How Do Equity Loans Calgary Work?

HomeFinance & LAW

How Do Equity Loans Calgary Work?

Equity Loans Calgary is available when you’re looking to buy a home you might need a down payment, but that doesn’t mean you have the money. If this s

Real estate agent vs. Mortgage Broker: What’s the Difference?
7 Simple Ways to Choose the Best Personal Loan Options in India
Colonial Life Launches Benefits Learning Center in Spanish

Equity Loans Calgary is available when you’re looking to buy a home you might need a down payment, but that doesn’t mean you have the money. If this sounds like your situation, then equity loans Calgary might be the perfect solution for you.

An equity loan is a loan you take out against your own home. When you take the loan you don’t actually have to pay back the entire amount of the loan, instead, you pay an interest rate on whatever is borrowed.

For Example: Let’s say you buy a house for $250,000 and put down $20,000 in cash as well as taking out an equity loan in Calgary with a value of $200,000 at 4.55%. You would make monthly payments to pay back the principal and interest on your loan and then after three years (or any other time frame agreed upon by all parties) you will have paid off your loan entirely.

Why would I need this?

The main reason you would need an equity loan is if you needed to put down a large down payment (for example, if a bank was requiring a 20% minimum deposit) on a home but didn’t have the cash on hand to do so. Or maybe you needed to buy a house more quickly than normal (for example, if you had just moved and weren’t able to wait due to school starting in a few months) and didn’t want to wait. Either way, there are many possible reasons why an equity loan in Calgary could be helpful.

What are the benefits of Equity Loans Calgary?

For one, you can get an equity loan in Calgary for a smaller amount than what the mortgage would cost on your own. For instance, it’s possible to have a $200,000 mortgage with 20% down and you could also take out a $100,000 equity loan at 4.55% interest and pay that off in less time.

If you needed to move faster than normal, you wouldn’t be stuck waiting for a year or longer to buy a house. Instead, you could take out the equity loan in Calgary and then just make payments on that one as if it were your mortgage itself!

If you could afford both options, then taking an equity loan may even save you money in the long run.

The other benefit is that if your property increases in value while you have the loan out, then technically speaking you haven’t really lost any money. For example, imagine that after taking out your $100,000 equity loan As mentioned earlier that two years later your property value has gone up by $50,000. Since you didn’t have to pay back the entire value of the loan, whenever you sell your home you can make the full amount that it’s worth even though technically speaking you haven’t come out ahead.

Another benefit is mobility. Because this is a loan against your own home you are essentially free to move in the future without any penalties for breaking the contract or anything like that. You won’t have to worry about paying back an equity loan in Calgary if you want to change houses, paying off an equity loan should be no issue whatsoever.

What are the cons of Equity Loans Calgary?

The main con is that there are some restrictions on this type of borrowing. You can only do this in some circumstances, they are as follows:

If you have the cash on hand to pay off all the money owed (or more than just what you’re borrowed) then this could be a great means of obtaining a home, however, if you don’t have enough on hand it is possible that what you borrowed won’t be paid back on time or at all and will be hiked up to what you owe. This can leave someone with no equity after getting themselves into such a situation.

Another thing to be aware of is that you can effectively only do this once, if you borrow more than fifty percent (50%) of the home’s worth then the bank will deem it risky and it is unlikely that this will be approved a second time. This means that if you own a house with an equity loan Calgary against it and purchase another one with an equity loan then you won’t be able to get another one. 

To Sum it Up

Equity loans Calgary work very well in some situations but if you own a home then it is very hard to see why they wouldn’t make sense for you as well. You can potentially get your hands on much more money than what could be available to purchase a house with, without having to pay for any of it upfront. This can be very useful if you’re trying to save money and don’t want to pay in full for a large home or if you’re interested in saving even more on your mortgage.