Home Equity Loans are either 1st or 2nd mortgages registered against your home. They are intended to provide an interim or short term financial solution.
Here are the main features of a Home Equity Loan/Private Mortgage
- Quick financing – approvals take days, not weeks.
- Qualifying based on equity, not income or credit.
- Minimal documentation – since the loan amount is based on your property details, documentation related to income and credit, is minimal.
- Borrow up to 75% of the value of your home.
- Short terms of 1-2 years.
- Open terms – many lenders allow you to pay off the mortgage early and without penalty.
Example scenario:
Sarah owns her home and would like to consolidate some debt and use the extra money for a new deck. The amount required is $50,000.
Her home is valued at $800k with a $400,000 first mortgage with a bank. The interest rate on her existing mortgage is low and the penalty to break early is quite high. Sarah may also have trouble qualifying for a larger mortgage due to the new stress test. In this case, a second mortgage makes the most sense. With both the first and second mortgage, the total loan to value is 56% which is well below the maximum of 75%.
Sarah was able to leave her first mortgage alone, pay off high interest debts, and use the remaining funds for a new deck.
How to apply for a Home Equity Loan?
- Call or book a call with GOAT Mortgages
- Complete an application and send any requested documentation
- Review terms and conditions of approval
- Home appraisal
- Sign with your lawyer/notary and receive you money
This article serves as a brief overview of how Home Equity Loans work and how to apply. If you have any questions, please call us at 604-334-8993 or email info@goatmortgages.ca
Click here to learn more about alternative mortgages.
