First, What is Home Equity?
Home equity is a valuable financial resource, but it can also enable you to access lower rates and can be used as money for unforeseen short term plans. Equity takeout is something everyone should look into.
Equity Takeout in Toronto
What Equity Takeout in Toronto Means
Home equity is basically the difference between all existing mortgages and appraised value of the property. Hence, home equity takeout is the process of taking money out from your home in order to make it available for other uses. Home equity takeout in Toronto can significantly help out with your financial goals.
Using the Equity in Your Toronto Home to Secure Finance
With the property values soaring in Toronto over the last few years, many Toronto homeowners have built up considerable equity in their homes. Very often this represents the largest accumulation of wealth for the homeowner.
Your home equity is the difference between the market value and the amount owed on mortgages on the property. When you make monthly mortgage repayments, a portion of the payment is allocated to the principal. So, month by month the equity in your home grows.
An equity takeout mortgage gives you, the homeowner, an opportunity to use the equity in your home to secure a loan. This loan should be used for big-ticket items such as renovations to the property, or a down payment on another property.
A traditional bank will allow you to borrow up to 80% of your home equity. Private lenders will often go up to 85% of the equity when calculating the loan amount.
Because it is a secured loan, a home equity mortgage is the most cost-effective way to borrow money. The lending criteria are also more flexible than those that apply to unsecured loans.
If you already have a mortgage on your property you can take one of two options when seeking an equity takeout mortgage:
- Refinance your property – Close the current mortgage, pay the penalties and renegotiate a new mortgage.
- Blend and extend – With this option, you remain with the current lender. He will combine your current interest rates with the new rate and extend the term.
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Refinancing Your Mortgage
It is not difficult to refinance a property. Your Toronto broker will negotiate a new mortgage for you. Then the new lender will pay off the old lender and give you what is left of the approved amount. If your mortgage is up for renewal you can save yourself penalties.
Equity Takeout Mortgages can be arranged at fixed rates for fixed terms or at variable interest rates. There will also be fixed costs involved including penalties, legal fees, brokerage fees and appraisal costs.
Refinancing offers you an excellent opportunity to negotiate better rates with your current lender or to shop around for a more competitive mortgage. It is also an opportunity to consider the consolidation of your more expensive unsecured debts.
Equity Takeout as a Line of Credit
You can decide to take the equity takeout mortgage as a line of credit. If you take this route you can borrow just what you need when you need it. You pay interest only on the amount that you have borrowed. With this type of loan, you obtain approval for a given amount but you don’t have to take it all at once. You can pay back the principal amount at your own discretion.
The Advantages of an Equity Takeout
- You can use the home equity to arrange relatively large loans that you require for renovations improving the value of your home
- If you use the equity takeout for investment property, the interest repayments are tax deductible
- You can use the money for debt consolidation, or anything else you choose
- The mortgage will attract closing costs
- Your home secures the loan. If for any reason you fail to make repayments, you risk losing your home
Certified Mortgage Brokers Toronto have the expertise and the contacts to help you make the right choices and to match you with the lender that suits your needs.
Variety of Rates
Banks only offer lines of credit not more than 65% of the appraised value of the home. At Toronto Mortgage Brokerage we can offer you better options than any bank. Keep in mind that if you want more money then there are also refinancing options available. With refinancing you can do 80% of the value. If you already have a mortgage on the property then when you take out the equity the principal on the value will increase.
Through the process there are many things to consider and we specialize in all mortgage related subjects. If you are considering equity take out and would like to find out your options and if this process is right for you, then contact us and we will be happy to help.