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Buying a home is one of the best investments out there, especially if you know how to leverage it properly. Owning a house is a gold mine of opportunity. As you’re gradually paying off your mortgage, your house value accrues and can be used as a wealth-building asset.

Home equity refers to how much of your property you own: how much you’ve paid for versus how much mortgage is left to pay off. When you borrow against your home equity, your property becomes collateral, and you’re able to leverage the gained equity to your benefit.

Read on for the complete guide on how to use a home equity loan for an investment property in Ontario.

What is a home equity loan?

Let’s begin with the basics. A home equity loan is typically provided by a financial institution and is secured against the borrower’s existing property. The more mortgage you’re able to pay down, the more equity you build in your home that can be used to take out a home equity loan.

For example, if your home is worth $500,000 and you’ve paid off $200,000, then you have $200,000 built-up equity in your property. You would then be able to refer to a lender in Ontario to bring the total loan-to-value up to 80% (meaning you get offered a home equity loan valued at $100,000).

This is extremely beneficial for all homeowners wishing to invest in a second home, or make home improvements to appreciate the value of the property. How you’re able to harness your home equity loan depends on three main factors:

1. How much your current home is valued at.
2. How much of your mortgage you’ve paid back already.
3. The remaining balance of all mortgages secured by your home.

Types of Home Equity Loans

Home equity loans are typically obtained through banks, financial institutions, lending institutions, and alternative lenders. There two ways they will allow you to borrow using your home as collateral:

1. Fixed-term equity loan: This sort of loan involves releasing a lump sum to the borrower, with payments amortized over a given time period.

2. Home equity line of credit (HELOC): This loan is similar to a credit card in that you’re able to withdraw any amount within the credit limit and validity period. A benefit of HELOC is that it can also be used on debt consolidation, in addition to property investment. About 36% of HELOC borrowers aged 25-34 used their loans to pay off other debts, so the loan is certainly flexible for different kinds of use.

Who can you take out a home equity loan with?

While home equity loans are a great way to get started on building your property investment portfolio, some challenges come with obtaining these loans as well. Investors are more likely to default on an investment property as opposed to their primary residence, leading to banks and more traditional institutions becoming slightly more hesitant to give out these loans easily.

In addition, it can be hard to qualify for a home equity loan if large outstanding debts are on the borrower’s profile. This could include current mortgage, credit card debts, or car loans. This is why many borrowers refer to alternative lenders such as trust companies or private mortgage lenders. Some benefits of referring to flexible mortgage specialists are that they often offer to lock in a fixed rate, and have a lower interest rate with fast funding provided as a lump sum.

When making lending decisions, lenders use several criteria to assess the borrower. This includes debt-to-income ratio, credit scores, and available cash. If the debt-to-income ratio of a borrower is on the higher side, then traditional banks and lenders judge the incremental home equity loan to be unfeasible.

Alternative lenders such as Canadalend.com can base lending decisions on home value and outstanding loans. This makes investing in property that much more feasible to a wider range of homeowners.

What are the benefits of a home equity loan?

Taking your home out as collateral has several advantages, such as:

1. It is cheaper: The main reason this loan is preferred by so many borrowers is that it comes at a cheaper price point with lower interest rates compared to the usual unsecured loans or credit cards.

2. Fits within financial goals: You’re able to take out this loan without dipping into your savings or attempting to sell any existing investments. Thus, it is financing that does not detract from your long-term savings and wealth creation.

3. Boosts credit history: Home equity loans in Ontario allow the borrower to improve their credit score. Once the loan is obtained and the borrower begins to make principal and interest repayments, the lender can send reports of the loan to Equifax and TransUnion Canada.

4. Utilization of all assets: Compared to a personal loan, home equity loans allow you to utilize a portion of your net worth that is typically difficult to access. If the value of your property has grown significantly since you purchased it, then you’re sitting on a sizable principal amount that can be drawn on using a home equity loan.

There you have it: your guide on using home equity loans as an investment property. This loan is a great financing tool for investing in a second property, building up your property investments, or making home improvements. Reach out to Canadalend.com’s team of licensed professionals for more ways to utilize this loan in line with your wealth-building aspirations.

For more information on home equity loans in Ontario, call Canadalend at 1-866-422-6536 or contact us here.

Referring to a mortgage broker is one of the best ways to get a great deal on a mortgage. Whether you’re looking to buy a new home or refinance an existing mortgage, brokers will help you navigate the entire (often tricky) process. Not only are licensed mortgage professionals experts in the field, but they will also do all the work on your behalf.

A mortgage broker acts as the intermediary between you and your mortgage lender. They will shop around and negotiate a deal to save you time and money. Once you decide to use the services of a broker, they will ask you questions relating to your financial situation and needs to get you a competitive mortgage rate. However, it is always helpful to go armed with questions so you have more clarity throughout the process.

Here are 7 important questions to ask your mortgage broker:

1. What are the fees associated with your services?

Every deal is different. We offer competitive rates that are tailored to each client based on the complexity of the deal and the lender involved. We disclose all of our fees upfront to ensure all parties are informed of the full cost of obtaining a mortgage.

The fees associated with our service will depend on a variety of factors, but we are committed to offering the most competitive rates possible without sacrificing the quality of our service.

Generally speaking, depending on the nature of the deal, the broker can be compensated by either the lender or the borrower, or a combination of the two.

2. Can I get pre-approved?

Once you decide to work with a broker, they will look into your financial records to determine your eligibility. After analyzing your income, credit, and down payments, brokers will typically give you a letter stating the mortgage amount you’ve been approved for. This rate gets locked in for anywhere between 90 to 120 days, giving you the time to look for homes and navigate the housing market. If your approved mortgage rate goes down by the time you’re ready to apply, you’ll get the better of the two rates. If the rates go up, you’ll still be able to go ahead with your pre-approved rate.

3. Which is better, a fixed or variable rate mortgage?

A fixed-rate mortgage implies that your mortgage rate and payment will remain the same for your mortgage term, which is typically around 5 years. A fixed-rate mortgage will make the most sense for first-time homebuyers, as it is a low-risk option. It does come with a higher initial rate, however, so be sure to get all the fine print from your broker.

On the other hand, a variable rate mortgage can have your mortgage rate and payment fluctuate or change at any point during your term. If you happen to hit the market at a great time, your payment will go down when rates go down, and, vice versa, if the market rates go up. Variable mortgages will have a lower rate, but get your broker’s advice on if any change in the rate makes sense for your needs.

Ultimately, the mortgage you decide to go with depends on your personal situation and the level of risk you’re willing to undertake.

4. How do I get approved?

After you’ve been pre-approved, it’s time to work with a realtor to figure out where you’d like to live. After accepting an offer, your mortgage broker will decide on the lender to submit your mortgage application. Two to three days after submitting your mortgage application is when you should expect the initial approval. You are then able to secure the mortgage rate and term, and the legal process to help with closing will begin.

5. Is there any prepayment deal for this mortgage?

Prepayment is great because it helps you become mortgage-free faster. Check if your lender offers good prepayment privileges, such as increasing your regular payment and making a lump sum payment. Different lenders will have different rules on how often the payments can be made and if they can be doubled up, so be sure to check on that as well.

6. What’s the penalty for breaking my mortgage?

It’s not an uncommon situation for a borrower to end the mortgage early. If you’re looking for a mortgage refinance or decide you want to sell your home, then you may face a penalty.

The penalty, which occurs if you break your mortgage before your renewal date, can vary greatly depending on your rate. In Ontario, for variable rate mortgages, the penalty can be around 3 months’ interest. Fixed-rate mortgage penalties are tricky to calculate, as they involve the interest rate differential or IRD. This amount is calculated on the posted rate when you sign your deal, which is usually a little higher than the rate you actually get. Simply put, it can result in a higher penalty than a fixed-rate mortgage if you decide to break the agreement.

Every lender uses a different method to calculate penalties, so be sure to discuss rates and terms with your mortgage broker in case you decide to refinance or sell. There is sometimes a fee associated with prepayment, so that’s another important question for your mortgage broker as well.

7. Are there any closing costs?

Although your mortgage broker’s fees may be negligible, there will be closing costs to budget for. These include land transfer tax, real estate lawyer fees, home inspection, and appraisal. If you’re worried about paying off the closing costs, you do have the option to sign up for a cashback mortgage. The cashback you receive from the lender can be used towards the closing fees you need to fulfill.

In conclusion, do your due diligence in learning about your mortgage process and refinancing with your broker. Shop around for a broker that understands your situation and can find the perfect rate that’ll work for you. As you’ll be working so closely with your mortgage broker throughout the process, a great broker can make a high impact and difference on your homeownership journey and its experience.

For more information on the mortgage process and mortgage refinancing in Ontario, call Canadalend at 1-866-422-6536 or contact us here.

Are you looking to get a second mortgage? If you have bad credit, then perhaps you’re concerned about the process.

However, there are some steps you can take to improve your chances of being approved! And the best thing about applying for a second mortgage is that it can also help improve your credit score.

If you’re looking to get a second mortgage in Ontario, then read on.

What is a second mortgage?

A second mortgage in Ontario is a means to borrow money based on the equity you’ve already built up on your primary home or mortgage. This type of mortgage is also referred to as a home equity loan.

The advantage to a second mortgage is that it relies entirely on your home equity, which you have taken the time and effort to build up. Larger financial institutions and banks do not typically offer a second mortgage, unlike a Home Equity Line of Credit (HELOC). This type of loan has a very low rate of interest, but is approved sparingly. This is because the Government of Canada places heavy regulations on eligibility and approval criteria for this loan.

Second mortgages, on the other hand, are quickly approved. However, approval does depend on how much equity you’ve built up; therefore, the more equity, the easier it is to get approved! Second mortgages also come with a higher interest rate than a HELOC. Despite this, the benefits of a second mortgage include:

Thus, a second mortgage is a viable option for any kind of buyer in Ontario. It is also particularly beneficial for those who are unable to qualify for a HELOC.

Is it possible to qualify for a second mortgage with bad credit?

The short answer is yes! You can qualify for a second mortgage with bad credit, but let’s start with the basics. Don’t assume that you’ll be denied funding right off the bat, and consider all the kinds of financing options you have available to you.

It may seem daunting to face rejection at the big banks, but the upside is that many alternative mortgage lenders specialize in helping those with bad credit. Traditional banking institutions have enforced stricter lending rules, which makes it extremely challenging to secure financing. Instead, apply with non-traditional lenders who will assess your unique financial situation and help you qualify.

Go With an Alternative Lender

Non-traditional lenders have fewer restrictions and less challenging applications. They are also governed by fewer requirements, which works in your favour if you have poor credit.

A lender like Canadalend.com, for example, helps homeowners get the best terms and rates. They will work with your built-up equity and guide you through the process of applying. Many alternative lenders will offer a better rate if your credit rating isn’t as bad as you initially assumed.

The Key to a Second Mortgage Is Home Equity

Our team at Canadalend has found that it is essential to focus on your home equity rather than your credit score. Calculate your home equity correctly because that is the critical factor for getting approved! Lenders will be much more open to financing your claim because there is less risk involved in the venture. The more equity you’re able to prove, the better rate you’ll get. And remember: you don’t need to borrow against all the equity you have. Leave some of the equity unfinanced so that you don’t need to mortgage your property to the fullest.

You Can Qualify for a Second Mortgage Without Income

Another benefit of taking out a second mortgage is that lenders rarely consider your income from work. As the focus is entirely on the built equity, it doesn’t matter whether you’re currently working or not. Thus, individuals who are laid off or have lost their job can also qualify.

This can come in handy if you don’t have income coming in every month. If you have adequate equity on your first property, then lenders may offer to prepay your second mortgage for a period or help you arrange an interest-only loan. This can significantly impact the amount you pay each year, with the added option of making the payments at your leisure.

Choose Canadalend.com for Your Second Mortgage Today!

We have years of experience in helping individuals in different situations get financing. We understand the importance of personalizing our services to your unique financial needs. We have the best rates available and friendly and dedicated staff who will provide you with various lending options. This will help you secure financing for a secondary property more efficiently, irrespective of your credit score.

For more information on second mortgages in Ontario, call Canadalend at 1-866-422-6536 or contact us here.

Are you a business owner looking for the perfect property for your business? A commercial mortgage is your best bet to acquire a great space. Taking out a commercial mortgage is the best way to lay your claims on real estate, using a loan on the property, which acts as collateral.

This mortgage is typically reserved for borrowers who are business or company owners, as opposed to individuals who are in an incorporated or a limited company. Thus, this loan will work best for companies of a particular type and differs quite significantly from residential mortgages.

Read on to learn more about a commercial mortgage.

What exactly is a commercial mortgage?

This type of mortgage is taken out by businesses and investors that wish to produce income or work out of the purchased commercial property. It can also be refinanced.

Certain types of properties will qualify as commercial mortgage properties. This depends entirely on the kind of business undertaken in the space. Typical commercial properties are retail, industrial/factory, or office spaces. In addition, specific residential properties will also qualify as commercial property. For example, a residential property with one to four units is a zone with a dual residential and retail space. A purely residential property with five or more units will also be considered for this mortgage type.

Commercial mortgages in Canada usually fall within the range of $500,000 to $2 million.

How long does it take to acquire a commercial mortgage?

Expect a much longer closing time for commercial mortgages compared to residential ones. While residential mortgages typically close within a couple of weeks to 90 days, commercial properties are closed within two months to a year.

Do you need a commercial mortgage?

Commercial mortgages are perfect for certain kinds of buyers. For example, real estate investors are ideal for this loan, as the property is legally recognized as an investment. Thus, if you are a real estate investor or business owner, this mortgage type is ideal. The amount of money you’ll be able to borrow will depend on the type of property you choose, for example, whether it is a construction project, farmland, etc.

How can I qualify for a commercial mortgage?

When deciding if this mortgage is right for your business needs, you must figure out the qualification criteria. The qualifications needed for a commercial mortgage are typically more strict than a residential mortgage. This is because lenders want to ensure that you will meet your financial obligations down the line. Let’s take a look at the main requirements.

1. Cash availability: Lenders will need proof that your business has enough cash flow to warrant taking out a mortgage. You will need to prove that you will be able to make the monthly payments. In addition, most lenders will ask you to invest some money to equalize the loan-to-value ratio.

2. Excellent credit: Having a great credit score is an absolute must. As the business owner, you will need to demonstrate a perfect personal credit score. Thus, your personal financial history matters as much as your business’s economic history. While it is possible to take out a mortgage with a lower credit score, remember that this comes with increased interest rates.

3. Business status: If your company has been operating fully for some time, your lender will want to verify your financials. They will check if your business appears stable and is generating a steady and consistent profit. However, not all your financials need to be liquid; they can also be in the form of stocks and bonds.

4. Contribution: You will need to put forward a higher down payment, which is typically around 50%. This can seem excessive when residential property down payments generally are 20% to 30%. However, remember that there is a higher risk associated with commercial properties.

If you’re worried about the loan-to-value ratio, remember that it differs according to the property too. Depending on the property, you can expect the balance to be anywhere from 55% to 80%, with farmland at the lowest and storefronts at the highest loan-to-value ratio. Thus, if you have the means to manage the rates, your business would be a great candidate for a commercial mortgage.

How can I get help for my commercial mortgage?

To get started on obtaining the loan, you will need the assistance of a reputable and trusted commercial mortgage broker. Your broker will be your main point of contact for the whole process and guide you through it with ease. They will explain everything involved, do the majority of the legwork, and help you find the best terms and rates. Going with a broker can also speed up the process significantly.

An important point to note is that mortgage brokers do not earn commissions for commercial mortgages. Instead, their services are paid for directly by you, the borrower. However, enlisting the help of a mortgage broker will save you thousands of dollars in the long run, so it is well worth the service fees.

Taking out a commercial property can be challenging to navigate. There is a lot of information, and deciding on the best rates and terms can be difficult. To ease your way through the process, enlist the help of an experienced commercial mortgage broker. Our team at Canadalend.com has years of experience helping businesses find affordable mortgages so they can achieve their goals.

For more information on taking out a commercial mortgage, call