Home Equity Loans Toronto – The Major Pros and Cons
Owning a house can bring you numerous benefits in terms of both comfortable living and financial security. With so many alternatives of home equity loans in Toronto, you may find them an easy way to remain financially secure. You can take your loan based on your home, regardless of the credit rating your home has.
The continuous flashing of home equity loan advertisements may sound tempting to you. They can even appeal you to renovate your kitchen of 1970’s or buy a new cottage to enjoy a stifling paradise. However, in reality, they involve both advantages and disadvantages for you that you need to understand prior to signing the loan document.
Home equity loans – the basics
The home equity loans in Toronto are available in two types namely HELOC (line of credit) and fixed-term loan. These loans will provide a lump sum amount in one-time thereby allowing you to pay it back on monthly basis along with fixed rate of interest within specified period. The time frame for the repayment of loan may usually vary from 10 years to 15 years. Such loans are also popular with the name of second mortgage.
A line of credit loan provides you access to funds whenever you are in need and allows you to pay back just like your credit card with least down payment and adjustable rate of interest. On an all, both the types of loans lend money to homeowners by leveraging their homes’ equity.
How it works?
Most of you may wonder how the home equity loans in Toronto work. The functioning is quite simple as it is entirely dependent on your home’s overall market value. The more market value your home has, the home equity also increases. The basic formula that can help you in figuring it out is –
Your home value – Mortgage owing amount = Home equity.
Its major downsides
Although, home equity loans come with multifarious benefits for you, they have certain downsides as well such as –
- Being dependent on the market value, the situation may become worst if the market value goes down.
- In case of delays in repayment, you can even lose your home.