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There are many steps involved in buying a home, not the least of which is securing a mortgage. While this is standard for most people as they seek to buy their first home or move to another home, some owners might need to apply for a second mortgage. That means, in most cases, that they want to take out a mortgage on top of the primary mortgage to pay off debts or make a large investment, which can include post-secondary education or starting a new business.

Why Apply for a Second Mortgage?

A second mortgage is also commonly known as a home equity loan. It may seem helpful to have this option to manage complex financial matters, but it is important to not enter this arrangement lightly. For some, despite taking on more debt, it can actually help improve your credit score if you use the money for debt consolidation.

Getting Approved

It may not always be possible to get approval from a financial institution in the first place. The interest rate is usually higher and there are often penalties for defaulting, so experts recommend comparison shopping both of these factors. Still, interest rates on second mortgages are usually lower than credit cards.

Be Prepared for Fees

Each financial institutions or lenders will charge different closing costs and fees. As a result, find out in advance what these parameters are so you can create a repayment plan. Qualifications for a second mortgage are first determined by the value of your home and its equity. Income and credit history are important, but not major factors like they are with most other loan applications—including a primary mortgage.

Value for Borrowers

There is greater freedom with a second mortgage compared to other loans. In fact, borrowers can often negotiate the terms and as much as 85% of your property’s value can factor into the amount you can receive. However, not everyone will provide this option as it is riskier for the lenders. That is because, if you happened to default on your loan payments, your primary mortgage lender would be paid before your second mortgage lender.

If you are considering a second mortgage application, contact us to help you ensure it is the right move.

For many, qualifying for a mortgage is stressful. But getting your mortgage renewed can also be stressful. Just because you have a mortgage doesn’t mean your renewal is 100% guaranteed. There are a number of reasons why your mortgage renewal could be denied, either by your current lender or a new lender. Below you’ll find some reasons why your mortgage renewal might get denied and what you can do if it does happen.

Why Your Mortgage Renewal Might Get Declined

The most common amortization period for a mortgage in Canada is 25 years and the most popular term is a five-year fixed mortgage. When your current mortgage term ends, you’ll need to renew the outstanding balance on your mortgage for another term. If the amortization period is 25 years, you can look forward to going through the mortgage renewal process at least five times.

Several months before the mortgage renewal term matures, you’ll receive a letter from your lender telling you that your contract is up for renewal. You’d think renewing a mortgage with your current lender would be a simple process, but this isn’t always the case.

Situation #1: You Are Denied by Your Current Lender

You do not generally need to requalify for a mortgage if you decide to stay with your current lender. That said, if you’ve missed monthly payments, your mortgage renewal request could be rejected. Worse yet, you could go into default and risk foreclosure.

Even if you’ve never missed a mortgage payment, your renewal could get rejected. The banks will review your financial situation, which means looking at your credit report and credit score.

Why? Traditional lenders want to make sure you haven’t racked up a large amount of debt that you may not be able to repay. This tells them that there is a high probability you could file for bankruptcy.

They’ll also want to see if your employment situation has changed. If you’ve lost your job, your income has been reduced, or you’ve found a new job with a smaller income, they could deny your mortgage renewal. In fact, any financial warning signs could result in your mortgage renewal being denied by your current lender.

Situation #2: You Are Denied by a New Lender

It’s not uncommon for homeowners to look for a new lender when their mortgage term comes up for renewal. Some switch because they want to find a better mortgage rate. Others are forced to look for a new lender because their current lender denied their renewal.

If you’re switching lenders because your original lender rejected your renewal, you’ll soon discover that there are some hoops you need to jump through. And just like your original lender, a new lender could deny your mortgage renewal as well.

When you switch lenders, you need to go through the mortgage qualifying process all over again. This means submitting a new application, which will trigger a whole new look at your finances, credit, and background information. Only after this review will they decide if you meet their standards.

If you’ve taken on a large amount of debt, missed mortgage payments, or your financial situation has changed for the worse, your mortgagee will be rejected.

If you are approved, you’ll be hit with a number of new fees, including the appraisal of the property, a fee to end your mortgage with your current lender, a fee for your new contract, and legal costs.

It’s entirely possible that your mortgage renewal is rejected by your current lender and you do not have enough saved up to cover the costs associated with switching to another traditional lender.

Things You Should Do if Your Mortgage Renewal Is Declined

Traditional lenders, like Canada’s big banks and credit unions, are federally regulated. This means they have to adhere to a strict lending and renewal process. If your credit score is low or your financial situation has gotten worse, chances are good they’ll reject your mortgage renewal.

Or, if they do agree to renew your mortgage, it will not be with the same rates and terms you initially signed on for. They will penalize you with higher rates and terms that are less than appealing.

If this is the case, your best chance for getting a mortgage renewed is to talk to a mortgage professional who works with alterative lenders. A growing number of Canadian homeowners have discovered the benefits of working with a private mortgage lender.

Private mortgage lenders, because they are independent, do not need to follow the same strict, federally regulated rules that traditional lenders do. With private lenders, you get access to the same kind of services that traditional lenders offer, but their qualifications are much more realistic.

Canadalend.com, Helping Your Business Secure a Better Mortgage

The mortgage renewal process can be stressful, even in a best-case scenario. If your mortgage renewal has been rejected because your credit score has fallen, you’ve taken on unmanageable debt, or your financial situation has changed for the worse, speak with the mortgage renewal experts at Canadalend.com.

The licensed mortgage experts at Canadalend.com are independent, that means they’re looking out for your best interest, not the lenders. Because the mortgage professionals at Canadalend.com are independent, they have access to hundreds of different lenders.

Many of the alternative lenders that Canadalend.com deals with specialize in providing mortgages, mortgage renewals, and loans to individuals and businesses that have declared bankruptcy, have bad credit, no credit, and unreliable income.

If you need help going through the mortgage renewal process and want to see what your financial options are, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

The dream of buying a home of your own, on your own, has become just that, a fading dream. There are two reasons for this: a strong housing market in the Greater Toronto Area and the prohibitive mortgage rules. The housing market in the GTA and Golden Horseshoe is very robust which can make it difficult for potential home buyers to save up a 20% down payment. Even if you do, there’s no guarantee you’ll be able to pass the big bank’s strict lending rules.

Case in point: In 2018, it is estimated that the recently implemented stress test sidelined 40,000 home purchases. Homebuyers aren’t left with many options—they can either keep renting and save up a bigger down payment or perhaps buy a smaller home.

There is another option, however, and that’s having someone co-sign a mortgage with you. Whether you’re the one asking for a co-signer or the mortgage co-signer, there are some important things you need to know before taking that step.

What You Should Know about Co-signing a Mortgage

If you’re turned down by a traditional lender, either because your down payment wasn’t enough, you have a poor credit score, or didn’t meet the bank’s strict mortgage lending rules, one option is to get someone to co-sign your mortgage.

A co-signer is someone in good financial health that can help you qualify for a mortgage. And in doing so, they are backing you up, saying you will make good on your promise to make mortgage payments.

As a co-signer, they take on the financial risk of the mortgage, which means the co-signer also owns the home, whether they live there or not.

Who Can Be a Co-Signer?

Anyone can co-sign a mortgage. And a mortgage can have more than one co-signer. Typically, though, a co-signer will be a spouse, if you’re married. If you’re single, it’s common for a parent, family member, or a partner to be a co-signer. Whoever the co-signer is, they should be someone you trust and who trusts you.

It helps to get the agreement on paper, which means drawing up a contract between you and the co-signer, outlining all of the rights and responsibilities. This includes who will live on the property, take care of it, and pay the bills. Both the homebuyer and co-signer should get their own independent advice and have any documents reviewed by an attorney before the mortgage papers are signed.

Responsibilities of Being a Co-signer

It’s great to be in a position to help someone get their mortgage by being a co-signer, but it’s important to know what the responsibilities and ramifications are of being a mortgage co-signer.

Qualifying for a Mortgage

When you agree to co-sign a mortgage, you basically end up going through the entire mortgage process again, just as if you were buying the home for yourself. Lenders will look at your income, credit score, and debt levels.

Mortgage Payments Are Now Your Responsibility

Congratulations, as a co-signer, you just bought a house. And because your name is on the mortgage, you are responsible for the debt of the mortgage. The term “co-signer” might sound like you aren’t as involved in the mortgage as the person you’re helping out, but you have the same legal obligations as anyone else who takes out a mortgage. Even if you aren’t living on the property.

If the person you co-signed for can’t make a mortgage payment, for whatever reason, because your name is on the mortgage, you’re expected to. When you co-sign for a mortgage, you take on the responsibility for making the mortgage payments, even if, technically, you never expected to.

If the person you co-signed for misses a mortgage payment and you do not make them, the lender could take legal action against you. The banks could garnish your wages or go so far as to foreclose on the property.

This Can Affect Your Credit

Being a co-signer will affect your credit and your ability to borrow money. If the person you co-signed for loses their job and can’t make their mortgage payments, it’s not just their credit score that gets hit. Yours does too.

That missed payment (or payments) will appear on your credit report, which could negatively impact your ability to get a loan in the future. It will also hurt your chances of getting the best lending rates.

If you want to borrow money to renovate your own home, buy a car, or take out any kind of loan, you could be turned down by the bank, if the person you co-signed for misses their mortgage payment.

Even if the mortgage payments are made on time, it can still affect your credit. That’s because the mortgage is still in your name and that additional debt could be seen as a liability.

Once a Co-signer Always a Co-signer?

Yes and no. On one hand, the co-signer can remain on the mortgage until it is paid off in full. On the other, it’s possible for the co-signer to get their name removed from the mortgage.

Unfortunately, the name of the co-signer cannot simply be removed from the mortgage contract. There are some hoops to go through. To get your name off a mortgage as a co-signer, the person who had you co-sign the mortgage needs to make a new mortgage application in their own name and qualify on their own.

If they do qualify for a mortgage, your name can be removed, along with all of the legal obligations. If they don’t qualify, your name stays on the mortgage until the next term.

Canadalend.com, Helping You Secure a Better Mortgage

Adding a co-signer to your mortgage if your application has been turned down by the big banks is certainly one option you can pursue. But, if you’d rather get a loan on your own, contact the mortgage experts at Canadalend.com.

The licensed mortgage professionals at Canadalend.com are independent. That means they want to help you find the best mortgage with the best rates possible. They aren’t pushing any one bank’s products. In fact, because they’re independent, they have access to hundreds of different lenders, many who specialize in providing mortgages to those who were unable to pass the banks’ stringent mortgage rules, have weak credit, no credit, unreliable income, have declared bankruptcy, or have unreliable income.

To find out what kind of 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.

The idea of buying a second property used to be reserved for those who were well-heeled. Not anymore. Whether it’s used as a vacation property, a rental property, or to prepare for retirement, more and more middle-class Canadians are purchasing a second property. Younger Canadians are also thinking about buying a second property; 65% of Millennials, aged 18 to 34 are interested in purchasing a cottage, cabin, or chalet.

Whether it’s a lakefront cottage, cabin in the woods, condo in downtown Toronto, or a suburban home you’re thinking of investing in or fixing up and flipping, you need to be aware of what you are getting into. That includes the mortgage approval process, refinancing options, and whether you can use a home equity line of credit (HELOC).

Below are some answers to popular questions when purchasing and financing a second property.

Can You Afford a Second Property?

Lots of people want a buy a second property, but you need to ask yourself if you can afford it and if so, how you can get the best financial products at the best rates. While interest rates in Canada are on the rise, they still remain near record lows, which means it’s the perfect time to look at buying a second property.

What Are Your Financing Options?

Refinancing

Buying a second home means, of course, that you already own a first home. Since purchasing your primary residence, you have built up equity in that property. Every time you make a mortgage payment you build up equity. The strong real estate market in the Greater Toronto Area and all of Ontario means your home has also increased in value; this too has helped build up additional equity.

You can tap that equity by refinancing your home. Refinancing is when you replace the original mortgage with a new mortgage. Most people refinance to take advantage of lower interest rates or they find a mortgage with better terms. Some refinance their primary mortgage because they want to switch from a variable mortgage to a fixed rate mortgage.

Again, depending on how much equity you’ve built up, you could use that money for a down payment on the second home, renovations, or maybe even purchase it outright.
Like any mortgage, when refinancing, you can choose a variable or fixed mortgage and renegotiate the amortization period.

A Second Mortgage

Taking out a second mortgage is a popular way to use the equity you’ve built up in your primary home to purchase a second property. Second mortgages are also known as a home equity loan; not to be confused with a HELOC.

A second mortgage is an additional loan that is secured against the property you already have a mortgage on. With traditional second mortgages, you can borrow up to 85% of the appraised value of your home, minus what is left to pay on the first mortgage.

Like the primary mortgage, you make monthly payments on the second mortgage. A second mortgage is a great option for those who can comfortably afford to make two monthly mortgage payments.

Home Equity Line of Credit (HELOC)

Homeowners can use a HELOC to access funds to help them buy a second property. But homeowners need to have at least 20% equity built up in their property and good credit. With a second mortgage, you get a lump sum payment up front, and you need to pay interest on the entire sum. A HELOC is a revolving line of credit that accesses up to 65% of the value of the first property. On a HELOC, you only pay interest on any money you use.

If a homeowner does not have 20% equity built up in their property or they have bad credit, it makes more sense to take out a second mortgage.

Will You Get Approved for a Mortgage on a Second Property?

When buying a second property, you still need to go through an approval process. Just because you already own a home does not mean that the big banks will automatically approve you for a new mortgage for a second property, though.

The approval process to buying a second home is very similar to buying a primary residence. Traditional lenders will look at your employment history, financial information, credit history, and details about the second property.

If you’re self-employed or work on commission, it might be difficult to get a mortgage to buy a second property because your income stream might be unreliable.

Because of stricter lending rules, homebuyers also need to pass a stress test, which ensures they can afford the mortgage if interest rates rise. For a five-year fixed mortgage, homebuyers need to qualify for whichever rate is higher: The Bank of Canada’s posted rate or the rate on the mortgage plus 200 basis points.

Stricter lending rules like the stress test are taking the wind out of Canada’s housing market. In 2018 alone, it is estimated that the stress test prevented 40,000 home purchases.

Like the primary mortgage, you need to have a down payment of 5%, 10%, or 20%. As with a first mortgage, the most popular down payment used for buying a second home is 20%.

Canadalend.com, Helping Your Secure a Better Mortgage for Your Second Property

If you’re thinking of buying a second property contact the licensed mortgage experts at Canadalend.com.

In addition to being licensed, the mortgage professionals at Canadalend.com are also independent. That means they work to help you find the best mortgage at the best rates. In fact, Canadalend.com has access to hundreds of different lenders, many who specialize in providing mortgages to those who have been turned down by the big banks, have unreliable income, have declared bankruptcy, or have bad credit or no credit.

To find out what kind of 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.