Second Mortgage or a HELOC? Which Is Better?

Choosing between a HELOC and a second mortgage can be confusing because both are loans that are attached to your home. Technically speaking, a HELOC and a second mortgage are both second mortgages, because you can only apply for them on top of your primary mortgage…so which is better and how are they different?

HELOC vs Second Mortgage

A HELOC and a second mortgage differs in how they are given by the bank and how they can be repaid. As mentioned earlier, both types of home loans are secured by your home, so it is very important to know how they work and to assess your capacity to pay them to ensure that you don’t end up losing your home.

How Does a HELOC Work?

A HELOC, or home equity line of credit, is a revolving line of credit that can be reused until the set limit is reached for the amount or the time period. Payment for the loan is on top of the primary mortgage and you only have to pay the amount that you use up or took out of the maximum allowable amount.

Because this is a revolving loan, you can re-borrow your paid-for credit until the terms of the HELOC state you can’t anymore. This means that if your HELOC is good for 5 years, you can keep re-borrowing any amount you’ve already paid towards it without the hassle of reapplying for a new loan.

How Does a Second Mortgage Work?

Although a second mortgage is also attached to your home like a HELOC is, the loan is given as a one-time lump sum that you’ll have to pay according to set terms. You won’t be allowed to apply for a new second mortgage until you’ve fully paid your second mortgage.

Because a second mortgage is given as a lump sum, most people who apply for it use it for debt consolidation and/or house deposits. You really have to think a lot and assess your full financial situation before applying for a second mortgage because inability to pay based on agreed terms can make you lose your home.

Is it Smart to Use These Loans as Emergency Funds?

The real answer to this is no. Why? Because with both loans, you’ll end up paying interest and putting your home at risk. Using them as backup cash for something that didn’t happen yet isn’t a good strategy. However, if you’re in a bind now and it can be a few months or more before you can recover, then applying for a HELOC or a second mortgage is a viable option.

Which Is Better?

The best answer for this will depend on your specific circumstances. Just remember that their nature and payment schemes are way different so having a clear idea of your future financial situation is paramount to intelligently choose between a HELOC and second mortgage.

Choosing between financing options can be confusing. This is why you need assistance from mortgage professionals who have a long track record of helping people get approved for loans while making sure that payment terms are doable for you. Contact us today to apply for a second mortgage or apply for a home equity line of credit.

What is Home Equity? And How You Can Use It!

Home equity is a great asset to have. It is computed as the difference between the home’s market value and the sum the homeowner still owes. A large home equity is built over time as the homeowner is able to pay mortgage. It is largest when the homeowner is totally debt-free.

Understanding Home Equity

With the above said, home equity is the percentage of the property that the homeowner truly owns. It is the value of the property asset that the homeowner can use because any mortgage left unpaid is ‘owned’ by the lender.

Say you bought a $500,000 home and placed a $100,000 down payment on it with the remaining $400,000 in mortgage. This means that you ‘truly’ own 20% of your home’s value at this point. As you pay your mortgage, the percentage that you ‘truly’ own increases, more so when property values go up.

Does  this mean that the lender owns 80% of your home in the beginning? It would look like that but technically you own your home all along only that the house is your collateral for the loan that you take to buy it.

What does the lender gain in this set-up? Well, you pay for interest rate. The lender may also end up owning your home if you fail to pay according to terms set up and agreed by both your parties.

How to Build Home Equity

You can build equity by paying off your loan and improving your property so that it gets a higher market value.

Your equity will increase as you pay off the balance in your loan. You have to ensure that you’re paying more than just the interest and that you’re paying towards the principal. This way, you build equity over time.

Your equity will also increase during surges in the real estate market or when you take on home improvement projects that has a positive effect on home value.

How to Use Home Equity

Like any other asset, you can tap your home equity when in need. You can do this by getting a home equity loan or a HELOC. You can also use the equity you’ve built when you sell your current home to buy another one that’s better suited to your needs.

Another possibility is to use your home equity to fund your retirement by getting a reverse mortgage. This will allow you to use your home equity like a savings fund. You get to stay in your home and not have to sell it to enjoy the equity.

The most popular ways to use home equity is by applying for a HELOC or applying for a lump-sum home equity loan. Both have pros and cons and are good solutions for needing a large sum of accessible cash. What’s best for you will depend on several factors such as how much cash you need, your ability to pay, and for what purpose you’re taking the home equity loan for.

Do you want to use your home equity but still unsure whether you want to apply for a HELOC or apply for a second mortgage? Speak with our professional mortgage brokers so they can help you determine which one would be a better way of using your home equity for you! Contact us today!

Choosing Debt Consolidation Loan Options Wisely

There are many types of debt consolidation loans to choose from, but one might be better than the other for you depending on your specific circumstances. Read on below to help you choose the best one for your needs!

But First, Why Consolidate Debt?

Paying debt can be very difficult, more so when you have to remember each one and make sure that you pay each one’s monthly payment before their due dates. Most loans also have high interest rates, so paying them off often means just trying to keep up with the minimum payment each month.

The beauty of debt consolidation is that it allows you to manage your debts easier. When you take a loan to pay off high-interest debts, you end up having just one debt to pay in the future!

Debt consolidation helps you get rid of the trouble of having multiple loan bills. Not only that, but some debt consolidation options help you save in the long run because of their relatively low interest rate.

Below are 4 popular types of debt consolidation loans that you can use to consolidate your debts.

Personal Loan

You can consolidate your debts with a personal loan if it is an amount that is large enough to cover your debts. Because a personal loan is an unsecured type of loan, you can expect to pay higher interest than other loans in this list. You will also have to make sure that you can afford the fixed payments.

A personal loan might be very difficult to get if your credit rating isn’t impeccable. Note too that because this is a high-interest loan, there is a huge possibility that you won’t be saving money in the long run.

Credit Card Balance Transfers

Credit card balance transfers work because this type of loan usually have a low interest rate, so you’ll be able to save quite a bit. The downside is that the low interest rate is usually for a certain length of time only. This means that any savings you’ll be able to get won’t be very substantial.

Note that using this method to consolidate debt can further cause your credit rating to plummet so be very careful and make sure that you read all details before signing up for a credit card balance transfe

Debt Consolidation Loans

Debt consolidation loans are loans that are offered by credit unions and banks specifically for the consolidation of debt. Their terms can vary widely but a key detail to watch out for is a longer repayment timeline because that means you’ll end up paying a lot more despite lower monthly payments.

Home Equity Loans

A home equity loan is a loan you can take using the equity you’ve built up in your home as collateral. Because this is a secured loan, you can enjoy a lower interest rate using this than using the other types of debt consolidation loans listed here. You just have to be very careful and make sure that you’ll be able to pay because choosing this means putting your home on the line. You need to be discerning and really look for a lender that’s not out to take your home.

Ready to apply for a loan to help you consolidate debt? Talk to us at Homebase Mortgages to avail of our professional mortgage servicesthat can help you manage your  finances better!

Try An Alternative Funding Source With Private Lending

If you own a business or tried to start one, you know that getting a loan from banks is about as easy as getting an uber to fly you to the moon, more so when your credit history isn’t as spotless as you may want it to be. It seems like no matter how well prepared you are and how nicely drawn your business plans are, financing via a bank loan just isn’t for everyone.

Private Lending as Alternative Funding

Financing via a loan from a private lender is often the best funding option for entrepreneurs who’ve been turned down by banks or is likely to be turned down by traditional lenders. This isn’t because private lenders will just hand over money to anyone who asks, in fact they are often as diligent as banks when checking for your information and credit history; it is just that they aren’t as institutionalised as banks and can look into each application with more consideration.

This is good news for those who want to keep their whole enterprise their own and not take investors in who want control in operations and executive level. A private lender won’t want that. They are usually just concerned with you being able to pay off your loan. That’s why they take risks on business ideas that have a good chance of truly taking off, to begin with.

Should You Get A Loan From A Private Lender?

A private lender is your best bet if you’ve got a realistic business plan that shows good promise backed by statistics and solid feasibility, more so when you can find a private lender that specialises in your business’ niche. Not only will they look into the viability of your proposed venture but can provide you great insights along with giving you a sound repayment plan that you really can pay for. Kind of like getting a mentor or a business fairy godmother.

Get a Private Lender

How do you find the private lender for your niche? You can ask around or get the help of professional brokers who can match you with a private lender that’s likely to give you a loan. This is easier than going through lender after lender trying to get one to take interest in what you’re trying to do.

Know too that there are private lenders that do not really have a niche or a specialty as to whom they give loans to, but have a solid track record of spotting businesses that are bound to succeed. These lenders usually use brokers to help connect them to entrepreneurs in need of capital. The brokers screen the projects and recommend the right private lender to borrow capital from. As such, they make everyone’s life a lot easier.

Thinking about getting in touch with a private lender to get a private mortgage but don’t know how and would want to get assistance from a professional mortgage broker? We’re here to help! Talk to us today! We’ll get in touch as soon as we can!

Use a Private Mortgage the Smart Way

A lot of people are afraid of applying for a private mortgage despite hearing a lot of good things about it and how it can benefit them because they worry that they might mess up and cause more financial issues on their side. That shouldn’t be the case, more so now that there is an increasing interest in getting a private mortgage because not everyone have impeccable credit ratings and can borrow brow traditional lenders.

What is a Private Mortgage and Why Get it

A private mortgage is a type of loan that you can get from a business, institution, or an individual that is not a traditional lender of mortgage. When done correctly, getting a private mortgage will create a win-win scenario for everyone where each party involved gains financially without going through too much risk.

But here’s the thing, we’ll be talking about getting a private mortgage in here from a party that is known to you or known to us. Trying to get one from cold contact is referred to as a hard money loan so we will not be tackling that.

So, why get a private mortgage from private lenders and not try to get a loan from other funding solutions?

Although there are a lot of possible lenders like local credit unions, big banks, online lenders, and their likes, getting a loan from them isn’t as easy as filling up an application form and getting approved.

The go-to lenders often have a lot of qualifying criteria in place such as you being able to provide certain documentation, being a resident for a certain number of years, having a good credit score, being employed for a specified number of years and so on. What if you’re a self-employed individual? Where are you going to get some of these forms? Or how about if you’re a young adult just starting out in life and have no credit score yet to speak of.

When you go the private route, you can save on paying interest and will have better chances of being lent the money that you need.

Issues When Getting a Private Mortgage

You have to keep in mind that even with the best intentions, deals can go awry and some issues will come up. This means that if you know your lender in real life, relationship strain might become an issue when you can’t pay or when they decide to give you higher interest than what you are expecting. This is why having a third party draw up terms can be very beneficial.

Another possibility is you may not get the loan you want because the lender will have to also cover their bases and consider property value fluctuations. This means that if your house is worth $500,000, the amount you’ll be able to borrow would be a lot less than that to account for other scenarios down the road.

Also note that maintaining the house is your responsibility so is checking that the title is good and that all taxes are paid on time. Once you note this and all of the above, you are ready to apply for a private mortgage and draw up private mortgage agreements with the help of a trusted private mortgage broker.

Using a private mortgage has many advantages. If you feel that you’re ready to apply for a private mortgage, don’t hesitate to contact usso we can assist you with getting one and making sure that the terms are what you can handle.

Finishing Your Basement – What Is The Impact on the Value of Your Home?

Finishing your basement isn’t just about increasing your living space, it is an investment in home improvement that can significantly affect you home’s value and increase your home equity when done right.

You have to make sure that you take certain precautions to ensure that your new finished basement will result to a livable space that’s not prone to leaks, water damage, and other issues. Below are some tips to remodel your basement in a way that maximizes function and gives you the most bang for buck.

Don’t Forget to Waterproof

Basements tend to be damp places even for homes that are not subject to flooding. It is not uncommon to find damp areas of moisture on the walls or get a musty odour even for basements that do not have any water leaks. This is why a complete waterproofing is the first step in remodeling or reconstructing your basement. You can DIY this but it will be much better to hire professionals to save yourself from future issues.

Design or Plan According to Your Needs

The cost of your basement remodel will vary depending on what you plan to add in it. A bedroom or new living area would be a little less pricey compared to a home theatre. You might also want to look into creating a walkout basement if your home is on grade. Another popular addition is setting an area aside for storage and utility space.

Get It Done

After coming up with the final vision for how you would want your finished basement to be, it is time to turn it into reality by researching the best team for the job. Go ahead and seek out the right plumber, carpenter, contractor, and other home remodeling professionals that you might need. Decide which projects you’ll be able to DIY and which ones are better left to professionals then get things done!

Reassess and Enjoy

Remember that finishing your basement is an investment in your home. More than enjoying its new functionality, you’ll also enjoy a substantial increase in your home’s value and therefore your home equity.

By how much?

There are a lot of factors involved in determining the increase in your home’s value after finishing your basement. What is known, though, is that a 2010 study showed that homeowners were able to recover 74% (of what they spent on average) when selling their home after finishing their basement. This is really good, considering that a finished basement will also allow you to save hundreds of dollars a year in energy savings.

Do not forget to install heating and get permits if you want your new finished basement to be officially recognized as a living space more so if you have plans to put your home on the market in the future. This is also a great selling point when the time to sell your home comes.

Investing in home improvement projects that add value to your home not only increases your home’s value but your equity as well. If you’re strapped for cash but want to pursue finishing your basement, we can help you tap your existing equity through a home equity loan. Contact us today so we can discuss with you what you’ll need for your loan application

Does a Home Equity Line of Credit (HELOC) Make Sense For You?

Applying for a HELOC can be very daunting more so if you have no idea whether going for one would be for your best interest when trying to finance a big project.

Financing big projects by using your home equity does make a lot of sense if the benefits you will get will outweigh the fees you’ll have to pay and the risks you’ll take. A HELOC may pose fewer issues for you compared to a second mortgage if you really want to use your home equity.

Why Get a HELOC

A HELOC allows a homeowner to access home equity by borrowing against it. Upon HELOC application, the lender will set a borrowing limit (related to the value of the home equity) from which the homeowner can borrow as little or as much as needed just like a credit card with a set limit as well. Just like with a business line of credit or a credit card, you only pay interest on the money you withdraw. You can also keep borrowing although you still owe money as long as you haven’t reached the credit limit yet.

A HELOC is different from a home equity loan because the lender gives the borrowed amount in a lump sum for the latter. You will also be required to pay a predetermined sum on a monthly basis with a home equity loan until the whole loan is paid off. Simply put, a HELOC is much friendlier on your wallet and more flexible for your needs.

HELOC Requirements

A HELOC requires that you have enough equity in your home. Lenders would often require that you maintain 10-20% equity in your financed home even after taking a HELOC. Other requirements include a steady employment, a good credit score, and having proof of income. Note that some lenders may be more lenient than others.

Does a HELOC Make Sense for You?

If you’re going to have multiple significant expenses over the course of the next few years, then getting a HELOC makes more sense than getting a standard home equity loan. Having multiple significant expenses mean that you’ll be facing a revolving bill, so it only makes sense that you get a loan that affords you a revolving line of credit. An example of this is paying for college tuition. You get a HELOC to pay tuition at the start of the semester, pay little by little for the next few months, and borrow again from the amount you paid to fund the next semester.

Questions you must consider before getting a HELOC include:

·        Is a HELOC a better option than just saving for the expense?

·        Can you afford paying interest should it skyrocket in the worst-case-scenario?

·        How do you plan to pay the debt?

·        Do you think you can handle not using the money for unimportant reasons?

·        Are you sure that you fully understand the terms and conditions?

Remember that a HELOC is a loan that uses your home as collateral. You need to be sure that you’re able to pay and that you’re considering all options as well as possible scenarios.

Would you want to consult with mortgage professionals to determine if a HELOC is really for you? Talk to us about getting a Home Equity Line of Credit, we’d be glad to help!