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Home Equity Loan Finder

Take advantage of the equity you've built up in your home by using it to finance your next big purchase.

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Name Product Interest Rate Loan Amount Loan Term Requirements Link
Fairstone Secured Personal Loan
19.99% - 24.49%
$5,000 - $50,000
36 - 120 months
Requirements: must be a homeowner, min. credit score 560
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Alpine Credits Home Equity Loan
10.00% - 22.99%
$10,000 - $500,000
Up to 60 months
Requirements: must be a homeowner, min. credit score 300
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Home equity loans can be a great way to help you take your next step, whether it be to a new car, to home renovations or to any other large purchase.

While car loans are the most common type of secured personal loans, a vehicle isn’t the only way to guarantee a loan. If you own your own home and have built up some equity in it, you can use that equity as a guarantee on your next loan. Find out how it works in this guide.

How does a home equity loan work?

A home equity loan works the same way as other secured personal loans. When you apply you will need to provide details of your mortgage, your personal financial position and the reason you’re taking out the loan. Your application will be assessed and if approved, you will be given a loan based on how much equity you hold and how much the lender thinks you can afford to repay.

How much you own in your home will be used as collateral for the loan. If you were to default on the loan, the lender could recoup its losses by taking ownership of that equity.

Calculating how much equity you have

Home equity is essentially the difference between your property’s value and any debt you hold against it. This means if your home is worth $500,000 and you have a mortgage of $250,000, you have $250,000 worth of equity in your home. With a home equity loan, you can typically borrow up to 80% of the value of your home, minus your mortgage.

How much can I borrow?

Here’s how to figure out how much you can borrow with a home equity loan:

  • Take the value of your home and deduct any amount you still owe towards your mortgage.
  • Multiply this number by 0.8 (0.8 represents the maximum amount of 80%).
  • Multiply this number by 100 and you have the maximum amount that you may be able to borrow.

Types of financing you can secure with your home equity

The types of loans available when using your equity give you real flexibility:

  • Fixed-term secured loan.A secured loan is guaranteed by collateral you put up and can be used for any purpose. It is given to you in a lump sum and you pay it back in installments, usually over a period of 1-7 years. As the loan is secured you can enjoy a more competitive rate.
  • Line of credit. As a continuous source of credit, you can draw on this loan as and when you need to. You’ll have access to the amount of credit that you’re secured for and be required to make regular repayments and as you repay the credit it will become available again. You may see this product marketed as a HELOC, or Home Equity Line of Credit.

Is a home equity loan the same as a home equity line of credit (HELOC)?

Not quite. While both types of financing draw from your equity as a source of collateral, a home equity line of credit (HELOC) functions more like a credit card. You have a large amount of money you can draw from at any time for the loan period, usually 5 to 15 years.

A home equity loan usually has the same repayment period, but you’re advanced the lump sum immediately. Because of this, you must pay interest on the entire amount (like a regular mortgage). On the other hand, if you take out a HELOC, you only have to pay interest on the amount you borrow from the possible pool of funds — say $50,000 of the total $100,000.

What kind of purchases and investments can you make with a home equity loan?

While the loans themselves are secured, there aren’t many restrictions on how you use your loan. You can use the money for:

How long does it take for approval on a home equity loan?

It can take anywhere from 3 to 31 days for a lender to process and approve your application for a home equity loan. But keep in mind that the exact amount of time it takes varies depending on the lender, your financial situation and how quickly you can get the paperwork together.

What affects my approval time?

Several factors can affect the time it takes for you to receive your funds, including:

  • The application. Most applications require a copy of your current mortgage statement, property tax bill and proof of income. Keep these documents handy throughout the process.
  • Verification. The lender takes time to verify the information you’ve provided, including your source of income and personal details. It’ll also probably check out:
    • Your credit score. If your credit score is less-than-good, that could delay the process.
    • Your debt-to income ratio. Ideally should be lower than 43% to ensure you’ll be able to pay back the loan without hardship.
    • Property debt. A lender will likely run a title search to check for existing debt on the property.
  • Home evaluation. You’ll need an appraisal to verify what your home is currently worth. The lender will typically assist with this.
  • Closing. You’ll need to meet with a lawyer in order to sign, seal and deliver the documents.

Can my credit score affect timing?

A low credit score could slow down the underwriting process, which is when lenders determine whether or not you’re eligible for a loan. If your credit score is lower than 650 – which is typically considered the point between a “fair” and a “good” credit rating – it could signal that a more in-depth review of your financial history is required. A credit score lower than 600 may outright exclude you from being approved – a sign that you’re a risky borrower.

What documentation will I need?

Staying organized throughout the process will help speed things up. Documentation you might need to provide includes:

  • Copy of valid ID
  • Copy of the property’s title deed
  • Three months worth of paycheques
  • Tax returns from the last two years
  • Mortgage statement
  • Copy of property tax bill

What are the benefits of home equity loans?

  • Competitive interest. Your loan is secured by a valuable and appreciating asset, your property, so you will usually get a competitive interest rate.
  • Flexible loan purpose. You can usually use the loan amount for whatever purpose you need.

Do you need to apply with the same lender you have for my mortgage?

No, you don’t. If you decide to apply with a different lender you will need to provide details of your mortgage, including your total loan and how much equity you hold.

Is there anything else to consider before applying?

This is a risky type of loan should you default. Failing to repay the loan could result in the lender taking the equity you have in the property to pay the loan. Before you apply, consider how financially stable you are and if this is the right type of loan for you to take out.

A home equity loan can offer you a low interest rate as well as a flexible way to finance a personal purchase.

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