Ways to Qualify for a Home Line of Credit Capital Mortgages Ottawa

Qualify for a Home Line of Credit

3 Ways to Qualify for a Home Line of Credit

Mortgage loans and home equity lines of credit are two ways to borrow against your home. But, which is better?

Loans have a higher interest rate than lines of credit, but the money you get is usually in one lump sum. Lines of credit are often lower-interest and you can use the money every month. There are several factors to consider when it comes to deciding between a home loan or a residential line of credit. Here’s how to qualify for either type of line of credit.

Decide if you need a lump sum or monthly payments

Do you need a lump sum or monthly payments? This is one of the biggest factors in deciding between a home loan and line of credit. Home loans are for when you want to borrow money all at once, like for a down payment on another home or car. Lines of credit are meant for borrowing throughout the year.

A mortgage loan is also appropriate if you have good credit but not enough savings to cover your needs, whereas a home equity line of credit is appropriate if you have good or excellent credit and sufficient reserves.

Home equity lines of credit are often lower-interest than mortgages and it’s easier to qualify because they base qualifications on your general credit score, not your mortgage history. You can qualify for a line of credit with bad or little to no history just as easily as someone with a perfect mortgage history. Conversely, people who have bad or little to no history may not qualify for a home loan at all because they lack the required income needed by lenders.

Consider your debt-to-income ratio

When thinking about qualifying for a home line of credit, your debt-to-income ratio is one of the first things to think about. Debt-to-income ratio is the debt you owe divided by the gross income that you make from your job.

For instance, if you are making $40,000 per year and have $1,000 in monthly debt payments (including rent), your debt-to-income ratio would be 20 percent. It would be 15 percent if you had $500 in monthly debt payments and $25,000 in annual income.

If your debt-to-income ratio is too high, you might not qualify for a line of credit on your home. The best way to figure out if you will qualify when applying for a mortgage or a line of credit is to use an online calculator like this one: https://capitalmortgages.com/mortgage-calculators/

Choose the right lender for you

First, find a lender that is right for you and your needs. Explore local lenders as well as national lenders. Even if you’re not planning on moving soon, it pays to shop around. Your credit score is an important factor when qualifying for a line of credit. Some lines of credit require a high credit score while others will allow you to qualify with a lower score.

Capital Mortgage broker in Ottawa can assist you.

Home equity lines of credit are often preferable for many people because they can be used every month. But, there is no lump sum payout at the end like when you get a home mortgage loan. If you need money now, then choose a home equity line of credit. If you don’t need the money all at once but want it in one lump sum, get a home loan instead.

Know the differences between a home loan and a line of credit

A home loan is usually a lump sum of money you receive in one payment. A line of credit is when you pay interest on the money you borrow and can use it in increments over time.

The main difference between a home loan and a line of credit is the way that they are paid back. With a home loan, you’ll only need to pay one lump sum at the end of your repayment period. With a line of credit, you will need to pay both interest and your principal balance monthly until the term ends.

Another difference between these two types of borrowing is the interest rate. Home loans will typically have a higher interest rate than lines of credit because there are more risks associated with them. Lines of credit are less risky for lenders so they charge less for those loans. It’s important to know that there may be hidden costs with both types of borrowing, so make sure to read all the fine print before deciding which type to take out.

Qualify for a home line of credit
  • A home line of credit is an excellent alternative to a mortgage loan if you want to borrow money over the course of a year.
  • Home equity lines of credit work much like a credit card, but they are secured by your home. This means you won’t be able to borrow more than the current value of your house.
  • You qualify for a residential line of credit by meeting one of two conditions: (1) You need a home equity line on your primary residence or (2) You have at least 20 percent equity in another property that can serve as collateral.
Qualify for a mortgage loan

If you plan on borrowing a large sum of money, it’s best to qualify for a mortgage loan. This type of loan is also better if you have an event like marriage or the birth of a child that requires you to finance an expensive purchase.

When qualifying for a mortgage, your credit score is the most important factor. You might also need collateral in the form of stocks, bonds or other investment instruments. If you have enough equity in your home, then you can qualify for a home equity line of credit (HELOC).

Conclusion

There are a number of options for financing your home purchase, but a line of credit can be a great way to take advantage of lower interest rates and a more flexible repayment schedule. Make sure you know what you’re getting into before you apply.

This isn’t a loan — it’s a line of credit. When you apply for a home line of credit, you’re asking for permission to withdraw money from your account as you need it. You’ll have to provide your bank with details like your income, debt-to-income ratio, and cash on hand. It’s important to think carefully about whether you really need the money upfront or if monthly payments would work better for you.

We here at Capital Mortgages look forward to assisting you with Ottawa mortgage needs and approvals. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

Purchasing a Second Property

Purchasing a Second Property

Financing Options for Purchasing a Second Property: Use Your Home Equity to Land Your Dream House.

Did you know that many homeowners are paying off their mortgage early in order to use their home equity for purchasing a second property? It’s true. Depending on the property, it may be possible to purchase a new home without having to put any additional money down!

If you don’t have any cash on hand and want to buy a second property, then this is the article for you. We will go over: Your mortgage, how much is left on your mortgage, what kind of discounts you can get when refinancing your home, and the different ways of financing your next purchase.

Options for financing a second property

When purchasing a new property, there are two options for financing. There are loans that are backed by the government or private lenders.

If you get a loan through the government, you will need to put at least 20% down on the house. These loans are cheaper than private lenders but come with strict guidelines and have high monthly payments. They also have some strict qualifications that some people may not be able to meet. Private lenders, on the other hand, only require 5-10% down up front and have some more lenient requirements. But they typically have higher interest rates so monthly payments may be higher.

The type of loan depends on your personal preference and qualifications which is why it is important to do your due diligence before making any decisions.

Getting a mortgage

If you want to use your home equity for purchasing a second property, then you will need to refinance your current mortgage. The following are the steps to take:

1: Get prequalified for a mortgage and find out how much equity is left on your home.

2: Find out what the interest rates are and the monthly payments that you will be required to pay.

3: Calculate what you can afford for monthly payments and compare it to the monthly payment of the new loan.

4: Refinance your mortgage and make sure that your finances will allow you to make both payments every month without any financial hardship.

Using home equity to purchase a second property

A lot of people are using home equity to purchase a second property. There are many benefits to this, for example:

  • You don’t have to put any money down!
  • Refinance your mortgage and pay it off early so you can use the equity on your house for purchasing a new home.
  • Invest in real estate without having to go through the hassle of purchasing one with cash.

This is an excellent way of being able to purchase properties without having to spend any of your own money. Here are some steps you will want to take:

What can you do with the money from your first sale?

The first thing you need to do is determine how much money you have from the first sale of your property. You can use this as a down payment for your next purchase.

Here are some examples:

  • If you had $10,000 left on your mortgage and sold your house for $200,000, then you would have $190,000 left over.
  • If you had $50,000 left on your mortgage and sold your house for $500,000, then you would have $450,000 left over.
  • If you had $100,000 left on your mortgage and sold your house for $1 million dollars, then you would have $900,000 remaining in equity which is enough for a down payment or to cover closing costs on a new property.
Conclusion

The options for financing a second property are plentiful when you have equity in your home. You can use your home equity for a traditional mortgage or cash out the equity in your home to purchase a second property, all while leaving your primary residence fully intact.

But if you do decide to sell your home, you will want to plan for what you will do with the money that is left over.

Financing options for purchasing a second property are only one consideration when it comes to making this big decision.

For more information on what to consider when buying a second property, click the link below.

We here at Capital Mortgages look forward to assisting you with Ottawa mortgage needs and approvals. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com

You can use these links to APPLY NOW or CONTACT US.

You can also click here.

What is a Home Equity Line of Credit (HELOC)?

Did you know you can easily finance purchases related to home ownership (i.e., renovations or home repairs) by using your home as a borrowing tool?

 

A Home Equity Line of Credit (HELOC) is a loan secured against the equity of your home. Because you’re using your home as collateral, this often means a lower interest rate on your loan. Additionally, borrowing to improve a home may result in increased home value.

 

How does a HELOC work?

 

Home equity is the difference between the value of a home and the unpaid balance of its mortgage. This value increases over time as a homeowner pays off a mortgage and the value of a home increases. HELOC loans can be distributed for up to 65% of a home’s appraised value, and can be combined with a regular mortgage for a maximum of 80% of a home’s appraised value.

 

A HELOC is set up as a line of credit with a set maximum draw, rather than a fixed dollar amount. Once a HELOC is negotiated, you can borrow up to your limit at any time. Much like a mortgage or credit card payment, you make minimum monthly payments on the borrowed balance. You would have a draw period during which you can use your line of credit, and a repayment period during which is must be repaid.

 

How is interest calculated?

 

HELOC interest is often calculated on a daily basis, since balances may change at any time depending on draws and payments. Your rate of interest is divided by 365, and then multiplied by the average daily balance during the month. For instance, a 28-day month may mean less interest than a 31-day month.

 

Are you interested in funding a temporary home project or other expense by using the equity in your home? To see if a HELOC would be suitable for your needs, contact Capital Mortgages today!