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Guide to Finding the Right Home Improvement Loan

Updated: Jan 5, 2023

Have you been searching for the right home improvement loan? 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. So 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, which 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 qualify for unsecured personal loans, which are the simplest form of credit and do not require any collateral. However, unsecured loans do not offer some protection to the lender against the borrower's risk of going default, which means it has a higher risk to the lenders and a higher interest rate than secured loans.


When choosing a home improvement loan, your financial goals and credit score are the most critical factors. However, lenders will also consider whether you have sufficient equity in the collateral (property worth more than the total amount owed on the 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 loan that allows you to borrow against the value of your home using a line of credit. You can use this money to pay off debts, cover unexpected expenses, or invest in property or stocks.


Before getting a HELOC, it's essential to determine the most suitable loan for your specific situation and goals by discussing 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. As a line of credit, it enables borrowers the flexibility to borrow and repay the loan at any time and almost instantly, unlike traditional mortgage loans that only allow one lump-sum and extended repayment schedule.


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

  • A quick and easy approval process

  • Low-interest rates

  • Flexible terms and conditions

  • You can borrow up to 85% of your home's value


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. For example, you can use it to cover everyday expenses like groceries, bills, and repairs or bigger project expenses such as kitchen renovation and paying off high-interest loans.


Three main steps involve getting a HELOC: researching potential lenders, creating an application package, and submitting it to lenders. Let's take each action in detail below.

  1. Research potential lenders: Before choosing a lender for HELOC, it is essential 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, work with a local mortgage broker to create an application package that will help your lender be confident about issuing you a loan. Include everything from how much debt you would like financing (in terms of both principal amount and interest rate) 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 a compelling application package, all that remains is to submit it! Lenders want accurate information and complete supporting documents from the beginning to avoid any follow-up requests.

Of course, when you work with a mortgage broker, all 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 want to avoid selling or renting your home to get extra cash. Or it's time for renovations, but you 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 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 you have enough money 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 to repay the debt and ongoing costs associated with owning a home, such as property taxes, Homeowner's Insurance premiums, etc. Once you have a reasonable 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 essential to review your loan agreement before signing it to ensure that you understand the terms and conditions of your loan and that you are comfortable with how things are going. Reviewing your contract before signing can also help catch potential problems before they become significant 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 not a challenging thing in the world if you follow all the instructions and advice given above. In addition, you can have a secured loan that you can afford when you work with an expert mortgage broker.

At Richmond Hill Mortgage Broker, we offer reliable services and highly experienced staff to handle your needs and queries. To start, you need to fill out our application form, and you will be glad you did!


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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