A good way to utilize the equity in your home and at the same time have a tax write-off* is to secure a home equity loan or a second mortgage. Terms vary in length from five to 30 years and we offer these loans up to 100% of your home's value. They may also be used as a means of avoiding mortgage insurance when purchasing a new home.

1. A home equity credit line - This is a very flexible and low-cost loan with the loan amount up to 100% of the value of your home. It is flexible in that you can secure, for example, a credit line of $75,000.00 but only draw $40,000.00 at loan closing. Subsequently, as needed, you can write checks up to the maximum amount of the loan. Also, as you pay it down, you may re-draw from it to the maximum amount. Payments are generally interest only although payments towards principal are always allowed and if made will reduce future payments. Interest rates are tied to prime and can fluctuate.
2. A fixed rate second mortgage - In this type of mortgage, the interest rate is usually fixed for 15 years (with up to a 30-year amortization) but the rate normally runs 1 to 2% higher than first mortgages. It is less flexible than home equity credit lines in that all the money is drawn at close and cannot be accessed later. Also, any payments towards principal do not affect future payments; they only shorten the duration or length of the loan. Fixed rate second mortgages are usually more costly than home equity credit lines, too.

Another use for a home equity or a second mortgage is to avoid mortgage insurance when buying a new home. These are known as 80-10-10, 80-15-5 or 75-15-10 loans. Whereas mortgage insurance is required on a new purchase when a first mortgage is over 80% of the purchase price, by utilizing a home equity or second mortgage for 10-15% and then putting 5-10% of your own money, you can avoid paying mortgage insurance (which is not tax deductible).

If you are interested in seeing how a home equity or second mortgage can benefit you or to get a competitive quote, contact us through our web form, by e-mail or by phone.