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In the wake of the COVID-19 pandemic, more homeowners have been renovating their homes to convert rooms to home offices, increase the amount of living space or just make improvements to feel more comfortable indoors and outdoors. According to the latest consumer study, 23% of Canadian homeowners have renovated in the past year and another 21% are planning to do so in the near future.

Reduced spending on going out for dinner, movies, commuting and even clothing, 25% of Canadians find that they have saved money during the pandemic, according to Scotiabank’s November 2020 survey. In spite of these savings, however, Canadians will have to borrow at least part of the cost of their renovations. The question is what is the best option for them?

Here Are Some Common Financing Options for Home Renovations

First, Determine If You Can Afford to Finance the Renovation

As long as you have the ability to repay the debt you incur from a renovation, it's okay to borrow money for it. The key here is to understand how your loan's interest rate and repayment structure will impact your finances. Would you be able to afford the monthly payment on a loan of $30,000 or a line of credit of $50,000, for example?

In the event of a steady income, you may be able to qualify for credit. This does not mean you should apply right away, however. It is probably a bad idea to renovate if you cannot get a secured loan or a line of credit.

A lender's decision to decline your loan is based on your credit history, debt, income, and other factors, including the scope and affordability of the project. You might want to scale back the renovation or wait until you've saved up a greater chunk of the cost.

Home Equity Loans (HELOC)

Generally referred to as a HELOC, a home equity line of credit is a credit line that you can secure by using the equity in your house. A HELOC can be obtained from nearly any bank or credit union, and since the loan is secured by the home, the interest rate is lower than that of an unsecured loan or line of credit.

Borrowers usually can borrow up to 80% of the appraised value of their home minus any mortgage payments they owe. Besides structuring interest payments, the homeowner can move money in and out of the line as desired.

You can use the money for whatever you like once you've been approved. HELOCs are often set up with lenders by homeowners to make credit available immediately in case of an urgent need. A person prone to overspending or who has trouble setting boundaries may find it dangerous to use this type of credit.

The following is an example. Your lender approves a HELOC of $100,000 or more at a great rate and you only need $10,000 to fund a small renovation. Taking a vacation or increasing the scope of your renovation can seem extremely appealing. Payments made back to the credit line make the credit available again, allowing you to borrow again. Making only the minimum payment each month – usually just the interest on what you've already drawn – can result in your debt skyrocketing.

If you use a HELOC to cover planned expenses only, avoid using it to fill budget gaps or make discretionary purchases.

Ask your lender for a limit you can afford if you're concerned about overspending on a HELOC. Getting the maximum amount approved does not obligate you to accept it. If all you need is half of what they're offering, ask them to meet you there.

A HELOC is typically applied for by homeowners through their mortgage lender, but a mortgage broker can help you find a better rate. If you decide to go this route, be sure to ask the mortgage broker if there are any fees associated with their services, as the lender typically pays the broker but not always.

Mortgage Refinancing

The amount of money you borrow to purchase your home increases when you refinance your mortgage.

Your mortgage is then rolled into balance with the new amount. Your mortgage payment covers your loan and line of credit payments, so you don't have to worry about them separately. Many homeowners choose to refinance their mortgages because they offer the lowest possible interest rate since it's a first mortgage backed by equity in their home.

The process of refinancing with your mortgage lender is relatively straightforward, and our experts suggest you do it when your mortgage is up for renewal. Fees may be significant if you refinance during your mortgage term. Despite fees, you may benefit from the new rate if it is significantly lower; ask your lender to crunch the numbers before committing.

If you have a tendency to spend, refinancing your mortgage is a smart idea since it requires less discipline. There will be a lump sum provided to cover the cost of your renovation, and the repayment schedule is fixed. You cannot actually abuse that money, nor can you get extra.

By adding to your mortgage principal, you will owe more, and consequently, your monthly payment will be higher. Even if you borrow more, if you lock in a lower rate when adding to the loan, you could actually end up paying less monthly.

Loans or Lines of Credit That Are Not Secured

Banks, credit unions, and subprime lenders offer unsecured personal loans and lines of credit. Personal loans are lump sums that you repay with interest on a set schedule. As you repay the funds borrowed, you will continually regain the credit limit you originally borrowed, but at a higher interest rate since your home is not secured. Most personal loans and personal lines of credit come with similar rates of interest.

Although this kind of credit can be useful during an emergency, it's not a good option for planned renovations. In addition to the higher interest rates on these options, you will likely have less money available to you, which limits your options.

In certain circumstances, however, a line of credit or an unsecured loan from a reputable lender may be helpful. In some cases, it's better than using a credit card as it's easier to pay it off quickly.

On the other hand, it isn't ideal for most people or inexpensive. HELOCs are usually indexed to the lender's prime rate plus 1%, whereas personal loans may have interest rates between 6% and 16% or more, depending on the lender and terms, as well as your credit history and debt load. Standard credit cards have interest rates of 19% or higher.

What's the point? Although personal loans can be a lifesaver in an emergency, they aren't ideal for most homeowners and should not be used for discretionary purchases.

Borrowing Money from a Family Member

It's common for your parents or other family members to offer to lend you money towards your home renovation, but this is not always the best choice. In the CRA's perspective, the lender's interest rate is supposed to be determined by a formula, but that doesn't happen very often.

Family dynamics can be affected as well, resulting in conflict or tension. When there are a lot of siblings in your family, it is best to avoid borrowing money from your parents. This could lead to awkward situations commonly found when dealing with family estates.

Consider These Other Factors When Borrowing Money for Home Renovations

Renovations can be expensive, but they often increase the value of your home, which is helpful if you're planning to sell soon. You may get a good return on your investment. In addition to improving real estate value, home renovations can also have a positive impact on your quality of life.

For more information about mortgage refinancing in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

Every facet of your life uses your credit report, from getting a cell phone plan or utility service to applying for a job or getting insurance.

Home loans are no exception. In order to assess your credit history and your credit score, your mortgage lender will examine your credit score and your credit history. Defaulting on previous loans or not paying on time in the past will be a big red flag for your lenders.

In order to qualify for a mortgage, you must have a good credit score given that mortgage lenders lend out hundreds of thousands of dollars to applicants. A credit report calculates your credit score. Your credit report contains information lenders have provided to Equifax Canada and TransUnion Canada, Canada's two main credit reporting agencies.

In addition to your payment history, your credit report will contain information about your credit limit, your credit history, the type of debt you have, any bankruptcy or past-due collections history, and records of when your credit report has been reviewed by lenders.

There are plenty of factors that will impact your credit score so it’s important to understand what those are and what power you have to change things for the better. Consider these tips if you’re looking to improve your credit score:

Make Sure Your Credit History Is Accurate

It is imperative that anyone considering a traditional mortgage review their credit history before assuming that their credit is too bad.

Credit scores measure how well you have utilized past credit in Canada and range between 300 and 900. Over 80 percent of people have at least one mistake on their credit history that affects their credit score. You should take the time to review your credit report and be prepared to contact any creditors you have already paid. Often, these discrepancies can be resolved very quickly once they are reported.

Choosing the Right Lender

Typically, lenders will not approve your mortgage request if you have a credit score below 600. If your credit score needs to be raised, you can either work hard to raise it, or find a lender who will work with you.

Usually known as "B" lenders or "subprime" lenders, they work almost exclusively with people who have less-than-ideal credit, and they can be of great assistance to you. It may be necessary, however, to work with a private lender if you have filed for bankruptcy or consumer proposal within the past two years. A mortgage broker can recommend a private lender that will best suit your needs if this is the case.

Save More Money by Saving a Larger Down Payment

The down payment is almost certainly going to be larger than normal, regardless of whether you work with a subprime lender or a private lender. A large down payment reduces the lender's risk.

There is a possibility that any bank or lender - including a private one - won't consider your mortgage request unless you've saved as much as 20% to 25% of the total purchase price. One of the benefits of a higher down payment is the ability to negotiate better interest rates.

A Higher Than Normal Rate and Extra Fees Are to Be Expected

Private lenders can charge high-interest rates as they manage to mitigate some of the risks associated with providing large amounts of money to people who have low credit scores. It is a fact that you may be able to refinance your mortgage at a much lower rate if you are diligent in paying your mortgage payments on time and improving your credit score.

Even though bad credit mortgages require a large down payment, fees, and a higher-than-usual interest rate, keep in mind that these rates are not permanent. It is possible to rebuild your credit enough to refinance in the future at a lower rate if you make timely payments on your mortgage while you work to improve your credit.

People with bad credit often think there is no chance of them getting a mortgage to purchase their own homes. Luckily, this is not true. Even if you have damaged credit because of bankruptcy or delinquencies, there are several ways to obtain a mortgage.

1. It is important to know how much debt you have to your income. Keep your credit card usage below 30% of your credit limit at all times. Having this reputation gives the impression that you are a responsible borrower and spender.
2. If you apply for too many different types of credit, lenders will consider you to be an unstable borrower, as you might need fast cash.
3. It is important that you have a long credit history if you want to improve your credit score. Getting rid of old credit cards reduces your credit history and shortens your credit history, both of which are bad. You should always keep your oldest account open in case you need it in the future.
4. Pay your credit card debt off as soon as you can and make sure you pay your bills on time (utilities, phones, credit cards, etc.). When in doubt about your ability to pay, do not ignore the bill as that will escalate the situation and further harm your credit score. You should instead discuss a payment plan with your provider.

Having a high credit score decreases your risk to a lender, so you'll be offered lower interest rates, allowing you to save thousands over the loan's life.

You should be aware that the credit report you see will differ from the credit report a lender sees. Even though the differences are often very small, each credit agency calculates a score differently so sometimes there may be credit agencies that consumers don't have access to that can explain small differences in numbers.

You'll be able to make a more informed decision about what to do next when it comes to pursuing a mortgage and buying a home if you know your credit score and what category you fall under.

For more information on applying for private loans in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

You're living inside a golden vault if you've held on to your property during this last year.

The question is, how do you get your hands on some of that money?

Canadian Bankers Association data indicates the average homeowner has about 74 percent equity. Price growth in many markets means a lot of capital to work with.

The three most common methods to access it without selling your home are listed below.

Borrow money from your home equity

To qualify for one, you must request a specific amount of cash and use the equity in your home as collateral. 

If your loan provider is willing to accommodate you, you'll receive the entire loan amount at once, and then you'll make monthly payments on a set schedule at a set interest rate.

You must have enough equity built up in your home to serve as collateral. Take a look at your credit score for free and see whether any issues need fixing to get the money you need.

A home equity loan can also help you increase your home's value in addition to paying down debt or covering your child's education expenses. 

Home equity loans generally have lower rates than credit cards or personal loans, so upgrading your home can add value.

Open a HELOC

With a home equity loan, you get a one-time cash injection and pay a fixed interest rate, whereas, with a home equity line of credit, you pay a variable rate. 

It's a little more complex with HELOCs (Home Equity Lines of Credit).

The borrower's credit line is divided into two periods: the draw period, during which you can take cash out at your convenience until your borrowing limit is reached, and the repayment period. 

In the case of repayment, both phases may extend for years. In either case, your HELOC borrowing is over after the draw period has ended.

While it's called the draw period, during that loan phase, you must make payments. Luckily, they're usually fairly manageable due to the interest-only nature of the payments. 

After you start making repayments, the principal of your loan is included in your payments, which increase significantly.

That's one of the most prevalent risks of a HELOC: uncertainty. With a home equity line, payments won't be fixed, and interest rates won't be fixed, making budgeting difficult.

Refinance

At under 2.5 percent, home equity lines of credit and home equity loans are hard to come by, so refinancing your home might be your best and most affordable option to access your equity.

In a refinance, you can select a new, larger mortgage to replace your current one - and make the difference in cash. A new mortgage is taken out to repay the existing mortgage and repaid in monthly installments.

With a refi, you can generally borrow up to 80 percent of the appraised value of your home. 

If your home is worth $400k and your lender accepts an 80 percent refinance, you could get as much as $320k. If you still owe $200,000 on your first mortgage, you would be able to pay it off and have $120,000 in tax-free cash at your disposal.

Talk to a financial adviser regardless of how you plan to access equity. Whatever type of refinance you choose, your home is your collateral. If you fall behind on your payments, you could lose your home, and all your equity will evaporate.

Financially, owning a home can be a constant struggle. No day goes by without some major expense taking up a bit of your mind space, whether it be your mortgage, taxes, or maintenance costs.

The six best uses of a home equity loan

Although you can use your home equity in various ways, there are a few good ways to maximize your loan. Some good uses for your home equity include:

Renovations to the home

The home's value may increase, drawing more interest from potential buyers when you sell it later. Upgrades are not only beneficial to you but also the home's value. 

Fees for college

A home equity loan to pay for college can be a great, low-interest option if the interest rate you find is better than what you'd get with student loans. However, it could also be riskier. 

The risk is that you will lose your home if you default on the loan.

Consolidate debts

If you have a significant amount of unsecured debt with high-interest rates and you are struggling to make payments, you will likely save money each month by consolidating that debt into one with a substantially lower rate of interest.

However, you are converting unsecured debt, such as credit card debt, into debt secured by a home. That means you could lose your house if you default on your loan. 

The expense of an emergency

In an emergency, if you do not have any other means to raise the necessary cash, home equity can serve as a solution. 

The risk is that the application process is lengthy and may not be appropriate for an urgent situation.

Expenses associated with a wedding

Home equity can pay for wedding expenses at a lower cost than a wedding loan. 

Alternatively, you can adjust your wedding celebration, save up for the wedding, and ask family and friends to contribute rather than give you gifts.

Charges related to business

If you need more capital to grow your business, you may be able to save money on interest by utilizing the equity in your home instead of obtaining a business loan.

However, if your business has not been tested, it could fail, and you still have to pay for what you borrowed - regardless of whether you earned money.

The Bottom Line

The advantage of accessing your home equity is that it doesn't force you to sell your home, take out expensive personal loans, or rack up credit card debt.

Taking out home equity debt to cover recreation expenses or monthly bills is not a good idea, but it can be lifesaving if you find yourself in a bind. 

Investing in the future with home equity is also a good option. If you don't repay the loan, you might lose your home in foreclosure. So make sure to borrow at the lowest possible interest rate.

For more information about home equity Ontario, call Canadalend at 1-844-586-0713 or contact us here.

The popularity of investing in Ontario real estate has increased substantially in the last few years. 

Considering the rates in Ontario, it is understandable that Ontarians would want their savings to be invested in assets rather than place them in the bank. See where you can invest in real estate in Ontario in 2022 by exploring the list below.

The following are the best real estate investment opportunities in Ontario for 2022.

1. Toronto (GTA)

Toronto is a highly desirable place to invest in Ontario for 2022

Although the prices for this key region of Ontario are higher than those in other cities, long-term demand is unrivalled.

Most new arrivals to Ontario land in Toronto, where business growth is so strong that interprovincial and intra-provincial migration isn't affecting demand. 

Even if tenants move away and leave the city, there's a big pool of potential tenants looking for rentals, which is a great opportunity for investments in real estate.

In Toronto, more graduates are skilled in technology than anywhere else. Toronto had the highest percentage of new tech jobs in Canada and the United States. 

Healthy, desirable growth is evident in the city, making our list of the top places to invest in real estate in Ontario in 2022.

Typical house price in Toronto:

City of Toronto: $1,190,300
GTA: $1,172,900

2. Durham Region

The Durham Region is growing rapidly east of Toronto. There is a projected growth of 10+% per year for the next 30 years, totalling 80%.

A growth rate this high is hard to ignore. Despite the high house prices in this area, with a long-term investment approach, it still has a lot to offer investors willing to look five, ten, or fifteen years down the road.

The average house price in Durham has risen 33.4% since the beginning of the year. The house prices may not increase that fast in the long run, and they could fall again in the future.  

Durham has a lot of potential if you think long-term and understand the market's fundamentals.

Typical house price in Durham Region: $968,500

3. Hamilton

One of the top places in Ontario to invest in 2022 is Hamilton.

Hamilton continues to be a very prosperous city for investors. Buying or renting a home here will be a wonderful experience as the city continues to grow and evolve.

In Spring 2020, Hamilton experienced a large jump in unemployment. But it has bounced back, and new businesses have sprouted in all city parts. The city is poised to grow significantly in the years to come.

Prices may be higher, but rents are generally higher, so homes are cash-flowing quite well for investors.

Homes with second suites, or those that can add a second suite, are excellent investments that generate high rents.

Student rentals around Mohawk College and McMaster University have also traditionally been successful. Despite the discontinuation of in-person learning, the student housing market did not experience a significant impact.

Hamilton is a large city with a variety of neighbourhoods. 

Before investing in Hamilton, it's important to work with seasoned investors who know the city to maximize their understanding of what's possible in the city.

Typical house price in Hamilton:

The Hamilton Mountain: $789,085
Hamilton West: $698,829
East Hamilton: $667,033
Hamilton Centre: $625,038

4. Niagara Region

Niagara is no longer a well-kept secret among investors as it once was. Property investment demand is high in the area.

Due to its proximity to the United States, easy highway access to Toronto, and the expanding GO train transit system, Niagara has become an enticing investment opportunity.

The best cities to invest in have been St. Catharines and Welland for the last several years. Investors have great success with property investments in the region because there are several hotspots.

Investing in Niagara Falls and Port Colborne has proven profitable. Not only are prices lower, but the demand for rentals is also higher in these areas.

A population boom above provincial forecasts is planned for Niagara. In 2022, it will be among the best places to invest in real estate in Ontario because it is actively working on densification while growing its tourism industry.

There are low vacancy rates across the region as well. In good areas, good homes seldom sit vacant. 

Due to the high level of competition for rental properties, potential tenants offer several months' rent in advance.

The Niagara Region offers fantastic opportunities for living and investing in 2022!

Typical house price in Niagaran Region: $701,700

St. Catharines: $654,900
Welland: $571,300
Port Colborne: $541,300
Niagara Falls: $649,800

5. Kitchener–Waterloo

Another of the best places to invest in Ontario 2022 is Kitchener-Waterloo. Kitchener and Waterloo's tech sector has flourished in recent years. 

Large tech companies have opened offices in the region, similar to Toronto. New people and money are coming in as a result.

Some tech companies are experiencing issues hiring fast enough, as there are more jobs than applicants. As a result, the Kitchener-Waterloo area is becoming more appealing to a growing educated population.

More people are already living in the Waterloo Region than anywhere else outside of the GTA, and it's expected to grow slightly faster than the provincial average. In the next five years, 56,000 will be arriving, and in the next 30 years, 305,000.

Additionally, Kitchener has accessory dwelling units. 

Tiny houses, laneway suites, and backyard homes are considered Additional Dwelling Units (Detached). Most properties zoned R-1 to R-7 are allowed to have these buildings."

Waterloo has a rental licensing system in place.  A licence is required for any investment made in the city of Waterloo. 

You need to follow a simple process with specific HVAC and electrical inspections and payment, a criminal check by the landlord in the first year, and yearly renewals are necessary.

Typical house price in Kitchener-Waterloo: $825,000

For more information on arranging a second mortgage in Ontario, call Canadalend at 1-844-586-0713 or contact us here.