Questions & Answers
A Home Equity Loan is for those who have “equity” in their home that may be used as collateral for a loan. The equity is the difference between any existing liens (debts) and the market value of the home.
We offer two Home Equity Products:
- Home Equity Installment Loan and (sometime referred to as a “Closed-End or Fixed Rate” loan)
- Home Equity Line of Credit (sometime referred to as a “HELOC”)
A Home Equity loan (referred to as a “traditional” home equity loan) is a closed-end (fixed) loan, extended for a specific length of time that requires repayment of interest only (or interest and principal) in equal monthly payments. This product features a fixed interest rate and your home serves as collateral for the loan.
A Home Equity Line of Credit (HELOC) is a form of revolving credit that permits borrowing at your discretion up to the amount of the credit line. Your primary residence serves as collateral. Many homeowners use a HELOC for purposes such as debt consolidation, tuition, and home improvements.
The differences are:
- Home Equity Installment Loan – You receive the full amount of the loan at your loan closing. Repayment occurs in regular fixed monthly payments. This loan has a fixed interest rate with offers various terms typically between 1 up to 3 years.
- Home Equity Line of Credit (HELOC) – features the flexibility of a line of credit to access cash as needed. This loan still uses your home as collateral and is registered as a charge against the property.
Just about anything!
- Debt consolidation – Many borrowers use a home equity loan to consolidate credit card debt into one payment with much lower interest rates. Doing so can reduce your monthly interest charges, allowing you to save or invest that much more. Making monthly payments more manageable may also improve your credit rating.
- Home improvements – Upgrading or repairing your home has many benefits such as making the home safer or more comfortable, and increasing the fair market value of the home. Kitchen improvements raise the value the most, returning 94 percent of your investment, followed closely by additional bathrooms, family rooms and second-story additions.
- Education – A loan used for college or technical school tuition can pay for itself several times over if it helps you or a family member secure a better job.
- Big-ticket purchases, medical expenses or emergencies – Possible tax advantages and lower interest rates make home equity loans a smart way to finance a new car, motorcycle or other high price purchases. Also an equity loan may be beneficial if you are faced with costly medical bills or other unplanned expenses.
- Pay off a current mortgage or other loans – To refinance at a better rate can save hundreds – sometimes thousands – of dollars over the life of a loan.
Borrowing against the value of a home has increased dramatically in popularity, for two key reasons: the equity raised can be used to pay off high interest debts that may take more than several years to pay off and since you are using the equity in your property, it can be easier to raise large amounts of quick cash.
Equity is the value of your home that you own outright. A homeowner’s equity increases as he or she pays off the mortgage or as the property appreciates (grows) in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in the property. It’s important to note: The market controls equity, not the home owner. Taking advantage of the equity available can be the difference between a strong financial decision and a weak one.
Simply take the estimated value of your home and multiply it by 80%, then deduct any existing mortgages you may have. The figure remaining is the maximum amount you may borrow. Here’s an example:
|Estimated Value of Home||$100,000|
|Loan to Value (LTV)||x 80%|
|Current First Mortgage Balance||-$55,000|
|Maximum Amount to Borrow||$25,000|
*Freedom Lending can finance up to 90% LTV on a Home Equity Installment Loans and up to 70% LTV for a Home Equity Lines of Credit*
Note: Equity exists in conjunction with the Loan-to-Value (LTV). You can determine the LTV by dividing the loan amount by the property’s value or selling/purchase price, whichever is lower. For example, you buy a $100,000 home with a $20,000 down payment of your own money, and cover the remaining $80,000 with a mortgage – 80,000 divided by 100,000 gives you a Loan-to-Value ratio of 80% and equity of 20%.Equity and LTV are both important because we prefer that a borrower have as much equity as possible. Traditionally the higher the LTV on a loan (90% for example), the higher the risk of default (usually higher interest rates and fees); alternatively, the higher the equity, the lower the risk – and therefore the lower the interest rate, cost, and fees associated with funding the loan.
That depends on your answers to the following questions: Are you making just minimum monthly credit card payments?
- Do you need the funds quickly?
- Is there a large judgement against you or your home?
- Do you need to pay for a Wedding, Car or home repairs?
- Are you making too many monthly payments and you find there’s nothing left over at the end of the month?
- Can you work with a “plan” to pay down large debt by making your home equity work for you?
No, Freedom Lending will consider rental properties however the loan to value may change depending on location and condition.
Yes, the minimum loan amount is $15,000 and the maximum loan amount for residential is $500,000. If you need more than $500,000, we offer many mortgage programs with competitive rates and terms.
An appraisal may not always be needed, but if it is determined one is needed we contact a trusted, certified residential home appraiser who will reach out with you and arrange a time to inspect your property. We will complete an “estimated” the value of the home, most often given in a dollar “range” initially and then proceed with an appraisal if there is enough home equity.
Typically, an appraisal cost depends on the market area and the availability of the certified appraiser. Appraisals can range from $200.00 and up depending on how quickly it may be needed.
A certified appraiser places a true market value on your home. Current properties sold, how long they were on the market and the condition of your home compared to those properties are used to determine value. Receiving a certified “home value” can actually increase the potential amount of cash available to you!
Nothing ($0). Freedom Lending will never charge upfront fees to process applications.
Once the home equity loan is referred to a Freedom Lending team member, the process should be seamless. Our goal is to conditionally approve the home equity loan at the time of application, during the same day. This approval would be subject to a satisfactory conditions.
If you have a mortgage with any bank, trust company or credit union, you can receive your funds in as little as two (2) weeks. If you don’t have an open mortgage or the mortgage is privately held, the process may take up to three (3) weeks as loans are processed differently.
It is important to explain to you that, due to Canadian law, the funds will not be available at your closing meeting. You will receive access to your funds after the mortgage has been recorded with the land registry office in your region.
Joint life insurance is available, and disability for the prime member is available for both types of loans. Freedom Lending has licensed insurance team members that can offer you and your family many different options when it comes to protecting your investment.
First, the good news is that you have 100% equity in your home. This makes you eligible for either a Home Equity product or one of our Mortgage products. Which product you choose depends on how much you’d like to borrow and what your needs are. The closing process can take up to three (3) weeks, as our attorney will handle this loan.
To process your application, you’ll need to provide:
- Proof of income for all people on title (Pay stubs, Tax returns and/or job letters)
- A completed mortgage application
- A copy of your current first mortgage and/or your second mortgage (if applicable)
Yes, in certain circumstances:
- The value of your home can fall over time, which could either lower the equity available to borrow against or reduce the value you repay against.
- If you default on the loan, you could lose your home, one of your most valuable assets.
- Such loans can be a risky spending tool for younger homeowners who are not established in their careers and have less experience owning a home and managing money. This could also be risky for older borrowers who would be tapping into their nest egg close to retirement.
Yes. Freedom Lending has several different options and works with almost every traditional bank, trust company as well their own private funding sources.
Yes, we can offer a Home Equity loans to virtually anyone in Canada.
* Certain fees may apply, including appraisal fees. Fee Disclosure is provided at the time of application/signing. We will identify an appropriate appraisal firm in your local area. The Freedom Rebate Program may not apply to all applicants, please check with a team member before proceeding.