Equity Home Loan Rate Variable Information

If you had chosen an equity home loan rate variable or a mortgage based on the variable rate, between July 2007 and June 2010, then you would have done very well.

The prime rates steadily declined from 6.25 percent to 2.50 percent. That’s a decrease of almost 4 percent in 3 short years.

If, over those years, you had diligently made your mortgage payments, then you would have reaped the rewards of steadily falling rates. Falling rates would mean steadily falling payments and therefore less and less interest paid toward your mortgage and increase equity!

Equity Home Loan Rate Variable: What is Equity?

The equity in your home is the difference between what is left to pay on your mortgage and how much your home is currently worth. Between what you have paid off and how much your home has appreciated over the years, this could be quite a tidy sum.

As a home owner that has built up equity, you can get access to these funds if your need them. There are many reasons that you may wish to access some of your built up equity.

Use your home equity to your greatest advantage:

  • Consolidate your debts into one easy monthly payment
    • to decrease your overall payments
    • free up cash flow
    • reduce the overall interest you pay
  • Purchase Investments
  • Renovate Your Home
  • Top Up Unused RRSP Contribution Room
    • could result in a huge tax rebate
  • Open or Start up a business or Franchise

Money may not be the answer to everything, but the things you could do with the equity in your home could certainly bring you happiness and peace of mind.

Equity Home Loan Rate Variable: How to Access Equity in My Home?

To get access to some of the equity in your home, through a home equity loan or mortgage, you have 2 choice:

  1. Arrange a new First Mortgage or Home Equity Loan
  2. Keep the existing mortgage as it is and Arrange a Second Mortgage or Second Home Equity Line of Credit

When we refinance our home, there are some rules, legislated by the Government of Canada. First, the maximum amount that we can refinance our home to is 85 percent of the value. This would be called a high ratio mortgage, there is an insurance premium we would pay and we would have a maximum amortization of 30 years.

If we refinanced to 80 percent of the value of our home, then this would be considered a conventional mortgage and depending on the lender we choose, we could have an amortization of 40 years.

Equity Home Loan Rate Variable: Arrange a First Mortgage or Home Equity Loan
Arranging this type of mortgage or home equity loan is just the same as we did when we purchased our home, except the total mortgage value for a purchase can be as high as 95 percent.

Most clients choose a fixed or variable rate mortgage when they first purchase but rarely do they choose a line of credit. When clients refinance, more will choose a line of credit. There are 3 options (products) to choose from when you refinance (or purchase, for that matter):

  1. Fixed Rate Mortgage, or home equity loan
  2. Variable Rate Mortgage, or home equity loan
  3. Home Equity Line of Credit (HELOC)
    • note: the HELOC is available for Conventional mortgages only

For details about the different types of equity home loan rate variable or fixed or HELOC, visit Mortgage Types

Equity Home Loan Rate Variable: How to Apply for a Mortgage or Home Equity Loan

Whether you are applying for a home equity loan, a mortgage or a home equity line of credit, the process is basically the same.

The first step is to visit your trusted mortgage broker, or lender and provide some of your personal information, complete an application. You would also need to provide some documentation to confirm your income, details about your home, details about your current mortgage, property taxes, etc.

Your mortgage broker would need to order an appraisal, from a qualified appraiser, to determine the value of your home. The lender will use your home as collateral, therefore the value is important to calculate the amount of funds you could access.

For more details about the application process visit 7 Step Application Process

There are a number of advantages to using a mortgage broker. He will typically work with a number of lenders, each of whom offer a wide variety of. Whether you have bad credit, a bankruptcy in your history or on a fixed income, a mortgage broker can still match you up with the perfect lender for your specific needs.

A mortgage broker does not give loans. He matches lenders with borrowers. A mortgage broker has access to many lenders, including private investors. This greatly increases your chances of getting the loan you need.

In most cases, you will never meet the lender or have to deal with anyone face to face. The only person you deal with is the mortgage broker you know and trust.

You can trust your broker because he works for you and only has your best interest at heart. He will work hard to make sure you get the perfect loan for your needs, and at the best rate possible.

One thing to keep in mind, though, a new lender will want you to refinance your entire mortgage. This may be a good option, but if you are against it, don't worry. Your mortgage broker will find someone that doesn't have this requirement. In this case, your home equity loan would be considered a second mortgage.

A second mortgage is not as bad as it sounds. It is not much different than a home equity loan. Both are secured by your home and both are second in line to be paid when you sell your house. Each offers its own unique advantages and disadvantages. Make sure you know all of your options before you decide.

Equity Home Loan Rate Variable: Interest Rates

Before you think about a lender, you need to decide what type of equity loan you want. Do you want an equity home loan rate variable or do you prefer a fixed rate.

Mortgage products are constantly evolving. This is not to make life more complicated for the borrower, but rather to provide a better match for individuals.

An experienced mortgage broker is up on all of the latest changes and can help tailor a loan for your particular needs.

Interest rates are directly influenced by the prime rate. Banks and other lenders will add or subtract a percentage point from the prime. Generally, most lenders offer about the same rates in order to stay competitive. If a lender charges way more than other lenders, he will not get too much business.

On the other hand, cutting interest rates too low will not produce enough profit. It may also make borrowers a little nervous and wonder why the rates are so low.

The term of an equity home loan variable rate is usually five years. However, you may be able to extend that to ten, fifteen or even thirty years. There are now more options available than ever before.

Make sure you have a clear picture of your personal needs and financial goals before you decide which variable rate loan is best for you.

A mortgage professional can present you with all of your options. The right loan can help you achieve your financial goals and eventually become completely mortgage free.

Equity Home Loan Rate Variable: Beware Pitfalls

An educated consumer needs to know what to watch out for. You need to fully understand what you are getting yourself into. Companies will often advertise super-low interest rates, like 1.99 percent or less.

This looks very tempting and many people jump right in, only to find out later that this rate is merely an introductory rate for three or six months. After the predetermined introductory period, the rate increases to the average prime lending rate. Meanwhile, you are locked in for a five or ten year term.

Whether your goals are financial or personal, an equity home loan rate variable can help make it all happen.

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