Category Archives: mortgages

Using your home as a piggy bank – Tap the equity you’ve accumulated and get tax breaks

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With the increase in the debt obligations in the nation, there is an increasingly large number of people who are desperately looking for ways to make ends meet. Due to the lack of people who can don a stellar credit rating, the chances of grabbing unsecured loans at high interest rates are gradually becoming fainter. But does that mean that it is impossible for all those debtors with a tarnished credit score to get a consolidation loan? Certainly not! If you’re someone who owns a home and has accumulated enough equity in your home, you needn’t worry as you can tap the equity in your home and take out a secured debt consolidation loan through which you can easily combine your debts into single monthly payment. Check out the concerns of this article to know more on home equity loans.

What are home equity loans or lines of credit?

If you’re not aware of the meaning of the word “equity”, you should know that it is the difference between the value of the property and the amount that you owe your home mortgage lender. Both home equity loans and home equity lines of credit allows you to borrow a lump sum amount against the equity that you’ve accumulated in your home to make some kind of discretionary purchases and even to repay debt. While incurring additional debt, you need not worry as you have the option of taking out a home equity loan.

Using a home equity loan to combine your unsecured credit card debts

Although home equity loans carry typically high interest rates than the first mortgage loans, they undoubtedly carry lower rates than the unsecured lines of credit. If you wish to combine your unsecured debts through a secured home equity loan, here are the benefits that you should consider.

  • The interest rates help you save money: When you’re already drowning in unsecured credit card debt, you must be looking for ways in which you can repay debt and also save your dollars. The home equity loan carries interest rates that are way lower than what you would have to pay on an unsecured loan and therefore this process of merging your debts will offer you a win-win situation.
  • The repayment term is long enough: As the home equity loan is a secured loan and involves a huge amount, the repayment term is usually longer. With a longer repayment term, the monthly payments become manageable as you can spread your payments throughout a longer period of time.
  • The tax breaks: Is a home equity loan tax deductible? Well, the answer is Yes. In fact the biggest benefit of merging your unsecured debts through a home equity loan is that you get tax breaks. The interest rate that you pay on the home equity loan are tax-deductible and hence you can get tax benefits through this option.

A deeper view into the tax-saving feature of a home equity loan

A nice feature about home equity loans mentioned above is that the homeowners can get a tax deduction for the interest rates that they pay on the mortgage. The taxpayers are supposed to claim a deduction on the interest rate paid on a loan that has been secured by their first or second home. Although most of the home equity loans fall into this same category, the borrowers might get confused when they have more than one “Second homes” in excess of the value of the home.

So, this goes without saying that the advantage of using a home equity loan is that you simply save your dollars. If you use your HEL for a debt consolidation program and your interest rates become tax-deductible, isn’t that a huge savings? If you’re going through such a situation, get in touch with your lender and get a home equity loan to avail the above mentioned benefits.

Cut Mortgage Costs with Simple Tricks

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With the extreme benefits that come with owning property, many desire to buy homes. But, those who are not rolling in money will most likely need to take out a mortgage, and as you likely know, mortgages can be costly. To pay off a loan in an efficient manner, there are various tips and tricks that can be followed. These can be broken down into seven primary groups: keeping a stable cashflow, using shorter amortization times, buying a smaller house, accelerated payments, shopping for good mortgages, buying a house that is a good long term decision, and making prepayments.

Having a stable cashflow is critical, as without it your payments may not be made on time. An unexpected dip in income or an emergency expense can send you scrambling, often having to make the choice between paying your mortgage bank a late fee plus overdue interest or taking out a payday loan and paying the high premiums associated with that form of debt.

Interest rates have a significant impact on cost of property over time. Because of this, cutting several years off of the time that it will take to pay the mortgage will significantly reduce the cost of the home in the long term, generally by thousands of dollars.

Buying a smaller house may also help with cutting costs. Space that is not going to be used is just costing you money. Adding these savings not only saves on the principle, but also saves on the cost of interest.

Another way to fight interest rates is through accelerated payments such as those offered by RBC Royal Bank. By paying twice a month rather than once per month, interest cannot build as fast, since interest is based on the principle, which is reducing more quickly. Every bank’s policies are different, so check with your lender for details.

While it may seem obvious, some mortgages are better than others. For a significant purchase such as a house, spending slightly longer to find a good mortgage will be worth it in the long term.

In addition to considering the cost of the mortgage, also consider whether the product is something that should be purchased in the first place. If you do not live in a house for a significant amount of time, you are likely going to be losing money on your mortgage.

Finally, make prepayments on your mortgage. Spending more than you are required to spend now will save you significant money in interest, and will get the mortgage paid sooner.

Following the above six tips will allow any homeowner to knock both time and money off of a mortgage, allowing money to be saved for other needs and wants.

Canadians still have a long way to go on their mortgages

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The Bank of Montreal reported today that the average Canadian has about fifteen years left on their mortgage. Twelve to twenty percent of Canadians, depending on the province that they live in, have more than twenty-five years to go on their mortgages. This is all on the heels of new government regulation that are supposed to lower demand and prices on home mortgages. These new regulations will decrease the refinancing limit on houses to 80% of home equity while limiting the amount of help that the federal government can make available for insurance from the Canadian federal government to home owners. The senior economist of the Bank of Montreal estimates that the prices of homes will need to fall an average of three percent in order to neutralize the impact of amortization rule changes on mortgage payments. It is his hope, and the hope of many others in the industry, that these new rules will help th real estate market landing softly back on its feet rather than hardly and dramatically. The study goes on to say that Canadians made larger payments than they had to and some even paid lump sumps on their houses. Unfortunately, twenty four percent of those surveyed could not afford to do so.