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Homeowner loans are a special type of loan. As the name suggests they are available only to people who want to own a home. So, what exactly is the difference between those loans and a personal loan? Basically, a Homeowner loan is secured on the property. The lender puts a legal charge on the property and the loan is, in effect, a second mortgage.
If the homeowner should ever default on the loan the lender can seek reparation from the value of the homeowners property. Does this mean that the lender can repossess the property in order to repay the loan? Actually, no. Because the homeowner already has a first mortgage and the lender of the first mortgage always has the stronger claim. All the charge really means is that if the property is ever sold the loan is automatically paid off by the solicitor handling the sale.
So what does all this mean to you?
Because a homeowner loan puts a charge on your property this acts as a kind of guarantee to the lender that the loan will eventually be repaid. Even if you stop making regular payments, when the property is eventually sold, the lender will get their money back. Because of this, lenders usually consider homeowner loans to be much less risky than ordinary personal loans. A lender will lend much more money on a homeowner loan for longer terms and at much lower interest rates.
Being able to borrow a larger sum than usual could be very handy. This makes possible things like substantial home improvements - maybe you want to completely redo the entire house or build an extension or loft conversion - and it makes sense, surely, that your property should pay for it's own upgrades by making a loan that size possible in the first place. Maybe you need a large amount of capital to start a business.
Lower interest rates are always a bonus and these types of loans can be taken for longer terms - such as ten, fifteen, twenty or even twenty fives years - it is a second mortgage after all! Lower rates and longer terms helps keep the monthly payments reasonable. There's not much point with a monthly payment that you can't afford to pay!
So how do you find the best loan?
These days the best place to start is probably on a loan comparison site. As with any comparison site, this will compare many different loans from many different lenders. You will be able to compare, at a glance, the interest rates and fees. Pay particular attention to the fees, as with some homeowner loans these can be varied and substantial. Also be careful to check the loan to value - which is how much the lender will lend against the remaining equity in your home after your first mortgage is deducted. It will do you no good if the lender will not lend up to the value you need!
Using the comparison site it should be an easy task to prepare a short-list of homeowner loans lenders and then slowly whittle this down until only one lender remains. This should be the homeowner loan lender for you.
Circle Mortgage has the ability to meet virtually with a client in any part of Canada but more importantly the advice we offer when we do meet takes into account the needs of each individual client. Some of you may be refinancing to pay for your child’s wedding, others may just be getting ready to move out on their own. For more information visit: Home Equity Loan Burlington
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