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  • Writer's pictureRichmond Hill Mortgage Broker

Guide to Finding the Right Home Improvement Loan

Updated: Dec 13, 2022

Have you been searching for the right home improvement loan? If so, you're in luck! This guide will help you find the perfect loan for your needs, and it includes information on different types of loans, how to get approved, and how to pay off your loan. Whether you're planning to renovate your home or update your appliances, this guide has everything you need to know!


What Is a Home Improvement Loan?

A home improvement loan is a secured loan used for various purposes, such as home repairs or improvements that is borrowed against the equity in the property. Home improvement loans come in a lump-sum loan or a revolving line of credit, like home equity loans and HELOCs.


Alternatively, borrowers can also qualify for unsecured personal loans which are the simplest form of credit and it is doesn't require any collateral. Unsecured forms of financing does not offer some protection to the lender against borrower's risk of going default, which means it has a higher risk to the lenders and higher interest rate than secured loans.


When choosing a home improvement loan, the most important factors are your financial goals and credit score. Lenders will also take into account whether you have sufficient collateral (property worth more than the total amount owed on loan) to cover potential losses if you don't repay the debt on time.


What is a Home Equity Line of Credit?

A home equity line of credit (HELOC) is a type of loan that allows you to borrow against the value of your home. You use this money to pay off other debts, cover unexpected expenses, or invest in property or stocks.


There are two primary types of HELOCs: personal and commercial.

Homeowners usually use personal HELOCs to cover short-term financial needs, such as emergency repairs or buying groceries. Commercial HELOCs are more commonly used by businesses and entrepreneurs who need access to cash quickly but don't want to risk using traditional loans taken out from banks.


Before getting a HELOC, it's important to determine the kind of best for your specific situation and goals. Discuss your options with a qualified mortgage broker who can help you find the perfect product for your unique needs.


What are the Benefits of using a Home Equity Line of Credit?

A home equity line of credit (HELOC) is a loan that allows you to use the equity in your home as collateral. This type of loan is usually used by people who need more money quickly but don't have access to traditional loans.


There are a few benefits to using a HELOC, including:

  • Quick and easy approval process

  • Low-interest rates

  • Flexible terms and conditions

  • You can borrow up to 95% of your home's value

  • Can be transferred among family members if needed


How do you get a Home Equity Line of Credit?

Getting a home equity line of credit is a great way to borrow money for short-term use. You can use it to cover everyday expenses like groceries, bills, and repairs.


Three main steps are involved in getting a home equity line of credit: researching potential lenders, creating an application package, and submitting it to lenders. Let's take each step in detail below.

  1. Research potential lenders: Before shopping for a home equity line of credit, it is important to research different lenders online. Look at their websites and find information about their lending policies and rates. It's also helpful to read customer reviews before making your decision.

  2. Create an application package: Once you have researched various options, it's time to put together an application package that will help make your lender feel confident about issuing you a loan." Cover everything from how much debt you would like financing (in terms of both principal amount and interest rate) down to providing detailed financial statements detailing your current income and spending habits over the past few years.

  3. Submit your applications: Once you have created an effective application package, all that remains is to submit it! Lenders want accurate information to compare apples-to-apples when assessing whether or not they are granting.

Of course, when you work with a mortgage broker, all of the above steps are done-for-you.


Why Would Someone Want to Use a HELOC?

For example, a HELOC may be an option if you're struggling financially but don't want to sell or rent out your home to get extra cash flow. Or it's time for renovations but no longer have the necessary cash upfront. A HELOC could provide enough financing so that work can begin without putting too much strain on your budget or credit score. So there is something for everyone who wants access to some extra financial stability - whether needs arise now or down the road!


How to Repay your Home Equity Line of Credit?

Repaying your home equity line of credit can be a difficult and challenging process. Here are some tips to help make the repayment process easier:

  • Make a plan. Before you start repayment, spend some time thinking about what you want to do and how much you think it will take to repay the loan in full. This will help ensure that you have enough money available to repay the debt over time.

  • Stick to your budget. Only borrow what you can afford to pay back in interest and principal each month. This way, you'll minimize stress on your finances and credit score.

  • Use online tools or calculators to get an idea of how much money you'll need each month for repaying the debt and ongoing costs associated with owning a home, such as property taxes, Homeowner's Insurance premiums, etc. Once you have a good estimate, subtract this amount from your outstanding balance on loan (the remaining instalment may be repaid through direct debit).

  • Contact your lender regularly and keep up to date on any changes that may impact repaying the debt (such as modification requests made by borrowers or increases/decreases in interest rates). Doing so will go smoother for everyone involved and potentially avoid any financial surprises down the road!


How to find alternative lenders that allow 100% of rental income to be used for a mortgage

It is important to review your loan agreement on a regular basis in order to make sure that you are aware of any changes or updates. This will ensure that you understand the terms and conditions of your loan and that you are comfortable with how things are going. Reviewing your agreement regularly can also help catch potential problems before they become major issues.


How Long Does it Take For a HELOC to Be Approved?

It usually takes about two to six weeks for a HELOC to be approved.


Lending money to your dream home is a challenging thing in the world. But if you follow all the instructions and advice given above, you will end up with a secured loan that you can afford easily.


At Richmond Hill Mortgage Broker, we offer reliable services and highly experienced staff to handle your needs and queries. You need to fill out our application form, and we will take care of everything else!


Visit https://www.richmondhillmortgagebroker.com/ if you want us to assist you in getting the best deal on your home improvements. We will be happy to help!

 

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