Navigating the Application Process for a Home Equity Loan

Do you have a home with a primary mortgage that you have been paying off for some time and are looking for a way to access a significant sum of money to cover some upcoming expenses? If so, a home equity loan, also commonly referred to as a second mortgage, could be the perfect solution.

This type of loan allows you to access the equity built up in your home over time. If approved, you could receive a lump sum of cash that you could use for anything you want, such as home renovations, medical expenses, and debt consolidation. With a home equity loan, you can borrow up to 80% of the appraised value of your home, minus any outstanding debt you have.

As with a primary mortgage, if you want a home equity loan, you must apply and qualify for it. Once you receive the loan, you will need to repay this amount with either a fixed or a variable rate of interest over a set term. It will be your responsibility to simultaneously make regular payments on both your first and second mortgages.

What are the steps of a home equity loan application process?

If you have a decent amount of equity in your home, you can access a serious chunk of cash with a home equity loan. Before you receive that money, however, you must first go through a loan application process that is similar to the initial mortgage loan application you went through when you first purchased your home.

This process consists of various steps and involves your home equity loan broker doing an investigation into you and your finances to determine your eligibility for the loan and to figure out the size of the loan you qualify for. The following are some of the most common steps of the home equity loan application process:

1. Identity and proof of ownership verification

When applying for a home equity loan, one of the first steps involves verifying your identity and proving ownership of your house. In Canada, you must be 18 years old to receive a loan. You must also have citizenship or permanent residency in the country, which can be verified by providing a valid form of ID, such as your driver’s license or passport.

Since a home equity loan necessitates that you own a home, you will have to prove this by providing evidence such as the property title and/or utility bills with your name and the address of the property on them.

2. Property insurance verification

Another matter that most lenders will want to examine before approving you for a home equity loan is whether your property has sufficient property insurance. If your lender requests such verification, you can simply provide them with a copy of your home insurance policy.

Verifying that you have such insurance and that your policy is extensive enough gives lenders more peace of mind in knowing their investment will be protected if your home is damaged or destroyed.

3. Mortgage payment history verification

One more thing that your mortgage lender will likely want to verify before moving forward with your application process is that you have paid at least 25% of the property off. This is typically necessary to qualify for such a loan. You can prove that you have done this by allowing your lender to review statements of your mortgage balance.

4. A home appraisal

Once the factors mentioned above have been verified, one of the most important steps of the home equity loan application is getting your home appraised. Since it is necessary for the lender to know the current value of your home to determine the amount of money you are eligible to receive via a home equity loan, this step is a must.

In most cases, a home appraisal will involve an official home appraiser visiting your property for an hour or two to thoroughly inspect both the interior and exterior, measure the square footage, and evaluate the home’s various features before comparing your house to homes of a similar size and style that have recently sold in the area.

5. Income and employment verification

Another critical step in your application process deals with income and employment verification. In order to verify your current income and employment status, the lender will likely request recent copies of your bank statements, pay stubs, and tax returns. If there are multiple names on the deed of your home, the home equity loan broker will require such documentation from all parties.

6. A credit check

One more step that is usually part of a home equity loan application process is a credit check. Your credit score and credit history will provide a good indication of how likely you are to pay back the money they lend as agreed.

Therefore, when you apply for a home equity loan, the lender will pull your credit report and check if you have a history of making late payments or defaulting on loans. Generally, your credit score will need to be at least 620 in order for most lenders to consider approving your application.

How Canadalend Can Ease Your Home Equity Loan Application Process

The steps outlined above are followed by most traditional lenders when it comes to home equity loan applications. However, if you are looking for a home equity loan broker to help make this process quick and painless, Canadalend can help.

Unlike most major banks, we do not have a long list of different factors when considering our clients’ eligibility for a home equity loan. We do not focus on aspects such as citizenship, credit history, or even income level. The only factors that matter to us are your home’s value and your outstanding loans.

Since we do not fuss over all the details that most other lenders do, we keep the home equity loan application and approval process easy and streamlined. This way, you can unlock the equity in your home and access the funds you need much faster.

Our licensed mortgage professionals will gladly take the time to go over every aspect of the home equity loan process with you to ensure your understanding each step of the way.

In addition to working closely with you to make sure the loan is tailored to your specific situation in terms of the amortization period, interest type, and repayment plan, we will also keep things transparent by ensuring you are fully aware of any potential costs or penalties you can incur based on your loan’s terms and conditions.

For more information about why we are the best home equity loan broker in Ontario, or to learn more about how a home equity loan application works with us, call Canadalend at 1-844-586-0713 or contact us here.