Home Equity Ontario – sMortgage Loan (ETO)
A home can be a source of great pride and satisfaction, and if you’re looking to finance a renovation, a new vehicle or some unforeseen emergency, it can also be a source of equity. A home equity loan allows you to leverage your property’s equity – i.e. the difference between the home’s appraised market value and your outstanding mortgage balance – to secure a loan.
Why do people opt for home equity loans? Simply put: the interest is lower. A home equity loan or line of credit, on the other hand, can range from the prime business rate set by the Bank of Canada, known simply as “prime”, to prime-plus-three. The rate for a home equity loan is often better than that for a personal line of credit. The rate you get will depend on your credit history, your earnings and whether you have existing assets with a particular lending institution.
Why use a home equity loan?
Many people take advantage of this financial instrument for renovations or the purchase of a car. Because it is secured to a house – for most people, the largest asset they’ll ever possess – this type of loan allows for a longer amortization. The typical car loan is amortized for a maximum of seven years; with a home equity loan, you can amortize it up to 25 years. You can make smaller payments over an extended period, but that also means you’ll incur more interest.