Thinking about a home equity loan? This article provides a quick primer on what they are, how they are used, and their most important characteristics.
Home equity loans are becoming more common in Canada – a result of tightening lending restrictions and rising equity, especially in areas of British Columbia, such as the Greater Vancouver Area.
But what is a home equity loan? What is a home equity loan used for? Who uses them? This article provides a quick explanation…
A home equity loan is simply a loan backed by residential equity. Essentially, it’s a mortgage, typically in second place (second mortgage).
According to this broad definition, your mortgage with your bank is considered a home equity loan. However, for our purposes, we will narrow it down to refer to second mortgages issued by private lenders, such as ourselves.
Loans are typically interest-only and short-term (6-12 months). They are designed to be transitioned to a re-financed mortgage or similar product as soon as possible.
The cheapest financing you can get will always be secured – loans backed by an asset. The cheapest secured loans you can get will always be backed by residential equity (HELOCs and mortgages).
The cheapest mortgage financing you can get will be through a traditional bank. If this is possible, it should be pursued. This will always be our main goal for you and we will place you with a bank loan immediately if possible.
Failing that, however, a home equity loan is your best bet for a few reasons:
Still not convinced? Click here for a longer list that goes into more detail
Typically, money from a home equity loan in Canada is fungible – they can be used just about any way you like. That being said, there are a few uses that are much more common that others
For a more in-depth discussion on these uses, click here
Home equity loans are designed for homeowners that are not able to obtain mortgage financing from traditional banks. People looking for home equity loans are diverse and numerous, so this list is not meant to be conclusive. That being said, there are some broad categories:
If you have any specific questions, we would love to speak with you. You can easily book a phone call with one of our experts to discuss your options
Applying for a home equity loan is quick and easy. You are under no obligation and all of your information is strictly confidential.
You can apply for a home equity loan here