgage lender added a little extra, right at the very end. Always know what terms you’re facing before you sign at closing! Ignorance is never a defense when it comes to your finances.
Talk with a Broker and Find Out More
You’ll really want to talk to a professional before you look at a home equity loan. They’ll help you understand everything you need to know to make sure that this is the right decision for you. Right now may not be the right time to borrow, you may be better off selling your home, or maybe you should work on your credit before you apply. Lenders will know what’s on your credit report so it’s important that you do too. Talk with a Canada mortgage broker today and see what they can do for you.