How to Borrow Money Against Your House
One of your most valuable assets is probably your home. Indeed, there are few assets in your life that are likely to be worth hundreds of thousands of dollars — like your house is.
However, getting at that cash value can be difficult. After all, you can’t just take your house and plunk it down as payment for something. It’s not very liquid.
The good news, though, is that you can borrow money against the ownership, or equity, you’ve built up in your home over the years. Here’s what you need to know so you can borrow money against your house.
What is Home Equity?
First, you need to understand home equity. When you borrow money against your house, you’re getting a home equity loan.
Equity is basically the ownership you have in your home. When you borrow to buy a home, the balance you owe represents what the bank has invested in the home. The lender put up the money, so you have to repay them.
However, as you make payments, and as the home’s market value increases, you reach a point where you have a bigger stake of ownership. This is your equity. You figure your amount of equity by subtracting what you still owe from the home from the market value of the house. So, if your home is worth $250,000, and the balance on your mortgage is $150,000, you are said to have $100,000 of equity in your home.
The key is to unlock that equity in your home to meet different financial goals or help you get back on the right track with your money.
How to Borrow Money Against Your Home
In many cases, lenders will allow you to borrow against the equity you’ve built up in your home. You probably won’t be able to borrow up to the full amount of the equity you’ve built up, but you can still usually get access to 80-85% of it.
You do need to apply for a loan to borrow money against your house. Some of the factors that major bank lenders consider when looking at your application include:
- Amount of equity in your home
- Credit score
- Purpose of the loan
- Type of home equity loan
There are two main types of home equity loan, and that can impact what type of underwriting process you have to go through in order to qualify for your loan.
With a second mortgage, you receive a lump sum and this type of home equity loan usually focuses more on the amount of ownership value you have in the home. If you need more money later, you have to re-apply.
As a rule of thumb, credit and income do not play a major role in approving borrowers for 2nd mortgages. Consequently, this is the most attractive method of financing for clients who have poor credit who need a debt consolidation loan.
On the other hand, a home equity line of credit looks more at your credit history. It also offers a revolving line of credit you can access in the future without filling out a new loan application. HELOC’s work more like credit cards without the absurd interest rates.
For those with bad credit, a second mortgage type of home equity loan makes the most sense. TurnedAway.ca specializes in connecting borrowers with lenders who focus more on the equity you have, and less on your current credit score and income.
What Can You Use a Home Equity Loan For?
A home equity loan can be used for a number of purposes. Your lender might ask you what you plan to use the money for when you apply, but you can pretty much use the money for what you want. Some of the common reasons you might borrow money against your house include:
- Home improvements
- Debt consolidation for unsecured debt, credit cards & loan or line of credit
- Pay off mortgage arrears
- Get rid of Revenue Canada tax liens
- Avoid foreclosure
- Whether an emergency, like a job loss or medical problem
For many Canadians, a home equity loan is a way to solve pressing financial problems. It can help them get on track when they have run into financial issues. With a home equity loan, you can access one of your most valuable assets and use it to your advantage — even if you have questionable credit.
What to Watch Out For
While it can help to borrow money against your home, you do need to be careful. When you get a home equity loan, you put your house on the line. That being said, it pays to deal with a reputable mortgage broker who specializes in equity lending who can give you proper counsel. In short, they will be able to provide you with a solution that will be cost effective and meet your long-term goals.
As you go through the process, make sure you have a plan for repaying your home equity loan and make sure that you only borrow what you need to meet your goals or to get back on the right financial track. Again, the right mortgage broker will be able to assist you and provide you guidance.
Why Choose Turnedaway.ca to Help You Borrow Against Your House?
Certainly, the name says it all. Turnedaway.ca specializes in arranging home equity loans that the major banks shy away from. We can arrange the most competitive mortgage rates with the most flexible terms, lowering your monthly payments, setting you up for future success.
With over 30 years of experience to our credit, we have been helping homeowners avoid trips to the credit counsellor. And we know how to consolidate high-interest credit cards to help clients become debt free.
To sum up, Turnedaway.ca is Canada’s premier mortgage brokerage for helping client’s borrow money against their home. Bad credit and challenging income positions aren’t a deterrent and we pride ourselves on helping homeowners access their equity. Got Questions? Give us a call for a free consultation at 1-855-668-3074 or apply online and we will get working on converting your equity into cash today!