A Fredericton home equity loan is exactly what it sounds like, it’s a loan based off of the equity in your home. So what is home equity? Home equity is your share of the value of your home. It is what you actually own. Not many people can buy their home out right, so if you buy a $200,000 home and you have paid off $50,000 of that, the equity or, what is truly yours is $50,000.
Back to Fredericton home equity loans, there are two types of home equity loans. You have a fixed rate and a line of credit. A Fredericton home equity loan (fixed rate) gives you a lump sum, but you pay it back in monthly payments with a fixed interest rate in a specific time span. The line of credit however, gives you access to those funds for whenever you may need it, so you take what you need at the time and the rest stays for when you need it. It has an adjustable rate depending on what the rate is at the time.
Some pros to the Fredericton home equity loan is obviously that you can get money when you need it. Whether it be a lump sum or a line of credit.
Cons to this loan is the loan depends on the market value so if the market suddenly goes down, the value in your home decreases as well. Which means you could end up owing on your home equity loan even after you sell your home. You can risk foreclosure if you can’t make the payments.
Canadians with a mortgage have a lot more equity in their homes, averaging about 66% of their homes values, according to the Canadian Bankers Association.