Daily Archives: April 20, 2021

When it comes to buying and maintaining a home, there are many ways you can achieve these goals without breaking the bank and getting broke in the process. One of these types of credit is HELOC or home equity line of credit, however, not many may be aware of what it actually means. 

If you are looking to take out a second mortgage, need extra funds for a home renovation or even for your child’s tuition, taking out a HELOC may be the right financial decision for you. This blog post will help you gain more knowledge about how this type of line of credit and how it works.

The Advantages of Applying for Home Equity Line of Credit

There are many advantages to getting a HELOC. However, it does also come with its downsides and risks. Here are some of the facts that you need to know before you apply to take out a loan like this. 

What is HELOC?

A HELOC or home equity line of credit is a revolving line of credit that will be secured against your home. If you have reached a certain amount of equity on your home, you may be eligible to use that equity to apply for a HELOC. Many people have the assumption that a HELOC is the same as a reverse mortgage, but it is not. There are many key differences between the two. In fact, HELOC isn’t a mortgage at all. Rather, it is a loan tied to your home that can be used for any purpose.

How HELOC Works in Canada

The first step to applying for a HELOC in Canada is to approach a bank or another financial institution and check with them to see if you qualify. Keep in mind that the more equity you have on your home, the larger the amount you will be able to apply for on your HELOC. 

There will be some fees that will go with the application for the HELOC such as legal fees, appraisal fees and processing fees. Also, the maximum amount of the line of credit cannot exceed 65% of your home’s appraised value. 

Why You Should Consider Applying For a HELOC

One of the key advantages of a HELOC is that the interest rates will most likely be lower than other types of loans. You will also be able to have access to extra funds and flexibility in how you spend it. You will also be able to continue living in your home while you apply and eventually pay off the HELOC. 

Conclusion

There are a few disadvantages to a HELOC. Being aware of these disadvantages before applying will help set your expectations. Keep in mind that even if you have qualified for a HELOC, the lender may reconsider their decision if you have a life-altering event that will affect your income. Also, they may have strict requirements for eligibility, so it is best to confirm this with  your mortgage agent in advance before applying. There may be additional fees that may apply in your case. 

If you are looking to apply for a home equity line of credit, come to Ottawa Mortgage Services. We specialize in setting our clients up with the loan or mortgage that fits you needs. Let us help you get what you need today!

Mortgages can be a challenging topic to first-time homebuyers, especially when they aren’t well-versed in financial terms and home-buying concepts. This is why it comes with no surprise that first-time homebuyers will carry a trunkload of questions that will help them understand the mortgage process.

One of the most common questions people have regarding mortgages is the type of mortgage they should select — a fixed-rate mortgage or a variable-rate mortgage. However, don’t feel disheartened if you don’t fully understand these terms, as even the most experienced homeowners also tend to struggle with these choices.

This is why you must work with a reputable agent, such as Ghummaz Bhatti from Ottawa Mortgage Services, who can explain these concepts to you. With the help of an expert, you can make better-informed decisions when selecting the right rate based on your financial health and capabilities. 

You’re probably here because you’re one of those who scratch their heads when they need to decide on their mortgage rates. If that’s the case, you’ve come to the right place. In this article, we’ll share what you need to know about fixed- and variable-rate mortgages and why you should consider each type. Let’s take a look!

What Is the Difference Between Fixed and Variable-Rate Mortgages?

Before digging deeper into fixed-rate and variable-rate mortgages, it’s best to understand the basics of each concept. 

A fixed-rate mortgage focuses on a fixed amount of interest that you would pay for in the duration of your mortgage term. On the other hand, a variable-rate mortgage is based on the current Prime Rate. It could fluctuate, depending on the status of the market and economic climate.

Basically, fixed rates are typically connected to the world economy, whereas variable rates are linked to the Canadian economy. 

Each rate can be beneficial to a borrower, depending on your financial health and capabilities. This is why it’s crucial to seek assistance from reputable mortgage agents to ensure that you make sound financial decisions that can benefit you in the long run. 

Why Should I Consider a Fixed-Rate Mortgage?

As a first-time homebuyer, stability is your priority, and fixed-rate mortgages can give you that sense of ease when you enter a mortgage space.

The great thing about having a fixed-rate mortgage is that your payment will not change throughout your paying term, allowing you to budget your income and expenses until you pay it off. 

But when the Prime Rate drops, you may miss out on opportunities in saving money on interests. Though similarly, when the Prime Rate increases, you’ll be protected from the hike and won’t need to pay surprising fees. 

Why Should I Consider Variable-Rate Mortgages?

As mentioned earlier, variable-rate mortgages are based on the Prime Rate in Canada. This means that the interest you pay on your mortgage may fluctuate depending on the economic climate. 

When you consider variable-rate, some individuals may set standard payments based on a fixed rate, which would push their interest rate much lower, allowing them to pay more to the principal instead of paying interest. 

When the rate goes up, a person will pay more interest instead of the direct principal loan. This is why some variable-rate mortgage holders simply go with the economic flow and allow their payments to drop and rise depending on the Prime Rate. 

The Bottom Line: But Which Mortgage Rate Should I Choose?

You need to consider several factors when you’re choosing your mortgage rate, and that includes your financial health, your income, and the penalties you may experience. 

But regardless of which type of rate you’re leaning towards, it’s important to have a clear idea of your mortgage contract and finances before you sign a deal. This is where Ottawa Mortgages Services come from since they can provide you with assistance regarding your financial situation and review all the options that could lead you to make the best financial decisions. 

Why Choose Ottawa Mortgage Services?

Whether you’re a first-time home buyer or an experienced homeowner, Ghummaz Bhatti can provide you with exceptional financial assistance that can benefit you in the long run — from first-time home buying assistance, pre-approval letters, refinancing, debt consolidation, and more.

Get a free assessment or try our mortgage calculator today!