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As you may know, a second mortgage is a loan that uses a homeowner's property as collateral, similar to their primary mortgage. Just like with primary mortgages, a homeowner can choose to refinance their second mortgage and replace their current second mortgage with a new one, ideally containing better terms and lower interest rates. 

However, there are certain situations or circumstances where it would make the most sense for a borrower to refinance their second mortgage. In this article, our mortgage experts will detail when and why you should consider refinancing your second mortgage in Ontario. 

When it's wise to refinance a second mortgage 

As a Canadian homeowner, you likely have specific financial goals you want to obtain in the future. 

That said, if your financial situation has recently changed to allow for a refinance of your second mortgage, there are several specific advantages this option can offer you to help you manage your debt and improve your overall financial situation in the long run. 

These second mortgage refinancing benefits include: 

Lowering Your Interest Rate and Paying Less per Month

Perhaps you had poor credit history or something else standing in the way of obtaining a low-interest rate when you initially applied for your second mortgage. 

If your situation has improved and you can get a lower interest rate on your new second mortgage, this can help save you money in the long term. This is especially true of a fixed-rate mortgage. 

Obtaining Better Loan Terms

Refinancing your second mortgage can also give you access to more fiscally beneficial loan terms to suit your financial needs, such as a shorter or longer repayment period or, as aforementioned, a fixed interest rate which can provide you with more security regarding your future payments. 

Consolidating Debt

If you are currently dealing with other obligations containing high-interest rates, such as personal loans or credit cards, you can reduce them into a refinance of your second mortgage. 

Cashing out some of the equity in your home: You can choose to use a cash-out refinance on your second mortgage if you are in a situation where you need extra money for things such as home renovations or repairs, education fees, medical bills, and other potential expenses. 

Improving Your Credit Score

Refinancing a second mortgage can also help homeowners to improve their credit score, such as by securing better loan terms that enable them to make timely payments on their new loan (a habit that does not go unnoticed when it comes to improving credit).

Are you considering refinancing your second mortgage? Keep these things in mind.

No matter the reason or reasons you may be motivated to refinance your second mortgage, there are some essential factors that you'll need to take into account before officially choosing this option. 

Firstly, consider how long you plan to stay at your home, as a second mortgage refinance will not make much sense if you're considering selling soon. Ideally, you should only consider refinancing your second mortgage if you will likely still live at your house for the next 5 to 10 years. 

Secondly, you'll also need to determine the closing costs of your second mortgage since a second mortgage refinance will not be beneficial if the closing costs or other associated refinancing fees are greater than the savings you want to achieve. 

Last but certainly not least, you'll want to be as confident as can be when choosing your second mortgage refinance lender. Make it a priority to find a lender that can provide you with the best loan terms, and pay close attention to the interest rate and processing and closing costs. 

With all of that said, it's essential that you weigh the pros and cons of refinancing before making an official decision to refinance your second mortgage. Consider your current financial situation, long-term financial goals, and plans before taking the plunge (or speak to one of our mortgage lending experts at Canadalend). 

Take Advantage of Second Mortgage Refinancing Starting Today

Fortunately, finding the right lender when refinancing your second mortgage in Ontario can be easy when you choose from our team of experienced and personable private lenders. We at Canadalend.com can provide you with an optimized mortgage solution that is smart and beneficial to your specific circumstances, so you can start breathing a little easier.

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

Becoming a first-time homebuyer in Canada can be an exciting yet confusing process.  

When it comes to financing your mortgage, in particular, it's essential to be fully aware of your options to make a decision best suited to your financial needs and goals, as well as your home-buying experience in general. 

That said, the two types of mortgage lenders you'll have the option of borrowing from are private and traditional lenders (also known as banks). In this article, we'll compare these two types of lenders to help you better understand which kind of loan will be right for you. 

What is a Private Lender? 

A popular alternative to traditional bank lenders, private lenders are typically funded by banks, private investors, or a combination of both. These mortgage lenders usually offer short-term, interest-only loans to borrowers who don't necessarily qualify for a bank loan to obtain their mortgage. 

Due to the higher interest rates on money borrowed from banks and/or the expectations from private investors to make a healthy return on their investment naturally plays a role in raising the overall expenses for the private lender, which is ultimately applied to the borrower. 

When Should You Choose a Private Lender? 

Fortunately for many borrowers, private mortgage lenders aren't closely looking at your credit score when determining your eligibility for a loan. They are more so interested in the value of your property. They also aren't going to turn you down if you have a non-traditional income, such as being self-employed. 

Private lenders in Ontario are also considerably more flexible with the kinds of loans they provide, generally allowing for some customization. They are also more flexible with the types of customers they loan to due to not being as regulated. 

They will also be able to provide you with your loan in a much shorter time frame, as less documentation is required, and approvals are generally speedy. 

Besides being generally more flexible in many ways, private lenders boast greater expertise than traditional lenders. They will be determined to work with you to find the best loan possible. 

Simply put, a private lender will offer a more customized and personal approach with more room for understanding and will do whatever is necessary to help you meet your financial expectations. Anyone setting out to purchase a home in Canada deserves nothing less. 

What is a Traditional Lender? 

A traditional lender (banks) collects funds from depositors, paying little to no interest, then lends this money to borrowers at mildly higher rates to make a profit. Before the introduction of private mortgage lenders, these traditional loans were the only way for borrowers to obtain a mortgage in the past.

Mortgage loans from the bank require borrowers to pay the principal and interest. They are generally longer-term loans with a much more strict approval process, unfortunately making them a non-suitable option for many people. 

When Should You Choose a Traditional Lender? 

Borrowers who are in no rush to close on their home, are confident in their financial history and income with a strong credit score and have all of the required important documents ready for presentation are likely to be good candidates for a traditional bank loan (although they will still have the option of going with a private lender). 

Moreover, banks may offer loan terms longer than that of a private lender (for example, they may offer a 30-year mortgage vs. a private lender only willing to provide a 10-year mortgage), which may be a more attractive feature for a homebuyer.

It is worth noting, however, that borrowers choosing a traditional lender for their mortgage should ideally not be self-employed or have a non-traditional income. Going with a conventional lender makes qualifying for this loan type substantially more challenging. 

It is also vital for borrowers to understand that there will not be as much flexibility in obtaining a loan from a bank compared to a private lender, including being required to choose from more limited, fixed loan options in-house. Furthermore, while the interest rates are generally lower with traditional bank loans, more fees may be involved - and these can add up to quite a hefty total. 

Choosing the Right Mortgage Lender Doesn't Need to Be Daunting 

Our mortgage experts agree that obtaining a loan from a private lender can be much more convenient for a borrower. Getting private lender loans can be a perfect option for homebuyers who are not eligible for a traditional bank loan due to their financial history, current income, or other factors - and in many cases, it just makes more sense. 

Let Our Private Lenders at Canadalend Help You Obtain the Right Mortgage. It's easy to find the perfect mortgage for your new Ontario home when you choose from our team of seasoned private lenders in Ontario. At Canadalend.com, we can provide an optimized mortgage solution that is financially beneficial and custom-tailored to your needs.

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

Without a doubt, purchasing a home is one of the greatest financial investments that anyone can make in their lifetime. This is why choosing the most suitable mortgage is critical to every new Canadian homeowner’s buying journey.

Cash back mortgages, in particular, have become a progressively popular choice for borrowers who require extra funds to cover certain expenses, such as costs related to moving, closing costs, and other common fees associated with home buying.

However, it’s important to understand that this mortgage solution may not be the right move for every homebuyer, and you should first determine (ideally with the help of a professional) whether you are a suitable candidate for a cash back mortgage before making any major decisions.

With that being said, in this article, we will be helping new homebuyers understand what a cash back mortgage is and the types of homebuyers they are most appropriate for.

What is a cash back mortgage?

A cash back mortgage allows borrowers to obtain a certain amount of money back from their lender during the finalization of their mortgage loan. The borrower will typically receive the cash back funds instantly upon the mortgage closing date.

Cash back mortgages are most commonly used to cover closing costs and other charges, purchase furniture and appliances, helping to fund renovations and upgrades or cover the costs of general unanticipated expenses that follow the purchase of a home. 

Additionally, cash back mortgages are often used to pay off the debts created by high interest, such as with a credit card or other type of personal loan.

How much money am I eligible to receive with a cash back mortgage?

When it comes to the amount that borrowers are eligible to receive with a cash back mortgage, it will depend on the size of the loan, with a lump sum of generally 1%-7% offered (with 5% being the most common).

For example, let’s say you’ve been approved for a $500,000 mortgage, and you’ve arranged to receive 5% cash back. Upon your mortgage closing, you will receive a lump sum of $25,000, with a mortgage balance of $525,000, even though only $500,000 is technically registered as your mortgage. The $25,000 is registered as a loan.

Furthermore, there may be a maximum amount that you are eligible to receive as per the lender’s rules. The funds will always be tax-free, although the mortgage interest rate will generally be around 1.75% higher than a conventional mortgage. Additionally, if the mortgage is broken early, you will be required to return some of the cash back amount.

As soon as a borrower’s mortgage has been finalized and they receive their cash back funds, they’ll be required to start making mortgage payments. The cash back value will be included in the mortgage payment balance, with each payment automatically contributing to its amortization for 25 years.

Who is a suitable candidate for a cash back mortgage?

A cash back mortgage can be a suitable option for many types of borrowers, from first- to second-time homebuyers to borrowers who are interested in refinancing their current mortgage.

While it is true that a cash back mortgage may be an excellent option for some, unfortunately, like with all types of loans, not everyone can qualify for it. In fact, a potential borrower will only be considered as an eligible candidate for a cash back mortgage if they possess a minimum credit score of 650, have a low debt-to-income ratio, have a stable income, and are applying for the cash back home loan as an owner-occupier (never as a renter).

At the end of the day, a cash back mortgage can be a considerably attractive option for many homebuyers in Canada, especially if they could use some extra funds to help with the associated costs. However, as always, it is important to do your research and seek help from a professional before making any official decisions about any mortgage option.

The good news is that our mortgage experts at Canadalend.com would be pleased to consult with you to determine whether a cash back mortgage is the right choice or if another kind of mortgage would be more beneficial for your financial situation.

Ready to purchase your home with a cash back mortgage?

Our mortgage lenders in Ontario are ready to lend a hand. Canadalend.com can provide you with the financing that’s best suited to your needs, whether it be a cash back loan, refinancing, a home equity loan, a second mortgage, or a reverse mortgage.

If you’re interested in purchasing a home in Ontario and want to learn more about our mortgage solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Mortgage refinancing can be a wise financial decision for Canadian homeowners looking to reduce the cost of their monthly mortgage payments, shorten their loan term, or simply access the equity they have already built in their homes.

However, mortgage refinancing may not always be the best answer for every homeowner, and there are a number of factors to consider before deciding to go this route.

In this article, we will explore several do’s and don’ts of mortgage refinancing so that you can maximize your cost savings while avoiding common mistakes that borrowers often make.

Mortgage Refinancing Do’s and Don’ts

DO:

Put your best foot forward as a borrower candidate.

As lenders are more cautious today than ever when it comes to making deals with borrowers, you will need to have proof of steady income and employment ready to show your prospective lender. If you happen to be unemployed at the time of your mortgage refinancing application, put together any evidence you have that can demonstrate a history of consistent income prior to your unemployment.

Moreover, you should also make sure that you have a strong credit score before proceeding with your mortgage refinance. Fortunately, there are several ways you can help to strengthen your score before starting your mortgage refinancing process, if necessary.

Shop around to find the best deal possible.

When finding a lender for your mortgage refinance, don’t simply pick the first one you stumble upon that seems like the right fit. It’s important to explore all of your options until you know that you’re going with the lender and agreement that suits you best and is capable of saving you the most money possible.

Know what your closing costs will be.

It’s important to always be in the know about what your closing costs will be. This is because the refinancing process will include certain fees, many of which may actually end up costing you more money, thus going against your goals.

These additional costs include registration fees, legal fees, and prepayment penalties, which can be the heftiest of all (but will only be applied in the case of breaking a term too early or having too many months remaining on either a fixed-rate or closed mortgage).

Have all of your necessary documents ready.

It’s important to have all of your appropriate documentation gathered and ready to present when applying for mortgage refinancing, as there will be no time to waste, and you’ll want to lock in your rate as promptly as possible.

These documents include your credit score, a recent mortgage statement provided by your lender, proof of employment via pay stubs, bank statements and/or a letter of employment, proof of income via tax documents, an estimate of your property’s current value, as well as a recent copy of your property tax statement or Final Property Tax Bill.

DON’T:

Refinance at an inopportune time.

Homeowners should only refinance the mortgage of their property when it is financially beneficial to do so or when more savings are guaranteed in the long run. Additionally, it is not advised to refinance if you are working with less than 20% in home equity at the time of consideration.

Fail to perform a background check on your lender.

Unfortunately, some lenders will offer very low and attractive rates, only to have a hidden agenda to take advantage of you. This is why it is crucial to perform a background check on your prospective lender and lending institution before going through with a deal, in addition to performing a thorough evaluation of the terms of the mortgage you are being offered (never overlook the fine print).

Fail to lock in your interest rate immediately.

In the world of mortgages, interest rates are constantly fluctuating, with the potential to be low one day and high the next. That’s why we strongly advise borrowers to lock in their mortgage refinance rate as soon as possible, as it will then no longer be at risk for a changing (and potentially higher) rate while their loan application is being processed.

Neglect to thoroughly read and understand your refinancing agreement’s terms.

Never rush reading through each legal document pertaining to your mortgage refinancing application and agreement. Again, always pay careful attention to the fine print and the clauses outlining critical details, including the mortgage term and interest rate, amortization period, options for prepayment, penalties, and others. Moreover, if you’re unsure about anything in the terms, ask your lender or broker about it.

In conclusion, mortgage refinancing can be a very valuable option for Canadian homeowners looking to improve their financial situation. By doing the necessary research and following the aforementioned do’s and don’ts of mortgage financing, you can make informed decisions while dodging common mistakes that can be quite easy to make.

Interested in refinancing your mortgage?

Our mortgage lenders in Ontario are here to lend a hand. Canadalend.com can provide you with the financing best suited to your needs, whether it be mortgage refinancing in Ontario, a home equity loan, a second mortgage, or a reverse mortgage.

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