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We all know that missing payments and carrying a significant balance on our credit cards are a big no-no. These kinds of actions can negatively impact our credit score and make future financial decisions more challenging.

However, did you know that many other factors can potentially damage your rating? Since our credit rating impacts almost all big purchases—from a car to a house—knowledge about factors that hamper your progress is essential. Mortgage broker services can also turn you away from financing and lending if your credit score is poor.

This article looks at some of the main things that are impacting your credit score (and what to do about it).

1. Not paying your bills on time

Let’s start with the basics. Even one late or missed payment has the potential to reduce your credit score drastically. It can dip 100 points lower if the bill is left unpaid for an extended period. Many people are aware of this impact, but where they trip up is they fail to consider that a bill includes your water bill, phone bill, and even services or employers you’ve hired.

How this essentially works is that missed payments are sent to third-party collection agencies. They then report them to a credit bureau like TransUnion or Equifax. It is essential to avoid reaching that stage because the longer the payment is put off, the more your credit score suffers.

How can I avoid this? Ensure that you set up automated bill payments. This way, you don’t need to worry about due dates and amounts for any recurring bills that you may have.

2. Overusing credit checks

Each individual is entitled to one free credit report a year from a credit bureau. However, if you surpass that limit and get it checked more than once, then you open yourself up to a drop in your rating. Many people sign up for multiple credit cards and financing options, thus leading to their credit being checked many times over. This makes it appear as if you are trying to accumulate a great deal of credit in one go. Financial institutions and mortgage broker services take this as a sign of riskiness.

How can I avoid this? Try to apply for only one line of credit a year. Whether that’s a credit card, mortgage, or home loan, try not to exceed the amount, and your credit score will not dip.

3. Extreme usage

The amount of credit that you utilize will also impact your credit score significantly. Lenders look at this through percentages. Someone with a high usage percentage is at risk of a dip in their score.

For example, if you have two lines of credit at a $10,000 limit for each, then you have a total usable credit limit of $20,000. If you find yourself spending $15,000 during a particular month, then your usage percentage shoots up to 75%. This is a sure-shot way to get your credit rating to drop.

How can I avoid this? Try to get your monthly percentage down to 30% at the minimum. The less you utilize your lines of credit and keep your rates low, the better it is.

4. You have a lack of credit history

Mortgage service lenders are more likely to provide financing to those who have an excellent financial history. They will look at your debt resolution strategies and assess your risk level. This then determines how much they will lend to you. Thus, it is essential to have a traceable history of purchases and paying bills. This represents a total of 15% of your score. The longer you have an account and statements to your name, the better. A lot of people take out new reports if they have a poor financial history. Even closing old credit cards can damage your credit! That is because your overall credit history gets cut short, which in turn affects your score.

How can I avoid this? If you’re looking for financing, then go with the credit card that you’ve kept the longest. Look for one with the most transactions on it, even if it is something as small as a recurring subscription purchase.

5. You have existing liens on your assets

Liens on any of your assets, such as your car or home, have the potential to impact your credit score poorly. Liens can be placed on an asset if you failed to make a payment to a service provider or lost legal proceedings. Those who’ve been sued may also find liens placed on their investments. A lien is one of the worst ways to impact your credit score. It can bring your score down significantly, thus affecting it as much as bankruptcy!

How can I avoid this? The best way to combat this is to make an immediate rectification. Be sure to pay off outstanding bills, service providers, and more. The longer you put off making the payments, the more your credit score suffers.

There you have it: 5 things that are majorly impacting your credit score! Many Canadians do not realize that small actions are reducing their rating. The good news is that there are ways to divert these mistakes. If you’re worried about your credit score and are struggling with getting approved for financing, then be sure to check out Canadalend.com. Our team offers a variety of lending options to increase cash flow that you can free up for renovation, investments, and more.

For more information on mortgage broker services, call Canadalend at 1-866-422-6536 or contact us here.

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.

If you’re a Canadian homeowner, then you’re probably all too familiar with mortgages. However, what do you know about second mortgages? Although over two million people in Canada have taken out a second home mortgage, many are still unclear about how this type of mortgage works.

Building up equity is a great advantage of owning property. If you’re able to use that equity sooner rather than later, then all the better! Second mortgages can be greatly advantageous. Here are 6 things you need to know to build up your assets.

1. What exactly is a second mortgage?

Let’s start with the basics. While a primary mortgage refers to the first loan undertaken by homeowners for property, a second loan acquired for the same property is called a second mortgage.

A second home mortgage is granted before the primary one is fully paid off. The total amount, however, depends on the equity of the house bought through the first mortgage. Here, equity refers to the value of a property minus mortgage debt and loans, and is calculated by subtracting the value of the property from the remaining balance left over from the primary mortgage.

Essentially, the higher your property equity, the higher the chances of getting a second mortgage. A second home mortgage is the loan that a lender will present to you based on the equity you’ve built up over the years. The key advantage to this kind of mortgage is that it will allow you to access up to 95% of the equity you’ve already built up just by owning the property.

2. There are different kinds of second mortgages

Second home mortgages can come in the form of different loans. The options allow homeowners to pick the one that is most suited for their existing loan and equity history. The two kinds of second mortgages are:

1. Home equity loans: This type of second mortgage will allow you to use the loan money only once. After the lump sum is used and spent, there will be no more money available to use.

2. Home equity lines of credit: The second kind of second mortgage functions like a revolving loan. The homeowner is extended a line of credit, which allows for flexibility in drawing out the money when needed, paying it down, and using it over and over in different circumstances.

3. The amount you can borrow varies

The total amount you can borrow for your second home mortgage is directly linked to how much existing equity you’ve built up for your property. For example, if the value of your home is $300,000 and you still have $250,000 remaining to pay off, then the equity for your home will be $50,000. The higher your equity, the more likely you are to qualify for that second mortgage. Lenders will usually have restrictions on the loan-to-value (LTV) ratio to take second mortgages into consideration.

Therefore, if you’ve built up some equity, a second mortgage is a great way to access money fast. However, since the rates and conditions attached depend on the lender you go to, make sure you do your research and find a lender who works best with your financial history. A credit score and income do not typically play an important role when qualifying for a second home mortgage, which is great for those that do not meet typical income or credit qualifications required by traditional institutions.

4. You can use your equity in different ways

A great advantage of buying a home is that you’ve accrued equity over time. Second home mortgages allow you to use that money to your advantage.

The options you have in how you wish to use your equity are limitless. You can use the funds for home improvements, education, and emergency funds. At Canadalend, our team has seen that a popular way to use a mortgage among Canadians is to make an investment, such as buying a rental property. Utilizing your second home mortgage is even more beneficial, as the entire interest on the loan becomes a tax deduction.

5. Second mortgages improve your credit

Borrowing money to pay off any existing debt can be challenging if you have bad credit. Those with low credit scores often think they will not be eligible for certain loans, but when it comes to second home mortgages, this is simply not true!

Taking out a second mortgage and gaining access to your equity is helpful in paying off any outstanding debts immediately, and preventing interest from adding up. Reach out to a mortgage lender who will let you take out your second mortgage, as many traditional banks will not let you take out the loan. You can then use that loan to pay off debt and build up your credit score at the same time.

6. It is easier to qualify with a private lender

Traditional banks and financial institutions often have severe rules in place, thus restricting the kinds of people who are able to apply for loans. Referring to a private lender for your second home mortgage can be beneficial because they often have less stringent conditions and guidelines in place. The regulations and internal policies are more flexible, which is great for homeowners with varying financial backgrounds!

Private lenders will also have guidelines for their loans that determine if the homeowner is a low or high risk. The better you can make your case for why you’d be a good risk for the lender to support, the better pricing you’ll get and the more you’ll be able to borrow.

To conclude, acquiring a second mortgage can be greatly advantageous. Not only does your credit score improve, but you can also get a lower rate, choose to pay off only interests and make your monthly rate lower, and use the money from the mortgage however you choose. Do you want to learn more about second home mortgages and how you can apply them to your life? Our team is happy to answer any questions and concerns you may have.

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