Home Equity Loan: The multiple types and associated risks
If you have not enquired Home Equity Loan Toronto thoroughly, then the radio ads might have influenced your perception on it. Perhaps, a cakewalk comes to your mind whenever you think of home-equity loan procedures. Well, you might be thinking that you can have it even with a crappy credit rating and despite your rejection by the banks. In fact, the classifieds and ads make it sound more appealing by adding jingles and phrases and the bank makes it more tempting by offering freebies sometimes.
Is it that good to borrow? What are the different types of Home Equity Loan Toronto? What are the risks involved in such loans? These are some of the questions that every borrower would like to know about before opt for such loans. The details here throw light on this issue and provide some valuable information on the same, just to make your careful before signing on the dotted line.
Types of Home Equity Loan
The home equity loans are of two kinds:
A fixed-term loan: In a fixed term loan, the bank provides an approximate amount to the payee. One has to pay it back as monthly installment along with some interest rate within a particular duration. Usually, the period to pay back the loan is around 10 to 15 years.
A line of credit (HELOC)
This type of loan works like a credit card and provides fund access whenever required. One has to pay it back just like a credit card. However, it includes a minimum down payment. The interest rate varies and is adjustable. Usually, it is around the prime lending rate.
Almost any market change will affect your equity on your house. Perhaps, the biggest risk is if you become a loan defaulter, then the lender may sell your dear house to get back his money. They can even mentally harass you by putting your home on the market.
To avail home equity loan Toronto should not be your overnight decision, instead you should make sure to enquire about all the pros and cons before opting for it. Moreover, it is not advisable to take it as an aid. The market is full of real-life stories in which people even after selling out their dearest house, have still some home equity loan left. Hence, better try to avoid it as much as you can, or opt for only genuine and trustworthy loan providers.