Home Loans & Refinancing

June 29, 2017 | Posted by: Richard Allatt

Purchasing a home in Ontario is likely going to be the largest financial commitment you will ever make but there are other costs associated with home ownership. Many homeowners choose to make use of the equity value of their home for all kinds of reasons, from renovation to redecorating to major repairs.


There are two main ways in which to access the equity value of your home - refinancing your mortgage or getting a home loan.  It's best to explore the pros and cons of each option so you can choose the correct financing for your situation.


Home Loans:


A home equity loan allows the borrower to use the equity value in their home, as collateral.  Getting a home equity loan will act as a lien against the borrower's property as well as reducing the over-all equity of the home.  There are two types of home loans - a home equity line of credit and a home equity loan.  A home equity line of credit acts like a revolving line of credit with an adjustable interest rate, allowing you to access the funds repeatedly. A home equity loan is a one-time lump sum loan that usually has a fixed interest rate like your mortgage.  In either case, a home loan can be extremely useful for expenses like major home repairs or renovations, and can even be used as a form of Ontariodebt consolidation if you prefer to have all your debts in one place.




Refinancing a mortgage means you pay off the existing mortgage as well as any other legal claims against the property, and then go about setting up a completely different mortgage.  If the mortgage rates are lower than when you originally obtained your mortgage or a new type of mortgage is available, refinancing can save you thousands of dollars in interest fees and other costs, over time.  When you refinance a mortgage you are able to access the equity in your home and you will have more liquid cash immediately.  Refinancing can save you money long-term as well as give you instant cash which you can use to improve your home or purchase other investments.


When it comes time to decide between a home equity loan and Ontariomortgage refinancing it is important to pay attention to the economic market.  If you are happy with your mortgage rate the way it is, then taking out a home equity loan can be a simpler and more secure way to access the value in your home, but if the mortgage rates have decreased and refinancing will help you pay off your mortgage quicker and lower your payments at the same time, then this can be a wise option.



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