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Homeownership is a significant financial milestone that often comes with the added benefit of building home equity. Home equity represents the portion of your home’s value that you truly own. 

This asset can serve as a valuable resource when you need to finance home improvements, cover education expenses, consolidate debt, or embark on other financial endeavours.

In this article, we will present some key aspects to consider when exploring different types of home equity financing to help you determine the right option for you and your family.

1. Home equity loan

A home equity loan allows homeowners to leverage the equity they’ve accumulated in their property as collateral. Equity, simply put, represents the difference between the current market value of the home and the remaining balance on the primary mortgage. 

These loans are sometimes referred to as second mortgages because they are a second loan on the property, with the primary mortgage being the initial loan used to buy the home.

With home equity loans, you can access up to 80% of your property’s equity in the form of a one-time, lump-sum payout. These loans often come with a fixed interest rate and a predetermined repayment timeline, which generally spans anywhere from 5 to 30 years. 

One of the main advantages of home equity loans in Ontario is the relatively quick and straightforward approval process. In many cases, applications are approved within hours, and funding is expedited within 48 hours with the help of our expert mortgage brokers at Canadalend.

Additionally, home equity loans in Ontario offer significantly lower interest rates compared to major credit card rates. The cost savings on interest payments can then be directed towards reducing the principal amount owed on your home equity loan much faster than paying off a credit card loan with a hefty 20% interest rate.

2. Home equity line of credit (HELOC)

A home equity line of credit is a revolving line of credit that allows homeowners to borrow money up to a predetermined limit based on their home’s equity. This financing option is known for its flexibility, allowing borrowers to draw funds as needed, up to a fixed credit limit, and then repay the borrowed amount over time.

However, it’s important to note that while HELOCs require interest payments on the amount borrowed only, the interest rates associated with them are typically variable and subject to fluctuations based on market conditions.

HELOCs are commonly used to fund various endeavours, including home renovations, debt consolidation, or any financial situation that demands ongoing access to funds. They offer a dynamic solution that adapts to a homeowner’s changing needs, providing a reliable source of financial support when necessary.

3. Cash-out refinance

A cash-out refinance is a mortgage financing option that allows homeowners to access some of their home’s equity in cash. In this scenario, the homeowner essentially replaces their existing mortgage with a new one for a higher amount, and the difference between the two loans is provided as cash.

This option is particularly appealing when homeowners have accumulated substantial equity in their homes due to property appreciation or mortgage payments. 

Cash-out refinances can provide homeowners with a lower interest rate than other forms of consumer credit, making it an attractive way to access funds while potentially saving on interest costs.

4. Reverse mortgage

A reverse mortgage enables senior homeowners, typically aged 55 or over, to borrow up to 55% of the current value of their home. What sets reverse mortgages apart from traditional home loans is that they don’t require monthly mortgage payments. Instead, the loan balance accrues over time and is typically repaid when the homeowner sells the home, moves out, or passes away. 

Reverse mortgages provide seniors the means to access their home’s equity to supplement their income, cover healthcare expenses, fund home renovations, or simply improve their quality of life in retirement.

The loan does not need to be repaid as long as the homeowner continues to live in the home as their primary residence and remains current on property taxes and insurance. However, it’s essential for seniors and their families to carefully consider the terms, costs, and potential implications of a reverse mortgage, as it can affect inheritance and the long-term value of the home.

Canadalend Offers a Range of Home Equity Financing Solutions for Your Needs

Canadalend is your trusted partner in finding the right home equity financing option that aligns with your unique needs and financial goals.

Our team of experienced mortgage professionals has an in-depth understanding of the diverse range of home equity financing options available, from home equity loans to reverse mortgages. We have the expertise and resources to ensure that you make the best decision for your financial situation, goals, and preferences. 

Additionally, our licensed mortgage professionals are here to provide expert guidance to ensure you have a clear understanding of the home equity loan process.

This includes working out the best amortization period, determining whether a fixed or variable mortgage is best for your particular situation, or selecting an accelerated repayment plan. 

We also help you comprehend the fine print, ensuring you understand the terms and conditions and are fully aware of any costs or penalties. We are here to make sure you get the best rate for your home equity loan in Ontario.

Experience our 5-star customer service today. Schedule an appointment with one of our agents by calling 1-844-586-0713 or contact us here.

The process of buying your first home may be daunting, but it is rewarding as well. Once you have acquired your first home and have returned to a comfortable financial position, investing your money in real estate is a great way to grow your finances. 

One way to do so is to buy a second home and rent it out. Buying a second home in Ontario for renting purposes is not uncommon, and even millennials these days have the potential to purchase a second home while residing in their first home and paying a mortgage. 

There are things to consider before going ahead with this decision. There are some advantages and challenges of renting a second home in Ontario. 

Let’s start with the advantages:

1. Tax advantages

As challenging as it is, being a landlord comes with its perks, and there are some significant economic perks. There are taxes you pay to the government because property expenses like insurance, property taxes, maintenance costs, utility bills, and more are from your rental income. 

You can also deduct losses against your other income, as well as deduct depreciation from your taxes. Furthermore, if you wish to, you can sell the rental property and use that income towards another rental property without paying capital gains tax. 

2. Growth of property value

The value of your property will grow over time. In cities like Toronto, Vancouver, and others, and Ontario in general, the increasing demand for real estate has fuelled property prices. Buying a second home in Ontario for rent will allow you to own real estate that continues to grow in value and become an asset. 

If you decide to sell the rented property, you can turn a significant profit to invest in a bigger property without having to shell out extra from your pocket. 

3. Regular monthly income

Rent becomes another source of income and is something you can depend on every month in addition to your other primary income. Some homeowners invest in multiple houses for rent, which becomes their primary source of income. Buying a second home in Ontario for rent will give you the peace of mind of having a regular monthly income even if your other sources of income stop or face delays. 

For working professionals with a typical 9 to 5 job, a second source of regular income is always welcome.

With the advantages covered, buying a second home in Ontario does come with some challenges. As mentioned, these are challenges instead of disadvantages, so you do not need to worry too much. However, as a landlord and the owner of a second home, there are things you need to keep in mind and deal with regularly.

4. Getting the funds ready

Buying a second home in Ontario, for rent or any other reason, is a costly affair. If you are already paying a mortgage on your first home, you may look elsewhere for the funds, like going to the bank for a loan or asking someone you know. 

Canadalend allows you to take a second mortgage on a previously mortgaged home. A second mortgage gains access to funds for various reasons, including paying off credit card debt, starting a small business, buying a car, or making a down payment for a second home. 

It is also a way to refinance your first mortgage and get more equity against your home, allowing you to get a bigger loan. A second mortgage from Canadalend can help you cover home renovation costs, pay outstanding bills, quickly get cash on hand, stop a power of sale, and more. 

5. Dealing with tenants

Every landlord wishes for decent tenants who respect the property and treat the home as they would their own. Yet, sometimes, a tenant causes issues for the landlord. You must tow the line between setting the rules straight and giving the tenants their freedom. 

It can be challenging as you, the landlord, may have to deal with issues like neighbour complaints, delayed rent, higher maintenance costs, and more. One way to avoid dealing with troublesome tenants is to vet them before signing the contract. Meeting with the potential tenant and understanding their mannerisms is essential as this would dictate your future interactions with them.

6. Complicated taxation

Filing income taxes is more complex with a second home and new avenues of saving on taxes. Not all homeowners know how to minimize income tax payments and maximize deductions. 

You may have to employ a third party to help you save money on income tax but, in turn, have to pay them to do the tax filing for you or give advice on what steps to follow.

7. Staying updated with property regulations

As the landlord and owner of the second home, you will be responsible for keeping the property up to code. It means you must stay updated with the rules and regulations that change in the real estate space. If there are some changes in local regulations, you will be required to be on top of them. 

Your tenant will inform you about any new changes, and it is your responsibility to ensure the house is up to code and you follow the new regulations.

Buying a Second Home to Rent: Final Thoughts

Buying a second home in Ontario to rent is a wonderful investment and an asset. It gives you an extra source of regular income but also acts as an investment that will turn a profit in the future if you decide to sell it. There are some challenges to deal with, but that is a small price to pay for the potential economic gain.  

For more information about buying a second home for rent or a second mortgage, call Canadalend at 1-844-586-0713 or contact us here.

In today’s market, misconceptions regarding home equity loans cause new homeowners to face issues before or after taking on a loan. Home equity is a great asset when you purposely require money. The loan can have relatively low interest rates and comfortable loan terms for large amounts of home equity. They provide flexibility and benefits not obtainable when borrowing money through other means. 

Before getting into the common myths surrounding home equity loans, it is essential to understand what home equity is and how you can borrow money based on the equity in your home.

What Is Home Equity?

Simply put, home equity is the value of your home that is not encumbered by a mortgage. You can calculate it by the market value of your property minus the debt against it. For example, if you purchased a home worth $500,000 and made a 20% down payment of $100,000, you have equity of $100,000 in your home. 

The mortgage for your home will be the remaining $400,000. Your equity will keep increasing as you keep paying off the mortgage. Furthermore, as the value of your home increases over time, your equity will increase.

Types of Home Equity Loans

There are two main home equity loan types: a lump sum payment and a HELOC or home equity line of credit. 

• Lump sum payment: As the name suggests, it is a one-time lump sum you get from a lender based on the equity in your home. You must pay back the loan over time with a pre-determined interest rate. 

   

• HELOC: This is a line of credit based on the equity in your home, which means you can borrow as much or all of the maximum limit. If you borrow some of the total amount, you can make payments and borrow more. 

Following are some myths related to home equity loans.

Common Home Equity Loan Myths

1. Home equity loans and HELOCs are only for significant expenses.

It is a common misconception among new home buyers. You can only use HELOCs for big spending like high-interest debt consolidation, home renovations, or buying new property. 

You can use home equity loans for costs like medical expenses, starting a business, paying for your child’s education, buying a new car, and more. These types of loans offer better flexibility than other lending products. 

2. Applying for HELOCs or home equity loans is complicated.

A common misconception is applying for home equity loans/HELOCs will be complicated and time-consuming as it involves a lot of paperwork. While that may have been true in the past, there is a more streamlined process with the incorporation of online applications and digital document submissions. 

Furthermore, if you meet the requirements of home equity loans and have a good credit score, you can expedite the process. 

3. Home equity loans are unsecured.

Home equity loans are a secured form of borrowing money, as they are issued based on the equity in your home. Unlike credit cards, your home is the asset that secures your loan. The amount of money you can borrow depends on the equity you have built up in your home, which means the more significant the equity, the larger the loan. 

It also means there can be severe consequences for defaulting on payments, such as the lender foreclosing on your home.

4. Home equity loans significantly affect your credit score.

Financial institutions run a credit check each time you apply for a loan, which slightly chips at your credit score. Applying for multiple loans in a short time triggers several credit checks. It will impact your credit score. 

Applying for a home equity loan will also chip at your credit score, but not significantly. However, you can correct it by making payments on time. Furthermore, making all your payments on time can also improve your credit score. 

5. Home equity loans have high-interest rates.

A home equity loan is a secure loan with a lower interest rate when compared to unsecured loans. Secure loans reduce risks for lenders, while your risk increases. If you default on the payments, they still have a way to obtain their money. 

Additionally, you can repay these loans over a longer duration for easier monthly payments. 

6. You must own your home for years to build equity.

Another common myth with home equity loans is you must own your home for years to build up equity. In actuality, the equity in your home increases over time as the value of your home goes up in the market, and you keep repaying the mortgage. You have equity the moment you purchase it.

If you made a down payment on your home, that amount will be your equity in your home. Since equity is on the rise and fall in the market, during an upswing, you can build significant equity in a short amount of time.

5. Pre-approval is a guarantee.

Pre-approval is an initial estimate of the home equity loan amount, the key being “estimate.” Your lender can still renegotiate or even back out of the deal after a deeper analysis. Pre-approval for a home equity loan is not guaranteed, and you should not treat it as one. 

6. Home equity loans and HELOCs are only for those struggling.

While home equity loans and HELOCs are helpful for those in a financial bind, they can be issued to people with all kinds of backgrounds. Homeowners who are well off and want to invest in new property, make home improvements, or fund education can also opt for HELOCs or home equity loans.

The Bottom Line

With these common myths around home equity loans and HELOCs debunked, you, as a homeowner, can make an informed decision about the money you wish to borrow. Remember, your home and the equity in your home is an asset and can be used to borrow large amounts of money to impact your life. However, defaulting on your payments can have severe consequences, so do your research and be responsible. 

For more information about home equity loans or to start your loan application, call Canadalend at 1-844-586-0713 or contact us here.

When you pay for a portion of a property with a mortgage loan, rather than buying it outright, equity is an important matter to consider.

Equity refers to the fair market value of your home minus the remaining amount you still owe on your mortgage. So, it is essentially a measure of the portion of your home you have paid off and what that portion is worth. For instance, if your house is valued at $350,000, and you have $150,000 left to pay on your mortgage, your home equity would be $200,000.

A home equity loan is a type of financing option that basically functions as a second mortgage and involves borrowing against this home equity. In most cases, the total amount you can borrow could be up to 80% of the value of your home minus the current amount you still owe on your first mortgage.

Returning to the above example, if your home is worth $350,000, then 80% of this would be $280,000. Therefore, you could receive a loan of up to $130,000 after subtracting the remaining $150,000 that you owed on your initial mortgage loan.

How is a home equity loan different from a personal loan?

There are some similarities between home equity loans and personal loans. As they both require an approval process in which factors such as your credit score are analyzed, you have to go through banks or credit unions to get approved for either of them. For both types, you must pay them back gradually over a predetermined period.

However, one of the biggest differences between a personal loan and a home equity loan is that while a home equity loan basically involves borrowing from yourself, a personal loan involves borrowing a sum of money from a financial institution.

Thus, a home equity loan is borrowed with significant collateral secured against your home, whereas a personal loan is generally unsecured. For this reason, the interest rates you must pay on a personal loan tend to be much higher than those you pay on a home equity loan.

How to Tell Whether a Home Equity Loan or a Personal Loan Is Better Suited to Your Needs

If you are trying to decide whether a home equity loan or a personal loan is a better option, there are a number of different factors to consider as you make this decision. These include the following:

1. Do you have home equity, and how much of it do you have?

If you do not own a property, obtaining a home equity loan will not be possible since you will have no home equity to offer as collateral. Therefore, a personal loan would be your only option.

However, having your own property does not necessarily guarantee that a home equity loan is right for you either, as this largely depends on how much equity you have in your home.

Most lenders require that you have at least 20% equity in your home to qualify for a home equity loan, but the potential loan amount you could get will depend on your equity amount. So, it is important to figure out ahead of time if this amount will be enough to cover the costs needed for this loan.

2. What do you hope to achieve with the loan?

The type of loan that will be best suited for you also depends on your goal. For instance, if you only need to cover a one-time expense, such as the purchase of a new vehicle, and you know that this cost will be less than $50,000, then a personal loan may work.

On the other hand, if your aim is to pay for several home improvements that will be ongoing for at least a year or so, then a home equity loan may be optimal, as this loan type is better to use when the total dollar amount that you require is uncertain.

3. How is your credit score?

Your credit score is an important factor to consider in this process as well. Thus, it may be worth it to do a soft check on your score before applying for either loan type.

If you have an excellent credit score, your options are more open, as this score may help qualify you for better personal loan interest rates than the average person.

On the flip side, if your credit score is not great, a home equity loan may be the better option. Although this score is a factor that is considered when you apply for such a loan, the fact that the loan is secured against your house means you will likely still be approved.

4. What is more important to you: interest rates or risk?

Since home equity loans are secured, their interest rates tend to be lower than personal loans if you have a good credit score. Paying higher interest rates on a personal loan means that this option will likely be more costly for you over time. However, because this loan type is unsecured, you do not have to worry about the risk of losing any kind of collateral.

On the other hand, if you do not stay on top of your home equity loan repayments, you run the risk of the bank/loaner foreclosing on your house. This may be a risk you would prefer to avoid unless you are certain you will always be able to make your loan repayments on time.

How Canadalend Can Help You Secure a Home Equity Loan

After you have considered all the factors mentioned above, if you are still uncertain of whether to choose a home equity loan or a personal loan, Canadalend has many experts in this domain who would be happy to guide you in the right direction.

Our team of licensed mortgage professionals has a wide range of solutions for all your financial needs. We have the knowledge and expertise needed to explain the subtle differences between these options so that you can fully grasp which one is best suited for you.

We will be there to guide you through these important decision-making processes every step of the way, answering any questions you may have and offering valuable advice when you need it.

For more information about how we can help you secure a home equity loan, or to learn about how we can help you get the best possible interest rate on such a loan, call Canadalend at 1-844-586-0713 or contact us here.