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A home equity loan is a type of loan that enables homeowners to borrow money using the equity they have already built up in their property, or in other words, through using their home as collateral.

While these loans are often used to fund home renovations and repairs, there are actually a number of other purposes that home equity loans can be used for to help Ontarians breathe a little easier, financially speaking.

From consolidating debts to financing new business ventures and investing in your continued education, a home equity loan can be a truly valuable tool to bring you closer to achieving your goals, without the added financial stress of interest charges or the hassle of other common types of loans.

In this article, we will go over the six common alternative uses for home equity loans beyond the usual home renovations, improvements, and repairs.

The Common Alternative Uses for Home Equity Loans:

1. Consolidating your debt

In Canada, home equity loans are most commonly used for the purpose of consolidating one's debt. This is because accessing home equity to borrow money comes with considerably lower interest rates when compared to other loan types, such as personal loans or credit cards.

Through tapping into home equity for debt consolidation, Canadian homeowners are able to cut costs on interest charges, as well, and can cut down on their monthly bill cycle.

2. Paying off your CRA tax debt

Owing a lot of tax debt to the Canada Revenue Agency (CRA) is never a fun position to be in. Fortunately, in many cases where homeowners owe a considerable amount of tax money to the CRA, a home equity loan can be used as a short-term loan to pay back these taxes and get out of the debt.

However, note that this will only be feasible in cases where there is enough room to pay off the CRA debt or when the amount of debt is not too large.

3. Starting a new business

A lot of capital is needed when you are starting a new business. Fortunately, tapping into existing home equity will allow many homeowners who want to embark on a new entrepreneurial journey to access these critical funds with much more ease than with other common loan types.

Moreover, these home equity funds can even be used to pay for a business loan.

4. Financing post-secondary or private education

In Ontario, post-secondary education programs or private schools can be very costly, and setting aside money for tuition is easier said than done for many homeowners.

This is why people who are considering personally returning to school for advanced education, or alternatively, who need to pay for their child's post-secondary education, can feel good about using a home equity loan for this purpose.

5. Covering a spousal buyout following a divorce

If you happen to be going through the process of concluding a marriage, then a spousal buyout may be a necessary course of action. This is generally applicable in cases where both spouses are not in agreement to sell the house and one spouse is unable to obtain another place of shelter.

In such difficult situations, a home equity loan can be used as a way to cover the costs of "sending off" a spouse. In fact, this is not an uncommon financial route.

6. Paying for unexpected emergencies

As the well-known saying goes, "When it rains, it pours." Canadian homeowners with equity built up in their homes should feel secure in case an unfavourable (and costly) event ever presents itself.

Last, but certainly not least, home equity loans are also often used to help cover unexpected expenses resulting from any type of emergency, such as a dental or medical emergency, an auto repair emergency, or other types of unfortunate incidents.

Access Your Home Equity Loan With Canadalend

Fortunately for homeowners in Canada, Canadalend.com can provide a high standard of service and more financing options compared to large banks. Since our professional team consists only of independent licensed mortgage experts, we also have access to hundreds of different reputable lenders, many of which are non-traditional or regulated on a federal or provincial level.

With that being said, if you are a Canadian homeowner looking to take out a home equity loan for any reason, whether that be to fund a home renovation or any of the above purposes and beyond, then a home equity loan broker on our team would be happy to meet with you. We will provide you with a thorough evaluation and go over all your options to ultimately help you find the right lender to suit your unique financial needs.

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

If you’re considering buying a second home in Ontario, you’re not alone. A recent survey concluded that more than 10% of Canadians have purchased a second home.

Participating in this growing trend is usually complicated if you don’t know the rules for second mortgages in Ontario. The good news is that you should consider only five main things before purchasing a second home.

In this post, we’ll explain these factors to help you make an informed purchase before choosing a lender.

1. Will You Use Your Primary Home’s Equity

Unless you have a high net worth, raising the capital to buy a second home will require a great deal of financial maneuvering. One way to raise the cash to buy a second home is by accessing the equity in your primary residence.

Suppose you plan on using your existing home equity to finance a second home. In that case, you should know that this process will involve a cash-out refinancing of your current home mortgage. Ultimately, you will have to take out a higher borrowed amount than before.

The upside of using your home equity to fund a second home is that you can bypass spending several years saving up toward the purchase. Also, depending on how much equity you have in your primary home, you can present a suitable financial profile to your lender to increase your chances of approval.

Make sure to speak to a mortgage professional to see if this choice is best for you.

2. Understand What Counts as a Second Home

Not every additional residential purchase counts as a “second home.” Typically, a second home refers to an owner-occupied property, at least for some time during the year. As a result, a second home could be a:

• Winter cottage for family get-togethers
• Summer vacation home
• Condo for long commutes to work
• An apartment complex that the owner lives in and rents to tenants

If you’re considering buying a second home in Ontario, your lender will mainly be concerned with whether or not you occupy the property. Lenders will classify it as an investment property if you don’t plan on living at the residence.

Some smaller lenders don’t provide mortgage loans for investment properties. Therefore, you should make this distinction early on before calling a mortgage lender.

3. Know the Rules

If you own a home, chances are you’re already familiar with the qualifying criteria for securing a home loan. This familiarity is because the requirements for owning a second or third home are similar to buying your primary residence.

These requirements are:

• You must qualify for a mortgage loan under the stress test
• You’ll need a good credit score for the lowest mortgage rates
• Borrowers must have an acceptable debt-to-income ratio with their lender

There is one difference you should be aware of, and that is the down payment. When you buy a primary residence, your down payment is tied into the total purchase price. However, buying an additional property means the following can affect your down payment amount:

• The size of the property
• The number of units the property has
• Whether or not the owner plans to live there

As you can see, the criteria for qualifying for a second home aren’t much different from your original purchase.

4. How Do You Plan to Finance

We’ve already covered that you can use the equity in your primary residence to fund the purchase of a second home. There is good news if you don’t have much home equity or want to assess other alternatives.

Buying a second home in Ontario can qualify you for the Insured Second Home Mortgage Program. Many Canadian homeowners enroll in this program and pay as little as 5% down for a property occupied by a family member going to college.

This program is also a popular alternative for purchasing a vacation home. Before enrolling in the Insured Second Home Mortgage Program, here are some things to keep in mind:

• The borrower must live in the property for some part of the year, or a family member can occupy the home. Under the guidelines of this program, you can’t charge a relative rent for occupying your home.
• The property you purchase must be accessible all year round. This factor means you’re responsible for winterizing your home and performing routine maintenance.
• Your second home must be located in Canada. You can’t use this program to buy timeshares or similar real estate.

5. Can You Afford a Second Home?

Understanding the rules of buying a second home in Ontario is very straightforward. Before any of that can matter, you must decide whether or not you can even afford the purchase.

A mortgage lender will evaluate your financial profile unless you have the funds to buy a second home outright. They will deeply examine your income, credit score, gross debt service (GDS) ratio, and total debt service (TDS) ratio.

Suppose you plan on buying a second home to add to your investment portfolio. In that case, your lender may count that anticipated revenue toward your gross income. This facet can substantially increase the amount you can borrow from a mortgage lender.

The most crucial aspect of affording a second home is the interest rate. An exorbitant interest rate could leave you stuck paying for a second home many years after you finish your first mortgage.

Ready to Take Out a Second Mortgage?

Buying a second home in Ontario is possible if your finances are in order and you agree to the purchase rules. Finding the right lender is crucial if you’re strongly considering making this choice.

At Canadalend.com, we help our customers thoroughly assess their options to take advantage of the most competitive mortgage rates. To learn more about our second mortgage and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

You probably have lots of ideas for what you could do if you had more money to spend. You could renovate your home, pay off high-interest loans, plan for retirement, invest, or do anything else.

Looking at the equity you have built in your home is a common way to get the cash you need. Second mortgages are a fantastic option for many people, and this article will help you better understand how a second mortgage can be right for you.

Like with all mortgages, there is a lot to consider. We want you to understand what a second mortgage is, how it differs from your first mortgage, when you should (and should not) consider a second mortgage, and how to assess your eligibility.

1. Understanding Second Mortgages

Understanding a great deal about obtaining a second mortgage is important, and this article is an excellent place to start.

You should know that a second mortgage differs from your first mortgage and when you should/should not begin a second mortgage. We will also introduce you to some common concepts that we use when discussing a second mortgage.

Second mortgages are just that, a second loan taken out against the equity in your home on top of your pre-existing mortgage. It is a way to access the equity you have built in your home and borrow money to invest, consolidate your debt, or save in an emergency fund.

At the outset, an essential thing you should understand about second mortgages is that they typically hold a subordinate position to your first mortgage. This facet means that the repayment priority goes to your first lender.

Second mortgages often come with higher interest rates (but that is not guaranteed). They are a great option in certain circumstances, but only on some occasions, so it's essential to know the specific use cases where a second mortgage is best for you.

2. Difference From Your First Mortgage

Your first mortgage is the primary loan you used to purchase your home or property. These mortgages often have a repayment period of 15 to 30 years. To repay the loan used in the purchase, you pay a monthly fee that covers both the principal and the interest.

Second mortgages usually have a shorter repayment (especially compared to your first mortgage). Rather than the borrowed amount being used for the entire purchase price of the property, the amount you can borrow is dictated by the amount of equity you have. To learn more about second mortgages, you can read our article here.

The main difference between a first and second mortgage is the purpose of the loan. A first mortgage is a loan for purchasing your property. In contrast, a second mortgage allows you to extract some of the equity in your home to put towards anything you like.

Since these are two separate mortgages, you will have to manage two separate monthly payments, so it's worth considering if you can do that beforehand.

3. Know When (And When Not) to Get a Second Mortgage

Depending on your circumstances, a second mortgage could be an excellent decision. Second mortgages are a great way to get money for investments, debt consolidation, home improvements, emergency funds, planning for retirement, or anything else you may need.

One of the great things about a second mortgage is that you can do anything with the money. While there is potential for lower interest rates than other types of loans, second mortgages are based on your credit score, equity in your home, and other variable factors.

Two primary types of second mortgages are a Home Equity Loan and a Home Equity Line of Credit (HELOC). These two methods offer flexibility in how you receive money from the equity you have in your home. A Home Equity Loan is a one-time lump sum payment.

A Home Equity Line of Credit allows you to take out the money as you need, and as you pay it off, you can borrow more money (up to the limit), much like a credit card.

Of course, you need to understand that the interest rates on your second mortgage will likely be higher than your first mortgage. You must also manage two mortgage payments instead of the original one. Therefore, before taking out a second mortgage, you should seriously consider the pros and cons of repayment.

4. Eligibility

To be eligible for a second mortgage, you must meet your lender's requirements. These usually include the lender looking at your credit score (the higher, the better), the equity you hold in your home (also the higher, the better), and your Loan To Value (LTV) Ratio (the ratio between your mortgage amount and the appraised value of your property).

Canadalend has access to Canadian banks, credit unions, and other lenders, so we can ensure you get the best and most competitive rates on the market. Our friendly and professional agents thoroughly understand all products, rates, and features of the financial tools available to you.

5. Seek Professional Advice

Creating a second mortgage can be a great way to get the money you need. Yet, you must carefully consider all variables to ensure this is your right choice. We have already discussed some of a second mortgage's pros, cons, and complexities. What you need is professional guidance from people you trust.

We are committed to finding you the best home equity loan to fit your needs. We offer great rates and 24-hour approvals. Our team of licensed mortgage professionals will help you every step of the way- even offering you a free personal consultation.

For more information about second mortgages (and alternatives), call Canadalend at 1-844-586-0713 or contact us here.

When you need money, look at your home to help you get a loan. Using the equity or appreciation of your home can be a great way to get the cash you need at interest rates that are often better than credit cards or personal loans.

Two types of loans worth considering are home equity loans and cash-out refinancing.

These are excellent tools, and each works best in specific circumstances. This article will define each of these methods, examine the primary differences between them, and assess their pros and cons.

What Is a Home Equity Loan?

First and foremost, we need to define what a home equity loan is. A home equity loan allows homeowners like yourself to borrow against the equity you have built up in your property.

Simply, it means that you can access your home's equity before selling it. The great thing about a home equity loan is that you can use the cash for anything you want. People often use this money for renovations, debt consolidation, or emergency funds.

There is even a chance that the interest paid on your loan is tax-deductible; depending on your specific circumstances, you may be able to write off the interest on the loan if you use the money for home improvements.

Since you're taking out a second mortgage, you should know that the interest rates can be higher than your first mortgage, but that is still not certain.

What is a Cash-Out Refinance?

A cash-out refinance is another way to access the equity built up in your home. In this method, you will replace your existing mortgage with a larger one. By doing this, you're taking out a loan based on your home's increase in value.

However much your home has appreciated, that's the cash you get. Just like a home equity loan, you can use the money you get for anything you like.

You can opt for a fixed or adjustable interest rate when you refinance. This choice can allow you to have some say in what your mortgage looks like. Refinancing your home can offer lower interest rates than other borrowing options, such as personal loans or credit cards.

Since you have increased your mortgage, you should be mindful that your monthly payments will increase.

Primary Differences

The primary and noticeable difference between a home equity loan and a cash-out refinance is what happens to your first primary mortgage. With a home equity loan, your first mortgage remains unchanged. With a cash-out refinance, you can get a new mortgage and reap certain benefits, such as extending the repayment term.

The closing costs of a home equity loan are typically lower than cash-out refinancing. As we mentioned, the interest on your home equity loan might be tax-deductible.

Experts state that a home equity loan is better for specific and minor expenses.

Cash-out refinancing typically comes with lower interest rates than a home equity loan. As well, this method can be better for getting more money. Of course, this depends on several factors, such as the equity you have in your home and interest rates.

Pros and Cons

Benefits of Cash-Out Refinancing

As mentioned, cash-out refinancing often comes with lower interest rates than home equity loans. In addition, because your home has likely increased in value, cash-out refinancing typically allows you to access a more considerable amount of money.

Potential Drawbacks of Cash-Out Refinancing

If you extend the term of your new mortgage, you risk paying more interest over the loan's lifetime. Furthermore, because cash-out refinancing allows you to access more money doesn't mean you necessarily need that money, and you can overborrow.

Finally, your interest rate may change over time if you opt for an adjustable-rate mortgage. You may not be interested in taking on that risk, depending on your goals and needs.

Benefits of Home Equity Loans

Home equity loans usually have a fixed interest rate, which lets you know exactly how much your monthly payments are. Also, because it is a loan separate from your existing mortgage, it does not affect the terms of your first mortgage.

We have already mentioned the potential tax benefits and the lower closing costs compared to a cash-out refinance.

Potential Drawbacks of Home Equity Loans

Since you are taking out a second mortgage on your home, that loan will usually have a higher interest rate than your first mortgage.

Also, the amount of money you can borrow is determined by the amount of equity you own in your home. You should consider why you need the money and if you own enough equity to consider a home equity loan.

Which is Better For You?

Of course, there's much to consider when deciding between a home equity loan and a cash-out refinance. It can take time to determine the correct path forward. You must look critically at your financial situation, goals, and needs. In this article, we have outlined a few considerations for this decision.

Consider how much money you need, what kind of repayment you can, and if you want to make any changes to your first mortgage. There is much more to consider, and you should seek a professional's advice.

Getting sound and trustworthy advice is always recommended. We are a friendly team of licensed professionals who genuinely want to help you find the best loan. We are confident in our service and are proud to offer 24-hour approvals and even a free personal consultation to get you started.

For more information about home equity loans and cash-out refinancing, call Canadalend at 1-844-586-0713 or contact us here.