By hearing about the dwindling financial system and people crumbling under debts, one wonders whether it is still acceptable to use credit and whether it is possible to borrow at reasonable costs to renovate, to offer a trip, buy a car or pay for Junior’s university studies.
Do you want to renovate to take advantage of tax incentives? Jump on deals to replace your car? Take advantage of reduced prices to go on a trip? But you do not have the necessary cash to take action? Here’s how you can borrow smartly.
Home loans – more commonly known as “release of equity” – are popular. Equity release allows you to renovate your home, buy a car or a motor, maximize your investments, pay for your children’s education or face unforeseen expenses.
They exist in two versions.
1. These products offer a line of credit that covers 70 to 80% of the total value of the home/mortgage. This margin makes it possible to consolidate all the debts of the owner, from the mortgage to the car loan. Also, the pay is deposited into an account, from which there can be automatic withdrawals. The advantage of this formula: lower interest charges. All debts are guaranteed by the house, which allows enjoying a cheaper interest rate. Moreover, since the income is deposited in this unique account, the debt goes down, so the interest charges too. Apparently, this product is for the disciplined because it can become a real trap for the compulsive consumer.
2. The second, more common version is to lend the equity of the house. As with all-in-one products, the customer benefits from a lower interest rate than a personal loan or standard line of credit. There are also several variations of the mortgage margin. For example, the client who has a mortgage sees their borrowing capacity increase as equity on the home increases. On a $100,000 equity, you could borrow $ 20,000 to buy a car at a fixed five-year interest rate, and another $20,000 loan for your child’s studies at a variable rate.
In addition to the flexibility of the type of rate (fixed or variable) that suits you, these two formulas allow you to decide how to pay your line of credit.
Other Perpetual Loans
Another way to borrow is to use the personal line of credit, and this is very similar to the equity release, it is available to individuals who are not homeowners or who do not yet have equity in the property. As it is not linked to a mortgage guarantee, lenders protect themselves by granting lower credit limits and applying slightly higher interest rates – between 5% and 9%.
They offer the same flexibility as the equity release on a mortgage concerning usage, rate selection and terms of payment. They also carry the same danger, that is, they can lead to overuse of credit. Obviously, the flexibility of the conditions varies from one institution to another. That’s why it’s good to compare the different services available and to negotiate.
With a laudable access to numerous lending institutions, including major banks, credit unions, and trust companies; the equity release professionals are familiar with a wide range of options available, and these can help in financing projects ranging from the purchase of second homes, to renovate, to offer a trip, to buying a car.
By ensuring that you (especially the seniors) get the best rates available to meet your needs the service of the equity release experts cannot be overemphasized.