Equity Takeout - Should You Go For It?
Updated: May 17
What is Equity Takeout?
Equity Takeout simply means taking out equity from a said property for various purposes. It is a kind of mortgage loan. Equity Takeout Mortgage is the same as Equity Loans post the amendments in Canada’s mortgage market.
Why do you need Equity Takeout?
Equity Takeouts are required and helpful for a variety of purposes when you are in pressing need of money. You may be in the process of:
Renovating your home
Opting for higher education
Planning your retirement among other needs
Paying off previously acquired high-interest loans
You require a considerable amount of money for all of the above.
Kinds of Equity Takeouts
There are broadly two kinds of Equity Takeouts that property owners can avail:
Equity Takeout at Fixed Rate: In this kind of Equity Takeout the borrower can take out a fixed sum of money against the property.
Equity Takeout at Variable Rate: In this kind of Equity Takeout the borrower has the power to withdraw less or more amount of money as per his discretion. This type of Equity Takeout can be made available as a line of credit.
Advantages and Disadvantages of Equity Takeout
When you pay mortgage for your property over the years, you reap the benefits in time of your need. Your house is your biggest net worth and undergoes considerable value appreciation over the years. This means you have also accumulated a lot of equity.
In times of need, instead of option for other loans, you can opt for Equity Takeout as the interest rates for Equity Takeouts are usually better than other methods of
Interest is paid only for the amount borrowed
You need to follow a certain schedule to pay off the loans and be disciplined about it
You could lose possession of your home to the lender if you default at payment