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Home equity loans, also known as second mortgages, are a popular way for homeowners to borrow money by using their homes as collateral.

Typically offered in the form of a lump sum loan or a line of credit, a home equity loan can be a great option for Canadian homeowners who need to borrow a large amount of money for a variety of reasons; whether it be for home renovations, paying for a child’s education, debt consolidation, or other purposes.

With that being said, there are many questions that homeowners may have about home equity loans. Understanding the answers to these questions can help them to make informed decisions about whether a home equity loan is the right choice.

Let’s go over some of the most frequently asked questions about home equity loans:

What is a home equity loan?

A home equity loan is a loan that is taken out against the equity in a home, which is simply the value of the home minus the amount still owed on the mortgage. For example, if a home is worth $500,000 and the mortgage balance is $250,000, then the homeowner has $250,000 in equity. Homeowners can borrow against this equity by taking out a home equity loan.

How are home equity loans provided to borrowers?

Home equity loans are generally offered as either a lump sum loan or a line of credit known as a HELOC (home equity line of credit). A lump sum loan is a one-time loan that is to be paid back over a certain period of time via fixed monthly payments. On the other hand, HELOC is a more flexible loan that allows homeowners to borrow money as needed, making necessary payments on the loan as required.

How do I know if I qualify for a home equity loan?

To qualify for a home equity loan, you must have sufficient equity in your property in addition to a good credit score. Lenders will also consider the borrower’s income, debt-to-income ratio, and employment history when evaluating their eligibility through the loan application process.

What can home equity loans be used for?

Home equity loans can be used for many different purposes, including covering the costs of home renovations or improvements, consolidating debt, paying for a child’s education, and more. However, lenders may have restrictions on how the loan proceeds can be used, so it is important to clarify this with your lender before taking out a home equity loan.

How much money can I borrow with a home equity loan?

The amount that homeowners can borrow with a home equity loan depends on several factors, including the value of their home, the amount of equity they have built up, and the lender’s unique lending guidelines. With that said, many lenders will allow homeowners to borrow up to eighty to ninety percent of the equity in their homes.

Are there risks to taking out a home equity loan?

Yes, there are potential risks associated with taking out a home equity loan. One of the main risks is the possibility of losing your home if you default on the loan and are unable to make the required payments. If you can’t make your payments and the lender forecloses on your home, you could lose your home and your equity.

This is quite a serious risk, which is why it’s critical to carefully consider whether a home equity loan is the right financial decision before you take one out (our Canadalend experts can certainly help with that).

How do home equity loans compare to other types of loans?

Home equity loans have some advantages compared to other types of loans. One key advantage of home equity loans is that they are a secured type of loan. Since these loans offer a greater level of protection to the lender, this generally results in lower interest rates for the borrower when compared to unsecured loans.

How can I calculate my home equity?

In order to estimate the amount of equity you have built in your home, simply take the market value of your property and subtract the loan amount that you owe on your current mortgage, along with any other loans secured against your home. For example, if your home is valued at $600,000 and you still owe a balance of $400,000 on your mortgage, then your home equity will be valued at $200,000.

How do I determine if I should choose a lump sum loan or a HELOC?

If you need a lump sum of money for a specific purpose, such as home renovations or debt consolidation, then a home equity loan may be the better choice. On the other hand, if you require ongoing access to funds for a variety of purposes, then a HELOC may be more suitable.

It’s also important to consider other factors, such as varying respective fees and interest rates (home equity loans typically have fixed interest rates, while HELOCs have variable interest rates that can fluctuate over time), and repayment terms (home equity loans have a fixed repayment term ranging from five to fifteen years, whereas HELOCs have a flexible repayment schedule). Ultimately, the right choice will depend on your unique financial situation and goals.

Start Using the Equity in Your Home to Your Advantage

Our mortgage lenders in Ontario have access to hundreds of different lenders and offer a wide range of mortgage solutions, such as home equity loans, that can help you finally attain the funds you have been wanting to access.

To learn more about our home equity loan solutions and mortgage financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Are you a Canadian homeowner looking to tap into the equity of your home, or benefit from lower monthly payments or rates? If so, then you may be considering either a second mortgage or a refinancing of your current mortgage.

While both of these options enable homeowners to use their property as collateral to borrow money, there are considerable differences between the two that are important and useful to understand.

In this article, we’ll compare both second mortgages and refinancing to help you determine which option may be best for your current financial situation and mortgage needs.

What is a second mortgage?

A second mortgage is a loan taken out against the equity in a home already being used as collateral for a first mortgage. Generally, the first mortgage is the primary loan that was used to purchase the house, and the second mortgage is a separate loan that is taken out on top of the first mortgage.

With that being said, second mortgages are usually offered in the form of either a home equity loan or a home equity line of credit (HELOC). However, how do the two differ?

A home equity loan is a lump sum loan that the borrower receives all at once, and is to be paid back over a certain period of time through fixed monthly payments. On the other hand, a HELOC is a revolving line of credit in which borrowers receive loan proceeds on an on-needed basis and will make payments on as they continue to borrow money. The interest rate on a HELOC is typically adjustable, meaning that it can change over time depending on the conditions of the market.

Advantages and Drawbacks of Second Mortgages

Second mortgages can be a viable option for homeowners with equity in their homes, who need to borrow a large sum of money and appreciate the security of fixed monthly payments.

Second mortgages also present several unique advantages, such as allowing borrowers to keep their current loan term without making sacrifices (e.g. keeping the low interest rates of a primary mortgage). The flexibility of choosing between a lump sum loan or HELOC serves as another attractive benefit for homeowners.

However, second mortgages have some potential drawbacks. One of the main drawbacks is that they are a second lien on the property, which means that the first mortgage lender has priority in the event that the borrower defaults on their loans. This means that if the borrower falls behind on their payments, the first mortgage lender can foreclose on the home before the second mortgage lender can.

In addition, second mortgages may have higher interest rates than first mortgages because they are considered a higher risk for lenders. This means that homeowners who take out a second mortgage may end up paying more in interest over the life of the loan, depending on their unique circumstances.

What is a refinance?

A refinance is a process in which a homeowner replaces their current mortgage with a new mortgage containing different terms. However, they are essentially taking out a new loan to pay off their existing mortgage.

Homeowners may choose to refinance their mortgages for a variety of reasons, including to lower their monthly mortgage payments and pay off their mortgage faster, obtain a lower interest rate, alter the term of the loan, switch from an adjustable-rate mortgage to a fixed-rate mortgage, or to access the equity in their homes.

Advantages and Drawbacks of Refinancing

Under the right circumstances, a mortgage refinance can help to free a homeowner of financial burdens through significant cost savings. They require borrowers to pay only single mortgage payments each month, and offer the opportunity for beneficial adjustments of mortgage terms and rates.

However, just like with a second mortgage, refinancing can also have potential drawbacks. For example, a refinance may be costly in the short term, as homeowners may need to pay higher closing costs along with other fees associated with taking out a new mortgage.

Furthermore, refinancing a mortgage may require homeowners to pay for a new home appraisal, and may also be required to accept different (and higher) interest rates.

Finally, refinancing may extend the term of a homeowner’s mortgage. This means that if a homeowner refinances their mortgage to get a lower monthly payment, they may end up paying more in interest over the life of the loan since they are technically stretching the loan out over a longer period of time.

Second Mortgage vs. Refinance: Which one is right for you?

When it comes time to decide between a second mortgage and a refinance, homeowners should consider their financial goals in both the short and long term, in addition to the specific terms of the loans being offered.

As always, it is advised to work with a trusted mortgage solution provider, such as our experts at Canadalend, to help you choose a solution that will be most financially beneficial for you.

Considering a second mortgage or refinance?

Our mortgage lenders in Ontario are here to lend a hand. Canadalend.com can help you determine whether a second mortgage or a refinance is a better option for you, so you can take the right steps toward achieving your financial goals.

To learn more about our second mortgage solutions and refinancing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Are you a small business owner in Ontario trying to secure financing for your business?

Many entrepreneurs find it challenging to get the funding they need to not only start, but to grow their businesses successfully. While obtaining sufficient funding may seem like a daunting or virtually impossible task, you should know you are certainly not alone in your struggles and that support is available to you.

Why is obtaining finance a significant issue for new business owners?

Starting a business often requires a significant amount of capital. This capital is required to cover a wide range of expenses, including purchasing costly equipment and inventory, hiring employees, and general marketing of the new business.

In this article, we’ll explore several of the most common reasons you might have difficulty obtaining financing for your Ontario business. We’ll also offer advice on overcoming these obstacles, so that you can get the capital you need to make your business venture a success.

Below are seven of the most common reasons you might be having problems obtaining financing for your Ontario business:

1. Insufficient initial savings

It can be very difficult to finance a business with limited personal savings, which is, unfortunately, something that many entrepreneurs struggle with. Without sufficient personal funds, a business may not be able to fully operate and could struggle to get off the ground.

This can be a major obstacle to obtaining financing from external sources, as this may cause lenders to view the business as a high-risk investment. Therefore, entrepreneurs must always carefully assess their financial situation and effectively plan for the start-up costs of their business.

2. Lack of steady cash flow

Often, small businesses that fail to demonstrate consistent cash flow are denied funding, as they are considered high-risk investments. Banks are far more likely to favour small businesses that have already secured a stream of steady revenue on a monthly basis.

3. Insufficient collateral

When applying for a loan, new entrepreneurs often are required to use their own assets as collateral (e.g., their house or car). Banks are careful to minimize risk, so if a borrower does not have solid collateral to offer (also known as being “asset poor”), it is unlikely that the bank will approve the loan. In fact, an insufficient lack of collateral is one of the most common reasons why businesses fail.

4. Poor credit history

Most small businesses still have credit scores negatively impacted by the recent financial crisis. Generally, a business will require a credit score of at least 720 to be considered for a loan from a bank. This can be a high bar for many small businesses, particularly those that are just starting out and may not have had enough time to establish a strong credit history.

5. Excessive debt with other lenders

Needless to say, banks are often hesitant to lend to businesses that already have current debt with alternative lenders. Usually, they will not even consider lending to a business that has already obtained funding from another source. The reason being many entrepreneurs will seek credit from a variety of lenders, particularly at the beginning stages of their venture; this can be a significant obstacle when applying for financing from the bank.

6. Weak business plan or credibility

A poorly orchestrated business plan or weak credibility will often fail to give banks or investors the assurance they need regarding the likelihood of business success. Many new entrepreneurs and owners of small businesses do not possess the proper credentials, reputation, or track records required to secure these loans, which can be rather discouraging.

7. Unfavourable economic climate and market conditions

Banks may be hesitant to lend money to a business if they feel that the current economic and market conditions will prevent them from receiving their loaned funds in the appropriate time frame.

While this certainly isn’t fair to owners of new and small businesses, as external factors are out of their hands, it’s important for these entrepreneurs to carefully assess the economic climate and market conditions before applying for a loan.

Consider Alternative Financing

If a traditional bank loan isn’t an option for your small business, then alternative financing may be a good way to obtain the funds you need to grow your company.

Alternative financing for your start-up business includes private lenders, which typically offer a range of loan products such as term loans, investor loans, lines of credit, and equipment financing to meet the unique needs of small businesses.

Additionally, private lenders may offer more flexible repayment terms and lower interest rates than other types of lenders. Overall, private lenders can be a good option for small businesses looking to secure financing to grow and expand their operations.

Let Our Experts at Canadalend Help You Achieve Your Business Goals

Obtaining proper financing is critical for the success of any new business. Whether you’re seeking commercial financing services to kick-start your business in Ontario, or are looking to give your existing business a boost, our private lenders and mortgage broker experts at Canadalend.com can assist you in securing the best commercial mortgage rates in the province.

To learn more about our private loan solutions in Ontario and other private financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

If you’re a first-time home buyer in Ontario, you may feel a mix of excitement and anxiety about buying your first home. We know that it can be a stressful experience, especially if you’re unsure what to expect or have concerns regarding affordability.

However, with some preparation, guidance, and financial assistance, you’ll be able to navigate the process with more confidence. This article will discuss what you can expect as a first-time home buyer in Ontario and several incentive programs to be aware of.

Knowing What to Expect as a First-Time Home Buyer

As a first-time home buyer in Ontario, you can expect the process to involve several steps and to take some time to complete. Let’s discuss some of the common steps involved.

The first step is to get your finances in order. This involves examining your income, savings, and debts to determine how much you can afford to spend, in addition to exploring the several first-time home buyer incentives available (which we will explore shortly).

It’s also important to get pre-approved for a mortgage. Doing so will give you a better idea of the price range of homes you can afford and will help make you a more competitive buyer when you’re ready to make an offer.

Once you have a sense of your budget, you can start looking for homes that fulfil your needs.

When you find a home that meets your criteria, you can make an offer to the seller. As many Ontario markets are currently experiencing extreme competition among home buyers, it’s essential to exercise patience during this stage and not feel discouraged if you don’t get the first property you place an offer on.

After receiving an acceptance, you will enter into a contract to purchase the home. This contract will outline the terms of the sale, including the closing date along with any conditions that must be met before the sale can be completed. You will also need a home inspection to ensure the property is in good condition. If any issues are discovered during the inspection, you can negotiate with the seller to have them addressed before closing.

Once all of the conditions of the contract have been met, you will be ready to close on the purchase of your new property. This typically involves signing a mortgage agreement, paying any remaining balance on the purchase price, and transferring the ownership of the home to you.

Incentives for First-Time Home Buyers 

First-time home buyers in Ontario have a number of incentives available to them to help make homeownership more affordable.

These incentives can reduce the upfront costs of purchasing a home and provide support for ongoing expenses such as mortgage payments and property taxes. Keep reading to learn about these programs.

Incentive #1: The Home Buyers’ Plan

The Home Buyers’ Plan (HBP) is a program that allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use as a down payment on their first home.

To be eligible for the HBP, the buyer must not have owned a home in the previous four years, and the RRSP funds must exist in the account for at least 90 days to be withdrawn. The money withdrawn under the HBP must be repaid to the RRSP over a period of 15 years, with the first payment due in the second year after the withdrawal is made.

Incentive #2: The First-Time Home Buyer Incentive Program

The Canada Mortgage and Housing Corporation’s (CMHC) First-Time Home Buyer Incentive Program (FTHBI) allows first-time home buyers to reduce their monthly mortgage payments without increasing their down payment. The amount of the incentive depends on the buyer’s household income and the location of their home.

The incentive is a shared equity mortgage, which means that the CMHC will provide a portion of the financing for the purchase of the home and will share in any increases or decreases in the value of the property. The buyer must also have a minimum down payment of 5% of the purchase price.

Incentive #3: Land Transfer Tax Refunds for First-Time Home Buyers

The Land Transfer Tax Refund program in Ontario offers a refund of up to $4,000 on the land transfer tax for first-time home buyers, and is available for homes valued up to $368,333. The amount of the refund decreases as the value of the home increases, so the maximum refund is only available for homes valued at or below the maximum eligible value.

To be eligible for the program, the home must be the buyer’s principal residence, and the buyer must not have owned a home in the previous four years. The deadline to apply for the refund is 18 months after the date of the transfer of the property.

Incentive #4: The First-Time Home Buyer Tax Credit

The First-Time Home Buyer Tax Credit (HBTC) is a non-refundable tax credit that can be claimed on the tax return for the year in which the home was purchased. The amount of the credit is equal to a percentage of the purchase price of the home, up to a maximum of $5,000.

To be eligible for the credit, the home must be the buyer’s principal residence, and the buyer must not have owned a home in the previous four years.

Turn Your Dream of Homeownership Into a Reality

If you are looking to buy your first home in Ontario, then look no further. Serving Ontario and the GTA for almost 20 years, Canadalend.com has become one of the largest and most preferred brokerages in the province.

To learn more about our mortgage plans and financing solutions in Toronto, call Canadalend.com at 1-866-I CAN LEND or contact us here.