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Homeowners are always looking for ways to pay down their mortgage the quickest way possible. And for good reason, the faster you pay it off, the less interest you end up giving the bank. This desire to save money has led people to come up with some strange, complex, and confusing ways to get out of debt quicker. One seemingly popular method involves using a home equity line of credit (HELOC) to make additional mortgage payments. But, as you’ll see, just because something works on paper doesn’t mean it will work well in real life. When it comes to paying off your mortgage faster, the best financial strategies are usually the simplest ones.

What Is a HELOC?

A HELOC is a revolving line of credit that is secured against the equity you’ve built up in your home. The HELOC comes with an adjustable interest rate that will go up and down with the markets.

The Bank of Canada has been raising its key lending rate and has said it has no plans on slowing down those plans. That means it’s getting more and more expensive to borrow money.

Like any line of credit, the HELOC is deposited into an account, and you can take out as much or as little as you like, whenever you like. There are no fixed repayment amounts, lenders only require you to make monthly interest payments on the equity you’ve accessed.

Is a HELOC Your Best Option for Paying Off a Mortgage?

The short answer to this question, is no. Technically, you can use the money in your HELOC for anything: renovations, vacation, car, tuition, etc. But using a HELOC to pay down your mortgage isn’t a sound financial idea.

According to one strategy, you can use your HELOC to pay off your mortgage in just a few years. But it’s not as simple as it sounds. There are also some doubts as to whether it really works or not.

As we all know, life rarely, goes according to plan, 100% of the time. Using a HELOC to pay down your mortgage could get easily derailed if you’re hit with an unexpected expense, or financial stress, like the loss of a job or reduction in pay.

A HELOC comes with a variable interest rate, meaning it fluctuates. At the same time, the vast majority of Canadian home owners have a mortgage with a fixed rate. With the above strategy, you’re exchanging a fixed mortgage rate with a variable HELOC rate. Variable interest rates are on the rise are expected to make significant jumps over the coming years.

Balancing a HELOC, managing your spending, and dealing with interest payments can be difficult for the most disciplined person. People refinance with a HELOC or home equity loan (second mortgage) to simplify their lives, not make them more confusing and susceptible to financial hardships.

Better Ways to Pay Off Your Mortgage Early

Pay More Than the Monthly Minimum Payment

Paying more than the scheduled minimum each month can help greatly reduce the time it takes to pay down a mortgage. Depending on the lender, you should have several repayment options. Reducing the principal helps reduce interest payments, which can save you tens of thousands of dollars in interest payments over the life of the mortgage.

Make at Least One Extra Payment Annually

An alternative to making higher payments is to make at least one extra mortgage payment each year. If you have a 30-year mortgage and make just one extra annual payment, you’ll slash the mortgage down to 26 years.

Refinance to Reduce Interest

Lower interest rates are the most popular reason to refinance a mortgage. More of a mortgage payment goes toward the principle, which means it gets paid off faster, with less going to interest payments. Having a lower monthly mortgage payment can also help free up money that can be used for day-to-day expenses.

Canadalend.com, Helping You Pay Down Your Mortgage Quickly

If you’re thinking of refinancing a mortgage or looking to take out a HELOC or home equity loan, the licensed mortgage specialists at Canadalend.com can help you find the best financial product with the best terms and rates.

Why should you choose Canadalend.com over the country’s big banks and other private lenders? The mortgage experts at Canadalend.com are independent, which means they’re looking after your best interest. Traditional lenders will only push their own products and services, even if it’s not in your best interest.

The independent mortgage professionals at Canadalend.com have access to hundreds of different lenders. Many specialize in helping homeowners with bad credit, no credit, and unreliable income, refinance their mortgage.

To find out what kind of mortgage or refinancing options are available to you, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

What Is a No Income Verification Mortgage?

If you’re self-employed or a seasonal worker and want to purchase a home or refinance a mortgage, it can be extremely difficult to secure a mortgage. Why? Because your income is hard to verify. If you work on commission, there could be months where you don’t register any income.

Years ago, it was relatively easy to secure a “no income verification mortgage.” All you needed was a good credit score. Not anymore. No income verification mortgages are higher risk, and because of stricter lending rules, many traditional lenders no longer even provide them.

Does this mean 2.6 million self-employed Canadians have no way of applying for the mortgage they need to buy a house? Fortunately, there are other no verification mortgage options.

Do No Income Verification Mortgages Still Exist?

Yes, no income verification mortgages still exist. But they are not provided by the big banks. If you want a no income verification mortgage, you need to approach an alternative lender.

While there is still a process that has to be completed to get a no income verification mortgage, alternative lenders tend to be easier to deal with than the banks in these situations.

In addition, alternative lenders won’t insist on a perfect credit score like the big banks do. Plus, they can also be a better option for those who are self-employed or work on commission.

No Income Verification Mortgage Process

You’ll find that working with an alternative lender is much easier than dealing with the big banks. For one, when it comes to no income verification mortgages, alternative lenders will not ask for traditional proof of income, such as a T4 or CRA Notice of Assessment to determine your income.

What they want to determine is whether you earn enough to qualify for a mortgage, to do this, alternative lenders will want to see your business statements, showing your deposits and invoices.

Because no income verification mortgages are unsecured, you do not need to put down any collateral. Instead, the lender will want to look at the property you are buying, the location, and marketability.

What Are the Rates on a No Income Verification Mortgage?

Because no income verification mortgages are riskier than conventional mortgages, the interest rate is higher. Even here though, the rate can fluctuate. For example, the quality of your credit score will help determine the interest rate and how much the lender will give you.

The higher the credit score the lower the interest rate. If your credit improves, the lender can help you refinance at a better interest rate.

No Income Verification Mortgage Pros and Cons

As with any financial product, there are benefits and challenges with no income verification mortgages.

Some of the benefits of getting a no income verification mortgage include:

• Not having to wait for a strong employment history to get a mortgage
• The lender will not run complicated ratios and formulas to determine how much they think you deserve
• Quick and easy application process means getting a mortgage in a matter of days
• Access equity in the home to consolidate debt, etc, without having to show your income.

Some challenges of a no verification mortgage include:

• There is a risk/reward payoff with no verification mortgages, namely, higher interest rates. Lenders take a higher risk when they offer a no income verification mortgage. To compensate for that risk, they charge a higher interest rate. But again, that rate is determined on your income and credit score.
• With a stated income, banks look at your income, debts, and credit score to determine whether or not you will be able to repay the mortgage. With a no income verification mortgage, there is, statistically, a higher chance of default, since the income can vary.

Tips for Getting a No Income Mortgage Application Approved

There are a few things you can do to increase your odds of getting a no income mortgage application approved.

Good Credit Score: The higher your credit score, the better the interest rate will be. That does not mean those with bruised credit scores cannot still get a no income verification mortgage. Some alternative lenders specialize in helping those who are self-employed with a bruised credit, or no credit, secure a mortgage.

Mortgage Request is Reasonable: Make sure the mortgage amount you are requesting is reasonable compared to your income. The lender may not need you to prove your income, but you are still responsible for the mortgage, and they will want the amount to be reasonable.

Canadalend.com, Helping Provide No Income Verification Mortgages

The big banks might not think Canadians who are self-employed, work on commission, or seasonally deserve a mortgage, but the licensed mortgage professionals at Canadalend.com do.

We understand that no income verification mortgages are the perfect way for those who are self-employed and those who have difficulty proving consistent, annual income, get the financing they deserve.

Because the mortgage experts at Canadalend.com are independent, they are looking out for your best interest. Where the big banks only try and sell you their own financial products, even if they are not suited to your needs, Canadalend.com has access to hundreds of different lenders, and will help you secure a no income verification mortgage with the best rates and terms.

To see what kind of home equity loan 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.

A second mortgage is a way to borrow money by using your first mortgage as collateral. It is a proven and safe way to borrow, and you can potentially access more funds then you could with the average loan. The process tends to involve many of the same details and a similar understanding of a mortgage’s legal framework.

Equity

Equity is the value of a property minus all the debts associated with it. It’s essentially the amount you actually own. In addition, the equity a borrower has in their current property is the most important factor in being approved for a second mortgage.

Your equity can be calculated by following these two easy steps:

• Locate the current market value of your property. Remember, the price you paid might not be the current value.
• Subtract your mortgage balance from that amount.

Your lender essentially wants to know how much you would make if you hypothetically sold the property tomorrow. This number is essentially part of your assets and subtracted from your loan debts.

Property Value

The value of your property is an important factor because it will most likely be used to secure the loan. Since you already have a primary mortgage, there is an additional risk for the lender because they would be second in line to be repaid.

The Approval Process

Getting approved for a second mortgage is like the process you experienced the first time around. You need to meet with a financial institution or lender and fill out an application providing key financial information. Approvals are based on an applicant’s repayment history, overall credit standing and their current home equity.

Starting the Conversation

We recommend sitting down with a lender to discuss the process and to ask any questions you might have. They can also help determine if a second mortgage is the best strategy for your financial needs, or if there’s another option that makes more sense.

Contact us for more information on how to obtain a second mortgage or to set up an appointment where we would be happy to review your situation.

Before applying for a second mortgage, there are different factors you should consider to understand the amount of funds that could be made available. Many individuals do not receive a clear explanation as to how the amounts they are able to borrow are actually calculated. Here is some insight into those figures.

Home Equity

First, the equity of your home plays an important role in their determination. This translates to the variance between its value and what you still owe. It goes without saying, but the smaller the amount you have left to pay on your primary mortgage and the greater the value your home is, the better.

Mortgage Terms

Second, the length of the mortgage term you choose will influence the amount you will be required to pay your lender each month. A longer term is often more manageable because that means smaller payments, but it will take significantly more time to pay off; if you choose to move beforehand, your equity will be less than if you paid higher monthly amounts.

Lender Fees

Mortgage lenders often charge their clients a lending fee, loan origination fees, appraisal costs, as well as a fee to reduce the loan’s interest rate. Since these amounts can all vary from lender to lender, it is important to check with at least a few different institutions to ensure you obtain the best rates and lowest fees. No matter what you decide, experts suggest also getting the amount in writing.

Rates

Like with a primary mortgage, your rate will remain the same throughout the term of your mortgage if you choose a fixed rate. A variable rate will change based on the market and can either work to a borrower’s benefit or detriment. While the fixed rate may seem more secure, you may be able to save significantly if rates decline.

It may be particularly helpful to speak with a financial advisor who can offer some insight based on industry projections. Contact us to learn more about second mortgages and how to determine the amount you may be able to borrow from lenders.