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Reverse mortgages are a great option for homeowners who are looking to add to their fixed or limited income.

Contrary to a HELOC (home equity line of credit), a reverse mortgage grants Canadian borrowers tax-free money accessed from the existing equity they have built in their home (up to 55% percent) to use as they wish, with no month-to-month payments required.

Fortunately, in Canada, reverse mortgages are a highly regulated financial product; however, the same cannot be said for many other countries. This has resulted in a variety of misconceptions regarding the Canadian CHIP Reverse Mortgage®, in particular.

Thus, we created this article to bring peace of mind to Canadian homeowners by disputing nine of the most common myths about reverse mortgages in Canada.

These nine myths are as follows:

Myth #1: You Will No Longer Own Your Home

Loss of home ownership with a reverse mortgage is quite a common myth that causes unnecessary worry for homeowners. However, just like with a conventional mortgage, you and your spouse (if applicable) will continue to own your home and maintain the title. You may continue to live there for as long as you desire, and the bank will have no power in forcing you to sell.

Similarly, it is often believed that a homeowner’s children will lose the family home with a reverse mortgage, as well, when this is simply not the case. Any heirs will maintain the option of keeping the home as long as they continue to pay off your reverse mortgage after your passing.

Myth #2: You’ll End Up Owing More Than Your Home’s Worth

Another popular assumption among homeowners that is simply false is that a reverse mortgage will result in owing more than the property’s value. In reality, reverse mortgage rules in Canada will enable you to borrow a maximum of 55% of the home’s worth, meaning you’ll retain a considerable chunk of the equity.

While interest fees on the loan can play a role in abrading this equity, your home’s value along with its respective equity is still likely to increase with time. In other words, property values would need to suffer a serious decline to ever result in you ever owing more than your home’s worth.

Myth #3: You Must Be at Least 65 Years Old to Qualify

While this might be the case in other countries, Canada’s CHIP Reverse Mortgage is available to homeowners aged as young as 55 years and older. In fact, the older a borrower is when they apply for the CHIP Reverse Mortgage, the greater the loan they will likely be eligible for.

Myth #4: The Application Process is Too Complex

The process for obtaining a reverse mortgage is actually very similar to that of a conventional mortgage. In conjunction with your home appraisal, you will need to put together paperwork demonstrating sufficient income, and also report any debts that are secured by your property, as well as any mortgages you have on additional properties.

The only real difference with a reverse mortgage application process is that you’ll need to acquire independent legal advice prior to your approval in order to be accepted. This advice serves as a form of protection to ensure borrowers thoroughly understand how a reverse mortgage works.

Myth #5: Reverse Mortgages Are Very Expensive to Arrange

Yet another misconception about reverse mortgages is that they are very costly. The truth is that while you’ll still need to pay for your property’s appraisal in addition to independent legal advice (as with traditional mortgages), your only other expenses with a reverse mortgage will include the one-off closing and administration fee. 

When you compare this to other alternatives, a reverse mortgage actually ends up being the more cost-effective option.

Myth #6: Interest Rates on Reverse Mortgages Are Higher Than on Conventional Mortgages

While interest rates for reverse mortgages are often greater than those of conventional mortgages, the difference is typically by only one or two percentage points. Reverse mortgages will have only slightly higher interest rates since they don’t require monthly payments to be made by borrowers.

Myth #7: Reverse Mortgages Are Impossible to Leave

Fortunately, reverse mortgages are possible to get out of. In fact, there are workable options available for repaying reverse mortgage principles and interest if homeowners decide to go this route. 

With conventional mortgages, however, you might be presented with a prepayment charge, particularly if you wish to discharge the full balance in one go (such as with selling the home).

Myth #8: You Must Obtain Mortgage Insurance

This is another myth about reverse mortgages that only applies to other countries. When Canadian homeowners take out a CHIP Reverse Mortgage, they won’t be required to pay for mortgage insurance.

Myth #9: You May Face Eviction if You Miss Payments

With a reverse mortgage, there is actually no schedule of payments at all, so it would be impossible for you to ever miss any. This is due to the fact that the equity you have in your home takes care of the interest on a reverse mortgage.

Ready to start reaping the benefits of a reverse mortgage?

If you’re looking to unlock the equity you have saved in your home with a reverse mortgage, our mortgage lenders in Ontario are ready to lend a hand. Canadalend.com can help you begin the hassle-free process of obtaining a reverse mortgage, so you can move closer to achieving your financial goals.

To learn more about our reverse mortgage solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Your home equity represents your financial stake in your property and is considered to be one of the most valuable assets a person can have.

With that being said, building home equity is incredibly important for any homeowner and comes with a wide range of benefits that are useful to be aware of.

The Benefits of Building Home Equity

Not only does building home equity serve as a reliable method for building long-term wealth over time, but it can also help homeowners maintain their property while they reside in it.

Building equity in your home also means that you’ll be able to borrow equity through home equity loans and HELOCs for just about any purpose - be it financing your child’s post-secondary education, purchasing a second property, or making improvements to your current home.

Furthermore, building home equity presents you with a greater likelihood of selling your property for a profit, no matter what the market conditions may be at the time. 

If you’ve been wondering about how you can build up your home equity, we’ve compiled a list of 6 simple ways to do so:

1. Make a Large Down Payment

If you’re aiming to build as much home equity as possible in a short time frame, you can choose to make a sizable down payment from the get-go. A down payment of at least 20% is the industry standard for buyers with conventional loans, namely if they want to dodge having to pay private mortgage insurance (PMI). However, even a down payment of 21% can help to boost your home equity more swiftly.

You just need to make sure that you’ll still have adequate savings left over after closing, reserved for things such as home maintenance costs (which will generally run roughly 1 percent of the property’s value during the first year) as well as for any financial emergencies that may arise.

2. Make Paying Off Your Mortgage a Priority

The more you pay down your mortgage, the more your home equity rises. With that considered, perhaps the most simple method of building home equity is to ensure you’re making your monthly mortgage payments, as the value of your home equity is equal to your down payment and the amount of money you’ve already put toward your mortgage payoff. To determine how much equity is being built as you pay off your mortgage, look into how much of your payments are being allotted to interest vs. the amount going toward the principal - because the latter is what will contribute to your equity building.

3. Pay More Than What’s Required

A third way to build your home equity is to exceed your lender’s payment expectations per month by paying more than the amount that’s required. For instance, you can aim to start paying $1,300 a month toward your mortgage if you’ve been previously paying $1,000. That extra $300 monthly will help you to pay off your mortgage and build equity more quickly, while saving yourself from potentially paying a ton in interest (as much as thousands of dollars).

However, it’s important to speak with your lender to ensure that the extra money you’ll be paying monthly will be applied toward the principal, as this will help to build your equity.

4. Refinance Your Loan to a Shorter Term

A refinance of your mortgage loan can present yet another opportunity to build home equity. For example, if you were to refinance your mortgage to a shorter loan term of half its duration, while you will be paying more monthly, you’ll reap the rewards of speeding up the payoff process while gaining access to an abundance of home equity. Yet another benefit of a shorter loan term is that it will typically come with a lower interest rate, as well.

It’s important to note, however, that a refinance is not always guaranteed. In order to qualify for a refinance, a borrower must have good credit and a satisfactory debt-to-income (DTI) ratio, among other considered factors.

5. Increase Your Home’s Value With Improvements

Home renovation projects or simple improvements will help you to increase the overall value of your property - and fortunately, many kinds of alterations are quite affordable. If you’re giving the walls in a room a fresh coat of paint and replacing the light fixtures for a new modern look, it shouldn’t break the bank, but it will help to boost property value fairly quickly and easily.

Additionally, consider making improvements to the outside of your home, too, if necessary (including landscape). The outside of your home is where those critical first impressions are made by future potential buyers, after all.

Keep in mind that some renovation projects will provide you with a greater return on investment than others, so be sure to do your research beforehand to determine which renovations will generate the most return.

6. Allow Your Home’s Value to Increase Over Time

If you aren’t in any particular rush to use your home equity, you could simply wait for the value of your home to increase on its own. If the history of the market has taught us anything, it’s that this is more likely to occur over time vs. the value of your home dropping (although anything can happen).

As any homeowner doesn’t exactly have control over the real estate market and its fluctuations, you can still do what you can protect yourself through making wise decisions when it comes to borrowing equity from your home. This includes avoiding withdrawing too much, and when you do, using this equity to put back into your property via any valuable improvements to protect its value.

Need help building up your home equity?

If you’re looking for some professional assistance with building the equity in your home more quickly and painlessly, our experts are here to lend a hand. Canadalend.com can help make building the equity in your home a more simple and effective process, so you can start reaping the rewards sooner than later.

To learn more about our home equity building solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Without a question, purchasing an investment property is an excellent way to build wealth while also diversifying your portfolio.

After doing your research and deciding that investing in real estate is the right choice for you, you’ll need to consider how you will go about obtaining financing for your exciting new investment property.

While there are four main ways that homeowners can secure financing for an investment property, we will be placing more of a focus on financing via leveraging home equity in this article.

The four common options for financing an investment property are as follows:

Option 1: Conventional Financing via Bank Loan

You’re likely already familiar with conventional financing if you own a home as your primary place of residence. With this financing option, the down payment expectation will generally be 20% of the property’s purchase price. Among other factors, the purchaser’s credit score and credit history will play a role in determining whether they are eligible for the loan, in addition to determining the kind of interest rates that will be reflected in the mortgage.

Option 2: Financing via Hard Money Loan

A hard money loan is a short-term loan option for commercial or investment properties. This non-comforming loan does not come from traditional mortgage lenders, but rather private parties that are willing to accept either property or another asset as collateral. Although the interest rates on hard money loans are often considerably higher than other loan types, they do come with a generally less strict approval process and can be secured fairly quickly compared to other loan options.

Option 3: Financing via Private Money Loan

A private money loan is a loan granted by one individual to another. This type of loan is generally secured by a kind of legal contract that enables the lender to foreclose on the borrower’s property if they are unable to make necessary payments. When it comes to loan terms and interest rates of private money loans, these can vary quite dramatically.

If a private money loan involves a friend or family member to the investor, as it often does, it’s important for the borrower to carefully consider how their relationship with their lender may be affected if anything happens to go awry.

Option 4: Financing via Home Equity Leveraging

Finally, leveraging your home equity can be an excellent option for financing an investment property. You can do this through securing a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance.

As you make payments toward your mortgage, thus decreasing the balance of your loan, you are simultaneously building equity. Home equity loans are a type of second mortgage that enable homeowners to acquire loan proceeds all at once. On the other hand, a HELOC enables a borrower to tap into their equity on an as-needed basis. Finally, a cash-out refinance would include a fixed rate, however it may lengthen the duration of your existing mortgage.

Using a Home Equity Loan or HELOC To Finance An Investment Property

Home equity loans and HELOCs are very similar in nature, however borrowers should be aware of their defining differences in order to make the right choice between the two.

If you plan on purchasing a sole property for investment purposes and require a precise dollar amount to cover the purchase, repairs and renovations, then a home equity loan makes for an ideal choice. On the other hand, if you intend on buying and selling more than one property in a short period of time, then a HELOC is the better choice as it will provide you with a rotating access to funds as you continuously take from and pay down your line of credit with each buy and sale, vs. withdrawing and paying off multiple loans.

When it comes to purchasing an investment property using the equity you’ve already built up in your home, the process will generally go as follows. Firstly, you’ll apply for either a home equity loan or HELOC with a trusted lender. Then, you’ll receive the loan or line of credit after you’ve closed on your property. You can then use this capital to fund your investment property’s down payment (or in some cases, pay the entire purchase price).

Before applying for a home equity loan or HELOC, you will need to first ensure that you’ll be able to make the necessary payments in order to avoid risk of property foreclosure. You should also be aware that a loan will require closing costs.



Benefits of Using Home Equity to Purchase An Investment Property

A home equity loan can help to make purchasing a second property less expensive while providing the buyer with more liquidity. When it comes to using home equity to buy an investment property, in particular, there are several distinctive advantages.

These advantages include the ability to increase the down payment you put toward your new investment property, as home equity loans are provided as a lump sum. With this greater down payment, you can also potentially reduce your monthly payments as well as interest rates. Home equity loans come with fixed and lower interest rates due to the fact that the property is secured as collateral. 

Thinking about finally purchasing an investment property?

If you’re considering buying an investment property in Ontario, we’d be happy to lend a hand. Canadalend.com is here to help make it as easy as possible to unlock the equity in your home, so you can turn your dream of acquiring an investment property into a reality.

To learn more about our financing options, or to begin your application for financing a second property, call Canadalend.com at 1-866-I CAN LEND or contact us here.

If you’re a first-time home buyer in Ontario, you may feel a mix of excitement and anxiety about buying your first home. We know that it can be a stressful experience, especially if you’re unsure what to expect or have concerns regarding affordability.

However, with some preparation, guidance, and financial assistance, you’ll be able to navigate the process with more confidence. This article will discuss what you can expect as a first-time home buyer in Ontario and several incentive programs to be aware of.

Knowing What to Expect as a First-Time Home Buyer

As a first-time home buyer in Ontario, you can expect the process to involve several steps and to take some time to complete. Let’s discuss some of the common steps involved.

The first step is to get your finances in order. This involves examining your income, savings, and debts to determine how much you can afford to spend, in addition to exploring the several first-time home buyer incentives available (which we will explore shortly).

It’s also important to get pre-approved for a mortgage. Doing so will give you a better idea of the price range of homes you can afford and will help make you a more competitive buyer when you’re ready to make an offer.

Once you have a sense of your budget, you can start looking for homes that fulfil your needs.

When you find a home that meets your criteria, you can make an offer to the seller. As many Ontario markets are currently experiencing extreme competition among home buyers, it’s essential to exercise patience during this stage and not feel discouraged if you don’t get the first property you place an offer on.

After receiving an acceptance, you will enter into a contract to purchase the home. This contract will outline the terms of the sale, including the closing date along with any conditions that must be met before the sale can be completed. You will also need a home inspection to ensure the property is in good condition. If any issues are discovered during the inspection, you can negotiate with the seller to have them addressed before closing.

Once all of the conditions of the contract have been met, you will be ready to close on the purchase of your new property. This typically involves signing a mortgage agreement, paying any remaining balance on the purchase price, and transferring the ownership of the home to you.

Incentives for First-Time Home Buyers 

First-time home buyers in Ontario have a number of incentives available to them to help make homeownership more affordable.

These incentives can reduce the upfront costs of purchasing a home and provide support for ongoing expenses such as mortgage payments and property taxes. Keep reading to learn about these programs.

Incentive #1: The Home Buyers’ Plan

The Home Buyers’ Plan (HBP) is a program that allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use as a down payment on their first home.

To be eligible for the HBP, the buyer must not have owned a home in the previous four years, and the RRSP funds must exist in the account for at least 90 days to be withdrawn. The money withdrawn under the HBP must be repaid to the RRSP over a period of 15 years, with the first payment due in the second year after the withdrawal is made.

Incentive #2: The First-Time Home Buyer Incentive Program

The Canada Mortgage and Housing Corporation’s (CMHC) First-Time Home Buyer Incentive Program (FTHBI) allows first-time home buyers to reduce their monthly mortgage payments without increasing their down payment. The amount of the incentive depends on the buyer’s household income and the location of their home.

The incentive is a shared equity mortgage, which means that the CMHC will provide a portion of the financing for the purchase of the home and will share in any increases or decreases in the value of the property. The buyer must also have a minimum down payment of 5% of the purchase price.

Incentive #3: Land Transfer Tax Refunds for First-Time Home Buyers

The Land Transfer Tax Refund program in Ontario offers a refund of up to $4,000 on the land transfer tax for first-time home buyers, and is available for homes valued up to $368,333. The amount of the refund decreases as the value of the home increases, so the maximum refund is only available for homes valued at or below the maximum eligible value.

To be eligible for the program, the home must be the buyer’s principal residence, and the buyer must not have owned a home in the previous four years. The deadline to apply for the refund is 18 months after the date of the transfer of the property.

Incentive #4: The First-Time Home Buyer Tax Credit

The First-Time Home Buyer Tax Credit (HBTC) is a non-refundable tax credit that can be claimed on the tax return for the year in which the home was purchased. The amount of the credit is equal to a percentage of the purchase price of the home, up to a maximum of $5,000.

To be eligible for the credit, the home must be the buyer’s principal residence, and the buyer must not have owned a home in the previous four years.

Turn Your Dream of Homeownership Into a Reality

If you are looking to buy your first home in Ontario, then look no further. Serving Ontario and the GTA for almost 20 years, Canadalend.com has become one of the largest and most preferred brokerages in the province.

To learn more about our mortgage plans and financing solutions in Toronto, call Canadalend.com at 1-866-I CAN LEND or contact us here.