Our blog

Construction mortgages are increasingly popular in Ontario with many choosing to build custom homes to meet their specific needs—needs that are not being met with the homes currently available on the market. Designing and building a custom home can be exciting, but it also comes with a unique set of, financial challenges.

Qualifying for financing the construction of a new home is very different than qualifying for a mortgage to buy an existing home. For starters, the process of qualifying for a construction loan is much more rigorous with construction mortgage lenders in Ontario because they will need a lot more information about you. On top of that, they might even require a bigger down payment than the minimum 20% needed for an existing home.

This is because there are a lot more risks associated with seeing a new home through the construction phase as opposed to purchasing an existing home. Moreover, you will need more capital during the construction process. As a result, mortgage construction lenders will only lend money based on the value of the home at the different stages of construction and not at the home’s future value.

Purpose of Construction Mortgages

Construction mortgages are required for home builders who are purchasing land for the immediate construction of a principle residence, or of a cottage or leisure home for their personal use.

Custom home builders will also need a construction mortgage if they already own their own land and need money to cover the immediate, upfront construction costs before the first advance is dispersed by the lender.

Different Types of New Construction Mortgages

There are three different ways you can finance your newly constructed home in Ontario.

• Builder/Contractor: You have hired a registered contractor to build your custom home with your own money.
• Self-Built Home: You have your home built and act as your own contractor.
• Buying a Newly Constructed Home: The contractor builds the home with their own money and you need to pay the builder when you take possession of the property.

Construction Mortgage Financing Options

In each of the above three types of new construction there are different kinds of financing options. There are variations in each one related to timelines and conversion. If you’re looking for construction financing in Ontario, you can build you home with a Process-Draw mortgage, Completion mortgage, or combination of the two.

Process-Draw Mortgage

A Process-Draw construction mortgage is advanced at different stages during the construction process. There are usually three draws (sometimes four) at 35% (roofing is complete), 65% (after plumbing and electrical is completed but prior to drywall installation), and 100% (final occupancy).

During each stage, the construction has to pass inspection before you receive the next payment. With a Process-Draw construction mortgage, interest is charged on the total amount advanced. And the final advance is released when the home passes its final inspection.

Completion Mortgage

A Completion mortgage is needed if you have built or purchased your home through a residential home builder and only really need the funds when the house is finished and you’re ready to move in. Unlike a Process-Draw mortgage, with a Completion construction loan, you typically only need a small down payment to start and only need full payment when the home passes the final inspection.

Combination

In some cases, you can start with a Process-Draw loan, which is then converted to a Completion construction mortgage. The single advance loan that comes when the home is finished acts like a regular residential mortgage.

Canadalend.com: Ontario’s Construction Mortgage Lender

A lot of Canadians build custom homes to suit their lifestyle needs and personal tastes. If you’re in the initial stages of planning your custom home, it’s important to talk to a lender about financing your construction loan.

They will help you determine your budget and can also help you get pre-qualified or -approved for a home construction mortgage . If you already own the lot, it and other real estate can be used as equity. Equity is important as it shows potential construction mortgage lenders that you can pay back the loan.

With an in-depth understanding of construction mortgages, the independent, licensed agents at Canadalend.com can provide you with all the support you need from start to finish.

Keep in mind that the process to getting a construction mortgage loan is much more rigorous than it is for a regular residential mortgage. Lenders will want to see proof of income, credit history, as well as a record of assets.

That’s why it’s imperative that you work with a lender who understands the nuances of the Ontario construction mortgage industry. The construction mortgage experts at Canadalend.com will look over your financial situation and help you determine what kind of construction loan you qualify for.

Reviewing everything will also help determine how attractive you are to various construction mortgage lenders. After all, every lender’s construction mortgage program will be a little different.

Because Canadalend.com agents are independent, they don’t just look at Canada’s big banks, which can be restrictive when it comes to construction mortgages. They have access to hundreds of different lenders; some specialize in construction mortgages while others lend to those with bruised or damaged credit. At Canadalend.com, we’ll help you find the best construction mortgage with the best rates.

If you are interested in finding out more about construction loans or want to know what kind of construction mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Canadalend.com is committed to helping everyday Canadians with their mortgage needs, providing debt consolidation solutions, plus home equity lines of credit, private mortgages, and more…

But Canadalend.com isn’t just a company. It’s a group of people who are passionate about helping others when they need help securing a loan when the banks say no. And one of those important people is Canadalend.com’s founder, Bob Aggarwal.

Bob sat down to answer some questions about himself and the mortgage business and explain how Canadalend.com helps so many people:

How did you first get into the mortgage business?
“When I first started out, in 2004, I worked in the collection industry. It was there that I first noticed that sometimes good people wound up in bad situations. So, I would do my best to get loans for these people to help them to refinance through brokers. After a year or so, I started my own brokerage, Canadalend.com.”

What’s the biggest benefit Canadalend.com gives to their customers?
“I’m proud to say that Canadalend.com has made it a mission to inform our customers that they do have options, even if they’ve been turned down by the bank.

We give a wide array of lending options like home equity lines of credit, second mortgages, private mortgages and more, all at competitive rates. I’m especially proud of our commitment to customer service and taking a hands-on approach to finding our customers real solutions for their mortgage financing needs.”

What is the most important thing you believe a consumer needs to know about getting a mortgage?
“The most important thing for anyone looking for a mortgage is that you have options. There are mortgages and loans that can be tailored to your situation and needs. Gone are the days where you just had to take what the bank gives you. Today, the consumer has a choice went it comes to mortgages.”

Where do you see the housing/mortgage industry trending in the next 5-10 years?
“While the housing boom has steadily been rising for almost two decades, some people think it’s going to contract. I think it’s still going to rise. There will be minor corrections, but I think overall, this market is still going strong. Real estate is still one of the best investments you can make and with private lenders like Canadalend.com, we can make it easier to get more Canadians the money they need.”

If you own your home and have been turned down by the banks for a second mortgage, or home equity line of credit because you have “less than perfect” credit or are self-employed, let Bob and the rest of the team at Canadalend.com help you get the money and advice you need.

Contact Canadalend.com at 1-866-i CAN LEND (422-6536) or click the APPLY NOW button to submit a risk-free application.

Self-Employed Mortgage Options for those with Bad Credit

For years, self-employed Canadians could count on getting a mortgage based on the strength of their credit score and on their word that they were making enough to repay the loan.

All that changed in 2008, though, when the Federal Government tightened lending rules in an effort to avoid the same kind of housing crisis that happened in the United States. Canada’s big banks now place a lot more importance on credit score and income than they used to before approving a mortgage or loan.

This has made it a lot more difficult for the country’s 2.75 million self-employed workers.1 For starters, if you’re self-employed and have bad credit , the banks believe there is a greater chance that you will default on the mortgage.

Banks might even want a down payment as high as 30% of the total purchase price. This is much higher than the 20% minimum down payment required by those who are not self-employed and have good credit.

If you are turned down for a mortgage by the banks, you can still qualify for a mortgage from a non-traditional lender. You’ll just need to be prepared to show them why they should give you a mortgage.

An alternate lender may want to see your current financial statements and tax documents. It may also want to see bank statements to show a regular income is going into your bank account. You’re also going to need to explain your business. Your credit score may be bruised, but lenders will still help you secure a mortgage if your business is profitable and income is steady.

You can also increase your chances of getting a mortgage with bad credit by reducing your debt and having a larger down payment. This shows lenders you know how to pay off your debt and save money, both of which also have the added benefit of helping you improve your credit score. After you make a few on-time mortgage payments, your credit score will improve even more.

Mortgages for Self-Employed with No Proof of Income but Good Credit

If you’re self-employed and have good credi t, it can be difficult to get a mortgage if you can’t verify steady income. Gone are the days of needing a credit score of 680 or higher to get a mortgage; even if you were self-employed.

Not having steady income, which is common for those who are self-employed, is a red flag for Canada’s big, traditional lenders. Without proof of income, they’ll say there’s no guarantee you’ll be able to repay your mortgage.

That isn’t the case with all mortgage lenders though. Some lenders will not even ask for traditional proof of income like tax returns or a Canada Revenue Agency Notice of Assessment. Instead, they will rely on your bank statements. In some cases, lenders will provide financing of up to 95% of the value of the property with little or no proof of income.

There are a lot of alternatives for self-employed Canadians with good credit but little or no income verification. For example, if you have excellent credit and prove you have been self-employed for two years, you may be able to purchase a house with as little as five percent down.

If you have a good credit history and have been self-employed for less than two years , you may be able to secure a mortgage with just 10% down. If your credit history is fair and you have been self-employed for at least three years, you may be able to get a mortgage from an alternate lender for 75% of the purchase price.

Your mortgage professional should be able to help you determine what kind of mortgage you qualify for.

Getting a Mortgage when Your Income Is Unreliable

Even with tighter mortgage rules for those who are self-employed, you can still qualify for a mortgage if your income is unreliable or fluctuates. It’s just going to take a little more effort.

If your income doesn’t meet the stringent requirements of Canada’s big banks, there are other lenders willing to help those with unreliable incomes secure a mortgage. In fact, some lenders look at different ways to increase the mortgage eligibility of those who are self-employed.

That’s because, in part, those who are self-employed try to minimize their taxable income by maximizing their business expenses and deductions. So, on paper, it may not look like you made a lot of money.

If you’re self-employed and your income is unreliable or fluctuates , some lenders will actually add 15% to your reported income and boost the percentage if you can show business deductions totaled more than 15%.

Because some lenders don’t have to follow the same rules as the big banks, they will extend a mortgage of up to 80%, 90%, or 95% of the purchase value to someone who is self-employed without the need of default insurance.

Canadalend.com, Helping the Self-Employed Secure Mortgages

Canada’s traditional banking industry makes it difficult for those who are self-employed and have bad credit , have no proof of income, or have an unstable income qualify for a mortgage. If you’re self-employed and are looking to secure a mortgage but have been turned down by the big banks, there is still hope.

With careful planning and consultation from the independent, licensed agents at Canadalend.com , you can overcome these hurdles and secure a mortgage.

Canadalend.com is the country’s leading low-cost private mortgage solution provider . We help those who are self-employed and have bad credit, low income, and unreliable income secure a mortgage.

Just because the banks don’t think you’re an ideal borrower, there are a lot of other lenders who think you are. Because Canadalend.com agents are independent, they are able to draw from hundreds of banks and lenders to help you find the mortgage best suited to your financial and lifestyle needs.

Many of these lenders specialize in providing mortgages to clients that are self-employed, have bad credit, unreliable income, and have even declared bankruptcy.

If you’re self-employed and are interested in finding out what kind of mortgage you qualify for contact us todayor apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Source:

1. “Self-Employment, Historical Summary,” Statistics Canada, last accessed October 5, 2016; http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labor64-eng.htm.

Debt is something many of us will experience throughout our lives. Whether you’re struggling with student debt, credit card debt, etc., the stress that debt can cause affects every part of our lives.

Sometimes, we get to a place where debt becomes unmanageable and feel as if we have nowhere to turn to for assistance. The hope here is that there is always a solution, you just have to be sure that the solution is right for you. That solution may be a home equity line of credit

What is a home equity line of credit?

A home equity line of credit, or HELOC, enables you to borrow money at a low mortgage interest rate using the equity that you’ve already built up in your home. It’s similar to a credit card although the interest rate is better, coming with a flexible repayment schedule.

What are the benefits of a home equity line of credit?

A home equity line of credit allows homeowners to spend their money when they want with a flexible repayment schedule to make their payments on time. The interest rate you pay on a home equity loan is higher than that of a first mortgage, but is drastically lower than the interest of a credit card or other consumer loans. So, it’s an option to put money in your pocket, without the insane interest rates and impossible payment deadlines.

What’s the difference between a line of credit and a loan?

When you’re taking out a loan, you know the amount of money that you are going to have to pay back from the beginning. Loans are used to pay for mortgages, school, vehicles, etc. and you will pay back the loan in equal instalments.

What are the benefits of a home equity line of credit?

• A home equity line of credit is like a credit card, without having to worry about the minimum monthly payment.
• You only pay back what you spend.
• You don’t need the lender’s approval before you decide to make a purchase.
• You only receive money when you need it.
• Minimum payments are lower.
• Closing costs are lower.

After looking at a few of the benefits of a home equity line of credit, you might decide that this option is exactly what you’re looking for. If that’s the case, or if you have any further questions, please contact us at Canadalend.com . We’re here to help you with your financial needs and get you started on the path to financial freedom.

Sources: http://www.huffingtonpost.com/aj-agrawal/the-difference-between-a_b_11482200.html