A Toronto home equity loan mortgage basically refers to the fact that any loan provided to a home owner that is equity based will be secured by a mortgage. The mortgage can be in first, second, third, or even higher positions.
There are basically two types of home equity loans.
There is a home equity line of credit or secured line of credit, and a home equity term loan.
A home equity line is going have a variable rate versus a home equity term loan that may potentially have a fixed or variable rate, depending on the program and applicant requirements.
With a home equity line, the principal amount approved can be drawn on at any time, provided the borrower upholds the lender’s requirements for the line of credit to be active.
For a home equity term loan, the principal amount is dispersed all at once and then paid back over time according to an amortization schedule.
The interest term for the term loan will be fixed or variable for a defined period of time, after which the mortgage will need to be renewed.
In many cases, both the line of credit and term loans are second mortgage financing facilities where the mortgage registration taken for security by the lender is behind a residential home mortgage that’s already registered in first position.
A home equity line of credit can only be obtained through banks and other institutional lenders.
A home equity loan mortgage can be obtained from both institutional lenders and private mortgage lenders.
When private lending is being utilized, its also typically in the form of private second mortgage financing where there already exists a first mortgage that will not be impacted by the new home equity loan.
The home equity loan option of financing behind an existing first mortgage can be a preferred approach over a home mortgage refinance strategy as a new second mortgage will not generate any prepayment penalties that can result from refinancing the first mortgage, and the rates for a second mortgage will be at or very near what you would be able to secure for a new first mortgage anyway.
In order to work through the different options that may be available to you, we suggest that you give us a call and we’ll go over everything with you.