What are Home Equity Loans?

Lets first understand the term Equity which is defined as a home secured by a primary residence or second home to the extent of the excess of fair Market value over the debt incurred in the purchase. Home Equity Loan is defined as Ownership interest in a corporation in the form of common stock or preferred stock. It is also referred to as total assets minus total liabilities, in which case it is also called shareholders equity or net worth or book value. It can essentially be the amount of ownership that has been built up by the holder of the mortgage through payments and appreciation. It is a special type of loan that is used by homeowners who desire to make use of their equity as collateral. These loans are important for family owners which help in Paying off certain expenses such as medical bills, college costs, or house repairs.

The main idea behind home equity loan is that you can borrow against the existing equity. The amount of money that will be given to the home owner will be determined by the credit score, salary, and the worth of the home of the loan seeker. They also serve you as a great source of credit if you are in ardent need of cash. These loans come with a range of advantages which facilitate borrowers in a number of ways. With the loan amount, one can use the extra money for home renovations or making any other payment.

Through Home Equity loan in Canada, which is an Equity line of credit, the home owner can have access to the equity of his home up to ninety percent of the value of his home. The fund can be utilized for renovating the home or undertake other important jobs.

First and foremost, homeowners are encouraged to know his or her overall credit score. The loan approval depends heavily upon an individual's credit standing. In many cases the homeowner will need an overall score of at least 720 or higher to get the loan approved. Before a person considers applying for a loan, it is vital for the individual to increase his or her credit score. The loan "approval or decline" decision is strongly based upon an individual's credit status and reputation. The higher the credit score, the lower will be the interest rate.

The Bank of Canada decided to keep its key interest rate stable which is good news for the country's construction workers, real estate agents and homeowners. It is also a major reason that home ownership is rising to record levels. The bank announced that its key rate will remain at 2½ percent which is a key determinant for housing affordability which resulted in the Canadian housing sector to show an impressive resilience.

One of the most noted advantages of this type of loan is accessibility and convenience. These loans are fairly easy to obtain and far easier than an unsecured personal loan. These loans also allow a person to take money he or she already has, and make it prosper for future investments. The homeowner can turn a sum of money into additional capital.