Pros and Cons of Home Equity Loans

Home equity loans, also known as second mortgages, are increasingly becoming flexible and attractive to many Canadians in need of fairly large amounts of money. One of the most attractive things about these loans is the ability to write checks against a line of credit, obtained by the borrower’s interest on their homes. Moreover, the interest rates on these loans are relatively lower compared to when the homeowner secures an ordinary personal loan.

Second mortgages also play a legitimate role when large sums of money are needed to overcome various financial difficulties. For instance, they can be very effective in paying for an additional home, a child’s education, or maybe taking a dream vacation, though this last one is not a very good reason to jeopardize your home.

However, before considering second mortgages, the borrower should be very careful due to certain inherent risks they may be faced with. To begin with, the borrower will be using their homes as collateral and this implies that if there is a default regarding repayment, then the borrower risks losing the home. With this risk in mind, second mortgage borrowers should have a solid plan on how they intend to meet the repayment obligation before they make the application.

If you intend to plan on going for a second mortgage, then you ought to do your research and find the right lenders. There are so many lenders in the market today, but does not guarantee that all of them will be suitable to fulfill your needs. Different lenders will offer different kinds of mortgages, and different rates, and it will be important for you to do good research and narrow down those who will best suit your needs.

Also be sure to consult a lawyer so that you have a good understanding of all the terms and conditions before you agree to any deal.