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If you own a home, your mortgage will probably be one of your largest financial obligations. The mortgage interest rates are still very low compared to where they were before the pandemic, despite expectations that they will increase. If you want to refinance and save money, then now is still a good time to do so.

According to the current interest rate situation, a 30-year fixed-rate refinance comes with an average interest rate of 3.32 percent, while a 15-year fixed-rate refinance comes with an average interest rate of 2.68 percent. Refinancing is still a good idea even though interest rates have not fallen to as low as they were in the middle of the pandemic. Keep reading to find out if you should refinance now and how to know if this is right for you.

Low Interest Rates: What it Means for You

Your chance to capitalize on savings at the current refinancing rates will end soon as interest rates rise from the rock-bottom level they reached during the COVID-19 pandemic. Despite the fact that mortgage rates fluctuate from week to week, and sometimes there are unexpected drops or increases, the general trend points to increasing interest rates in the future. The good news is that interest rates are still below pre-pandemic levels, so those interested in getting financing may be able to score a good deal if they act quickly.

Refinancing: What is it?

Taking out a new loan to replace an existing one is referred to as refinancing a mortgage. While you keep your house, the mortgage terms could change.

Refinancing is commonly done for the following reasons:

• Lowering your interest rate

• Changing from adjustable to fixed rates

• Private mortgage insurance (PMI) can be eliminated

• Your mortgage can be shortened to allow you to repay it sooner

• If you want to lower your monthly payment, you can extend the term of your mortgage

Refinancing: How does it work?

By refinancing your mortgage, you replace your existing loan with a new loan. You will have to go through the same steps as you would for a new home: the loan application process, the underwriting process, the home appraisal process, and the closing process. The difference is that you’ll keep your current residence, instead of shopping for a new one.

A mortgage application will require you to fill out a form and meet lender requirements in areas like credit score, debt-to-income ratio, and employment history. During refinancing, you can go with the lender you originally chose or find a new one. Refinancing is also contingent on you having enough equity in your home, which is typically at least 20 percent.

Lastly, don’t forget to budget for closing costs and fees, which can be between 3 and 6 percent of the loan amount. Creating a budget in advance will allow you to determine whether the interest you’ll save will exceed closing costs.

How do you determine a good mortgage refinance rate?

A “good” refinance rate does not have a set standard. It is generally suggested that a refinance rate be at least 1 percent lower than your current mortgage rate for a refinance to make sense. However, you must crunch the numbers to fully grasp whether a refinance is worthwhile for you.

Calculating the break-even point is one method of doing this. Due to the closing costs and fees associated with refinancing, you want to ensure that the amount you save from a lower interest rate surpasses the amount you pay in these fees. By calculating the break-even point for a refinance, you can determine how long it’ll take to recoup the upfront costs.

Make sure you shop around with multiple lenders in order to find the best refinance rates if you decide to do so. Despite the low interest rates currently available, keep in mind that specific interest rates could differ depending on factors such as your credit score and debt-to-income ratio.

Pro tip: Examine your income stability before you consider refinancing. Take your time before refinancing your mortgage if you aren’t fully secure.

The Benefits of Refinancing Now

If refinancing is on your financial agenda, now is the perfect time. Let’s look at two reasons why refinancing makes sense now.

Interest Rates Are Low

Refinance rates today are not as low as they were in the early months of the pandemic, but they are still low compared to before the pandemic. The window of opportunity may be closing soon, however, because experts predict interest rates will rise. You are more likely to save if you lock in your rate as soon as possible.

There Is Hope for Economic Recovery

Some homeowners did not refinance their homes in 2020 as a result of the pandemic-induced recession and economic uncertainty that followed. Due to the extended refinancing process, some people held off until things were more stable because it could take months to complete the process. However, the economy is slowly beginning to recover. The chance to refinance may now be available for those who weren’t able to do so last year.

Rising Equity Should Make Refinancing Easier

The recent increase in home values across Canada could make cash-out refinancing a good idea in 2022. You borrow the exact amount you owe on your existing mortgage when you refinance normally. Cash-out refinances allow you to borrow more than the remaining mortgage balance and get the rest in cash, which you can use for any reason. When you have more equity in your home, a cash-out refinance is easier, and you might be able to borrow more at a more affordable interest rate.

Mortgage Refinancing: When to Do It

Calculate the numbers yourself to determine whether you should refinance. You should look for savings of at least half a percent, and you should be confident you can pay your new monthly payment for the entire term of the loan.

You should also ensure you’re going to be able to recoup the refinance cost by staying in your house long enough. You might not want to refinance a house that you plan to sell soon if you have to pay thousands of dollars in closing costs.

Your refinance time should be based on your personal financial goals and circumstances. You might be able to save on your monthly mortgage payment if you can arrange refinancing at a lower interest rate and you can afford the closing costs. If you are uncertain about your finances or your house plans in the coming months, you might want to put off pursuing a refinance for a while.

For more information on mortgage refinancing in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

It may seem tempting to pay off your credit card debt all at once if you have a lot of it. Some people find the best way to do so is with a home equity line of credit (HELOC). A home equity line of credit can be used to pay off old debts and consolidate new ones, and HELOCs usually have much lower interest rates than credit cards. However, there are risks associated with using a HELOC, including losing your home. The following information will explain how to make use of a HELOC to repay credit card debt.

What is a HELOC (Home Equity Line of Credit)?

If you have equity in your home, you can use a home equity line of credit, or HELOC, to get funds. Home equity lines of credit do not require that your home be fully paid off.

A HELOC works by providing you with a line of credit based on a percentage of the value of your home, minus what you owe on the house. You can get $300,000 in credit if, for example, your home is worth $800,000, but you still owe $100,000. By taking out a HELOC at 50 percent of the value of your home and subtracting the $100,000 you owe, you can obtain $300,000.

You can borrow money from a HELOC, pay it back, and borrow again. Revolving credit is similar to a credit card. The key difference between a HELOC and a home equity loan is the fact that the latter offers a single lump sum that must be repaid within a set timeframe.

An average HELOC lasts for about 25 years, including both a draw period and a repayment period. It is possible to draw money from your line of credit during the draw period, which can last for up to 10 years. In the repayment period, which lasts through the remainder of the HELOC’s term, you will no longer be able to withdraw money from the line of credit and must repay any debt you incurred.

During both the draw and repayment periods, you will be paying interest on your HELOC, so shop around beforehand to secure the best interest rate.

Some Questions to Ask Lenders

• If you want to qualify, what do they require from you?

• Can they offer you the best rate of interest?

• If your interest rate increases, how much notice will you receive?

• What fees are involved?

Can you consolidate credit card debt with a HELOC?

Consolidating your credit card debt and paying it off quickly with a HELOC is a commonly used method. You can pay off your credit card debt by applying for a home equity line of credit. The money you owe on your HELOC will still have to be paid off, but you will have a longer period of time in which to pay it off and the interest rate on your HELOC will likely be lower, saving you money in the long-run.

Benefits of Paying Off Credit Card Debt With a HELOC

If you have multiple credit cards, you can pay off all of them at once. A HELOC lets you pay your credit card debt entirely at once instead of in bits and pieces (like via the snowball or avalanche methods). Using a home equity line of credit to pay off your credit card debt can provide significant mental relief if you are currently overwhelmed by debt.

You Will Have a Lower Interest Rate

Most credit card’s charge interest rates around 17 percent. A typical home equity line of credit has an interest rate of 6 percent. It is important to remember that HELOC interest rates are variable, which means they can go up or down depending on the prime rate. Yet even if your interest rate goes up, it will still be much lower than credit card rates.

Disadvantages to Using a HELOC to Repay Credit Cards

If you don’t practice healthy financial habits, you may find yourself right back in the same situation once you pay off your credit card debt. Nobody pays off their credit card debt with the intention of getting back into debt right away, but you may be back right where you started. A HELOC can be used to pay off your credit cards, but if you then accumulate a bunch of credit card debt, you’ll have to pay both the credit card debt and the HELOC debt. Depending on your financial situation, that might exceed your capabilities.

Your Home May Be at Risk

HELOC debt is secured debt, meaning the lender can claim whatever you put up as security if you fail to pay it off—in this case, the home. In the event that you don’t pay back the principal within the designated time period, you run the risk of foreclosure when you take out a HELOC.

Can I cancel my home equity line of credit?

It is not possible to cancel your home equity line of credit until you have paid it off. You usually have 10 days to cancel your loan if you provide written notice. For more information about cancelling, see your terms and conditions.

The Bottom Line

There are other tools available that can help you consolidate and pay down your debt quickly. During an introductory APR period, you may be able to pay off existing credit card debt with a balance transfer credit card or zero interest credit card. Once you start working with a reputable debt counselling service, this can also make it easier to manage your finances and pay off your debt over time. In order to repay your debt, you have a variety of options, one of which is taking out a home equity line of credit to pay off your credit cards.

For more information on a home equity line of credit in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

Have you been thinking about investing in property, but don’t have the funds? You can apply for a loan from many lenders if you meet their requirements. Nonetheless, you should explore all of your borrowing options, and ensure you work with only the best lenders before agreeing to an agreement.

Private lenders are a popular choice in the real estate market, and they have many advantages. Prior to taking the plunge, you need to educate yourself about private lenders if you have never dealt with one before. You will benefit from a private lender in the following ways:

1. Generally, private lenders have fewer requirements

The paperwork and requirements are one factor that discourages people from applying for loans. Compared to traditional lending institutions, private lenders have much fewer requirements. The only requirement for borrowing against a property is sufficient equity, enough cash for payments, and a sound exit strategy.

When you have few requirements, it will be easier for you to get your loan approved. The majority of lenders with a lengthy list of requirements will decline loan applications. By making qualifying for a loan difficult, they hope to keep away borrowers, as opposed to private lenders.

2. Flexible loans are offered by private lenders

Different variables need to be considered when applying for a hard money loan. Examine the interest rate, loan fees, and other requirements. A private lender allows you to negotiate all these terms, and you can choose the ones that are most advantageous to you. Several lenders are available, so you can compare their terms until you find the one that suits your needs. With such flexibility, these loans are among the best options available.

3. Control over the process is 100% yours

You determine the terms of your real estate loan when working with a private lender. Generally, the type of loan allows you to control the process to an extent. You have the ability to make every decision you want without sacrificing anything. It is not necessary for either you or the lender to adhere to strict policies outside of the company. You can negotiate all of the terms of the loan facility with the lender; he or she will determine the best interest rate. You can use this to establish a more positive relationship with your lender.

4. Collateralizing property with real estate

A borrower is more confident in his or her loan if they have collateral. As well, private lenders don’t have to be concerned when they lend huge amounts since there are backup plans in case things don’t work out. In addition to being able to get a large loan amount with collateral, real estate loans are also faster and easier to get approved for.

5. Improvement of creditworthiness

Private lenders can increase your credit score if you take out a loan from them. Your future financial history can be greatly impacted by debt depending on the situation. Your lender will have more trust in you if you borrow and pay on time. A positive track record for 12 months is often required by lenders to ensure a good credit history with private loans.

You will have better opportunities to get a new loan if you have a good credit score. Those who want to improve their credit scores should make sure they don’t miss any payments.

6. Getting a loan approved and funded quickly

Private lenders are best because they provide your loan application approval quickly, and the money appears in your account swiftly. Your loan could be approved in just a few weeks, and you’ll have the money in your bank account within hours. Your only task is to make sure everything is in order during the application process, and arrange an appraisal as soon as possible.

In the loan process, private lenders look at factors like the property you own, the down payment you made, and your equity. The exit strategy for the property is also examined, as well as the cash reserve for the loan payment. The money will be sent to you immediately if all of these appear reasonable.

7. Private lenders can provide funds to projects if they cannot otherwise be funded

Traditional lenders like banks are hesitant to finance projects that private lenders are willing to finance. A fix and flip loan, for example, does not typically work with traditional bank financing. Investors purchase properties, do renovations, and then sell or refinance them using short-term loans.

These short-term loans may not be offered by other lenders because they must pay interest over the long term. Investors may also need to take out private loans if the property is in poor condition to qualify for a bank loan.

8. Simpler process for approving loans

The process of applying for a loan is simplified with fewer requirements. So long as consent between two parties is present, the loan process is relatively straightforward for both lenders and borrowers. Borrowers are able to take advantage of better facilities and traditional loan advantages.

Additionally, the lender would benefit from this, as nothing would slow down the issuance of loan funds since the collateral can be used immediately. These benefits translate into flexible and straightforward hard money lending for both parties.

Summary: Lenders of Private Equity Come to the Rescue

Investors in real estate have the best chance of financial success when they take out a loan from a private lender. Understanding all the requirements and the risks involved is vital before submitting an application. By shopping around, you can find various lenders, compare their terms, and choose the most appropriate one.

When buying property right away, a private lender will close your loan faster, and with less aggravation for you. The borrower will also be able to grow their business faster, which will justify the additional short-term costs associated with a private lender.

Real estate investors should not select the lender based solely on its lowest cost. It can take weeks or even months for a potential borrower not to qualify for a bank loan to receive a decision, whereas a private lender can approve them in a matter of days and then fund the loan.

There is a possibility that the most affordable loan at the beginning may be the most expensive one in the end.

To learn more about private lenders in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

Recent modifications to Canada’s mortgage regulations have forced homeowners to borrow from alternative lenders, often at higher interest rates than they can obtain through a bank.

There are several misconceptions about private lending that lead some developers and investors to avoid it. Private lending has a reputation for being slow, costly, and inflexible. Since several lenders entered the market without the resources to deliver on their promises in the past few years, many of these misconceptions have grown.

Many of these new lenders have exited the market in recent months, leaving the way open for experienced lending businesses to benefit. To secure funding from this sector, you are going to have to take the right approach. Private lending is much faster than banks when it is handled correctly.

Banks typically pigeonhole each transaction based on its credit policy, and don’t evaluate each on its merits as do private lenders. Private lenders aren’t controlled by banking policy.

Private lending is perceived as being more expensive because of the flexibility of approvals. However, faster project funding is possible through private lending, and is essential in some cases where the slow approval processes by banks can cause developers to lose out on great opportunities. 

In spite of the higher interest rates, you may increase your profits at the backend of the transaction by being the first to market as you start your project earlier in the cycle. In addition, it is usually a short-term loan (at 6-24 months), so the effect of higher interest rates (that are more competitive now than ever before) is not as dramatic.

It’s not uncommon to use private lending as a bridge to bank financing. A direct approval system is another benefit of private lending—you are dealing directly with the people making the decisions.

The non-commercial approach used by banks overcomplicates transactions, and does not provide the transparency expected by developers. On the other hand, you have certainty of outcome with private lending and the contract is fixed.

Buying Your First Home

How do private lenders work?

A private lender may be a corporation that pools investors’ capital or an individual lending their own money.

Unlike banks and credit unions, private lenders do not take deposits, so they are not subject to the stricter regulations that govern the way they lend. This enables private lenders to make riskier loans.

Investing in properties is a great idea if you have access to private money lenders. Borrowers view investment properties in the same way that private money lenders do: as an investment.

Private Loans: 6 Misconceptions and Truths

Misconception 1: A private lender is unethical and offers loans illegally

Truth: The borrower’s property as collateral secures your investment. Loans secured by real estate must be originated by licensed mortgage brokers. Provincial lending regulations apply to private lenders. There are rules that private lenders must follow despite not being regulated as strictly as banks. The process of obtaining a private loan is managed by a lawyer. Mortgage Commitment letters drafted by lawyers are required to be signed by the borrower and lender.

Misconception 2: Taking out private loans is the last resort for desperate borrowers

Truth: It’s likely that this misconception arises since private lenders look at a property’s marketability and overall value rather than the borrower’s credit history. When the equity in a deal is sufficient, private lenders are less concerned about other shortcomings. The majority of private loan borrowers are successful and knowledgeable individuals or businesses who happen to have financial circumstances or investment opportunities that do not meet the strict criteria of conventional lenders.

Borrowers Choose Private Loans for Many Reasons:

• A prime lender or bank isn’t willing to finance an unconventional property you want to purchase.

• An approval process that takes a long time is inconvenient for you.

• Conventional lenders refuse to lend to you due to your poor credit history.

• The loan only needs to be for the short term.

• You cannot get a traditional mortgage because your income is not verified.

Misconception 3: Lenders in the private sector are just loan sharks

Truth: Business professionals who are successful and experienced are private lenders who are willing to invest their own money in loans that they believe will provide the highest possible return on investment. Having control of their funds, they can choose how to use the loans. Since private lenders are usually small companies, they rely heavily on referrals, word-of-mouth, and their reputation to attract customers. As a result, it is easy to distinguish honest private lenders from the dishonest ones as long as you do your homework.

Misconception 4: A private loan is too expensive

Truth: Obtaining funding quickly enough (for example, to take advantage of a discounted purchase price or to dissolve a partnership that needs fast cash) often cancels out the higher borrowing costs of private loans. In order to determine whether a private loan would be beneficial to your deal, you must consider all the lending factors.  

Misconception 5: Private lenders give risky loans

Because private lenders do not lend someone else’s money (as opposed to employees of institutional lenders), they are less likely to approve truly risky loans. 

Truth: Typically, a private lender will only approve a loan against a property whose value can be determined with a reasonable amount of confidence, regardless of how financially savvy or experienced the borrower appears to be, or how strong his or her track record may be. Nevertheless, private lenders may be perceived as risky because they understand local markets well and may approve loans that other lenders may deem too risky.

Misconception 6: Lenders in the private sector try to beat banks

Truth: There is no competition between private lenders and banks, nor are they intended to replace them. It is likely that a private lender can assist you if you cannot get the funds you need from a bank. When your credit rating is less than stellar, the stress test cannot be passed, or you need flexibility in the loan structure, then private loans are especially worth considering if you own your own property.

For more information on private loans in Ontario, call Canadalend at 1-844-586-0713 or contact us here.