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Most homeowners will be familiar with the concept of home equity: you take out a home equity loan, convert your equity to cash, and, voila, you have an effective way to achieve many of your financial goals. Whether it's starting a business, funding education, or investing in a property, you'll be able to do it all with your home equity.

However, is it too good to be true? In this article, we break down the pros and cons of home equity in Ontario. Let's get into it.

What is a home equity loan?

Let's start with the basics. In Ontario, a home equity loan is a second mortgage that allows homeowners to tap into the equity existing in their home. Equity is understood as the difference between your home's value and your mortgage balance.

How does the loan work? Well, it is paid out in a lump sum and remains secured by your home. The loan repayment term can range from anywhere between five to 30 years. Lenders typically have strict qualifiers for home equity loans. Some of the standard requirements can include higher credit scores and less flexibility on debt-to-income ratios. 

There are two primary kinds of home equity loans:

1. Fixed-term loan: This is a one-time lump sum loan. It is paid back only every month with fixed and consistent payments each month.

2. HELOC: Home Equity Line of Credit, or HELOC, is a line of credit that provides access to funds at a competitive interest rate. Lenders typically need a 20% equity down on the home and a good credit rating as well.

Home equity loans are a popular choice because many homeowners are sitting on a gold mine. As you're paying off your mortgage, you're accruing value on your house, which can then be put to good financial use. And that's where home equity loans come in!

The Pros of a Home Equity Loan

Let us now look at some of the main advantages of taking out a home equity loan. Some of the pros include:

1. Fixed interest rate: Home equity loans have a locked-in interest rate, unaffected by the general rising and falling of interest. This rate will be set for the loan duration, which is extremely handy as it allows homeowners to budget accordingly.

2. Lower borrowing costs: Borrowing rates on personal loans, credit cards, and other lines of credit can often be high. This is because they are unsecured. With home equity loans, you'll be using your house as collateral, which results in lower borrowing and interest rates.

3. You can use the funds in many ways: Once you take out a home equity loan, you'll have the freedom to use the funds in virtually any way you please. Whether to finish your college degree, use it as retirement income, renovate your home, manage debt, and even cover emergency expenses—your home equity loan will have you covered. You can also use it as a starter to feed your other investments or combine your bill payments. Thus, it is an excellent option for homeowners looking for cash for a myriad of purposes.

4. Potentially tax-deductible: Sometimes, interest payments on home equity loans may be tax-deductible. This depends on which province you're in, but you may qualify to deduct your interest payments from your gross taxable income.

The pros of a home equity loan make it very compelling! Let's take a look at some of the cons.

Different Ways to Use Home Equity Loans

The following are different ways you can use home equity loans in Ontario:

1. Manage unexpected expenses: You can use home equity line loans to manage your unexpected expenses such as job loss, sudden injury, or other emergencies. 

2. Consolidate debt: If you need to consolidate high-interest debt (such as a credit card) then a lower interest rate combined with a payment plan can help you manage it better (note: it won't completely solve your debt problem). 

3. Property or commercial investments: Some individuals choose to use the money they get from the loan to put into investments. Make sure you assess the risk of this before doing so. 

Taking out a loan of any kind is a huge decision! And with your house as collateral, this one will even be a bigger decision. 

If you don't have much cash saved up, don't worry. You likely have a lot of home equity that you can use for a variety of purposes, such as the ones listed above. A home equity loan is a wise choice for such homeowners requiring the extra finances for any of life's curveballs. It's fast, easy, and less expensive than refinancing. At the end of the day, though, only you can tell if the pros outweigh the cons for this significant financial decision.

Our only suggestion is to set yourself up for success, which means going with a reputed and effective home equity loan broker in Ontario. After all, you worked hard for your home, so why not let it work for you?

At Canadalend.com, we provide a locked-in fixed rate with lower interest rates compared to credit cards. Our expert team looks at your home value and outstanding loans rather than other qualifications such as credit history or citizenship. Get started with the perfect loan today! For more information on home equity in Ontario, call Canadalend at 1-866-422-6536 or contact us here.

Life happens to all of us. We get busy, don’t have extra cash on hand or simply forget to make our mortgage payments some months. However, this seemingly simple act of missing a payment can have a profound impact on your credit history. It can quickly ruin your score - and the more payments you miss, the more it damages your overall credit history.

And it isn’t just credit you need to worry about. You may be forced into situations like foreclosure or power of sale. Banks and other financial institutions may turn you down for extending lines of credit. If you’re interested in finding out the consequences of missing a mortgage payment, keep reading.

What are mortgage arrears?

Arrears are when you’re behind on meeting your financial obligations or debts. Mortgage arrears refers to being late on making monthly mortgage payments. Remember, your home is more than just shelter. When you get into mortgage arrears, your ownership of your property can be potentially affected.

When does your mortgage go into arrears, you may be wondering. It takes three to four months of missed payments to go into arrears. However, it does depend on the lender or bank you’re working with. It can be measured by the frequency of prices too. For example, if you’re making weekly payments, it will take two to three missed payments to go into arrears. Be sure to check with your lender on your clauses so you can make payments in time to avoid arrears.

How do missed mortgage payments affect credit score?

One of the most significant consequences of a missed mortgage payment is a poor credit score. Mortgage lenders will report your payments to Equifax or TransUnion, the main credit bureaus in Canada. This holds for ‘positive payments’  i.e. when you make the payment on time and in full. Even one missed payment will appear on your comprehensive report. 

Mortgage payments are coded as an ‘M,’ with the numbers corresponding. An M1 means that you’re making your payment on time and that the amount is up to date. M2 means you’re 31-59 days late, while M3 means you're 60-89 days late. Essentially, the higher up you go, the more challenging it will be for you to get loans and other lines of credit quickly. 

What are some other downsides to missing a payment?

A mortgage is a legally binding contract. So not adhering to its terms is considered a breach of contract. When your mortgage goes into arrears, your lender is at liberty to carry out various actions. This can include:

• Suing the borrower because they have failed to make the due payments

• Taking possession of the property

• Foreclosing the property

• Selling the property (power of sale)

Your lender will notify you of your options if you end up missing a payment. This gives you time to make the payment, if possible.

How many mortgage payments can I miss?

Technically, none. Lenders can bring legal proceedings after 15 days of non-payment have passed. However, lenders prefer to communicate from the get-go and help find a solution rather than proceeding with confrontation. Ask your lender if they can offer you a repayment plan or if you can have a little more time to take out mortgage arrears loans. There is typically no grace period, and lenders do take missed payments very seriously. 

When you’re 90 days behind on payments is when most lenders will start legal proceedings. They usually do this through foreclosure or power of sale.

What can I do?

Missing a payment can happen to all of us. It is what you do after a missed payment that matters. Try to take speedy action. One of the best courses of action is to take a mortgage arrears loan to help consolidate your payment. This will help if you’re got a power of sale or foreclosure notice or if your bank won’t renew your mortgage term because of missed payments. It will also help with the resolution of late payments.

In addition, those who miss a couple of payments often see a snowballing effect, where the costs (along with other bills) start piling up. Using professional help to solve your financial problems will be critical as you could end up losing your home and access to other lines of credit due to your poor credit history. So taking out a mortgage arrears loan will help you keep your head up and tackle all your payments to prevent the snowballing effect.

Mortgage relief isn’t a decision to be taken lightly. Make sure you speak to a reputed and trusted mortgage lender who will work on personalized plans to resolve your problems for you.

Missing a mortgage payment and the ensuing credit trouble can be daunting and scary. However, we believe that you shouldn’t live your life weighed down by anxiety about your finances. 

If you have current mortgages or taxes in arrears, Canadalend.com experts can help provide relief from your financial burdens. Whether you decide to take out a second mortgage or a home equity loan, mortgage arrears loans are the best way to resolve your mortgage payments quickly.

We offer personalized loans to help fix your late payment problems. The licensed independent mortgage agents at Canadalend.com will walk you through the options to get back on track with the right financial solutions.

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

Do you have massive student debt you need to return? Perhaps you have mounting credit card bills that you’re finding impossible to pay back. For anyone considering paying off significant expenses with loans, you’re in luck. There are other options out there with better consequences on your financial history. One of the most viable options for those with high debt is taking out a second home mortgage.

What is a second mortgage, you may be asking? Well, in this article, we walk you through everything you need to know to determine if this option is the right one for you. Keep reading for more.

What is a second home mortgage?

A second mortgage is a collateral home loan. It is typically taken out by homeowners who have built up equity on their first property but have not yet fully paid off the first mortgage. Thus, by borrowing against the equity of the first property, homeowners can get significant advantages - all without refinancing the existing mortgage! The line of credit is called a ‘second’ mortgage because the loan is taken out on a lien on the property.

This mortgage is also known as a home equity line of credit or HELOC. 

How is a second mortgage used?

The great thing about a second mortgage is that it can be used in several different ways.

It is often used for debt alleviation purposes, such as paying off debts, loans, credit cards, outstanding bills and more. But it can also be used to cover more considerable day-to-day expenses. Homeowners can use a second mortgage to buy another property, fund their home renovation, pad up a college or education fund and pay off other expenses. You can also use it to invest in your business, cover wedding expenses or buy a car!

It can even be used to get some cash on hand or stop a power of sale. Thus, if you’re considering getting a second mortgage, it will likely come in handy no matter your needs or goals. And if you’re looking to cut your monthly payments by up to 50%, be sure to reach out to a reputable lender like Canadalend.com.

How to qualify for a second mortgage?

The criteria to qualify will likely determine if a second home mortgage is the right move for you. As with other loans, lenders will look at various factors to ensure you’ll pay back the payments consistently and promptly. They will also want to ensure you’re not too much of a risk. They evaluate all this by using three main criteria:

1. Credit score: You will need a decent credit score to qualify for a second home mortgage. Most lenders will ask for a score upwards of 680, although some private lenders offer options for those with poor credit history. Just remember - the higher your credit score, the less interest you pay. Check out this handy guide on things you didn’t know were affecting your credit score (so you can bump it up in the future)!

2. Equity: Lenders will see if your property will have enough equity left after the second mortgage is taken out. This will ensure an average loan-to-value ratio which is essential to reduce the risk level if interest rates drastically increase or your income drops. Try to ensure you have a minimum of 20% equity remaining in your home after borrowing against it.

3. Income: You will need to demonstrate proof of income coming in each month consistently. This one is important, as it helps lenders understand that you have the money to make your loan payments on time and in full. For this, they will look at your finances and bank statements to determine your payment capacity.

Being able to meet these criteria increases the chances of getting approved for your second mortgage. If you find yourself struggling to take out a mortgage with traditional banking and financial institutions, check out alternative flexible lenders who will help you instead.

What are the benefits of taking out a second mortgage?

To make your decision, you’ll need to consider what’s in it for you. There are some obvious advantages to taking out a second mortgage. A significant benefit is that second mortgages can be more affordable than other loan types, often with lower interest rates. In addition, you’ll get access to money which can be a huge help. You’ll also be able to borrow more money than with a personal loan - sometimes up to 80% of the value of your home! This can be highly beneficial if you’re attempting to alleviate your debt or planning to incur heavy personal expenses or costs.

A second home mortgage is an excellent option if you have substantial equity built up in your property. You can use that existing capital to borrow additional funds. Whether it’s for a college fund or that renovation you’ve been eyeing up for a while, a second mortgage can be an excellent solution for every kind of homeowner. If you find yourself confused about how to take out a second mortgage, don’t worry. 

Our team of friendly mortgage professionals has years of experience guiding homeowners like yourself through a successful second mortgage. Be sure to reach out with any questions, queries or doubts so you can get started on the process today.

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

Refinancing your mortgage is a smart financial move. You’ll be able to access the built-up equity in your home, pay back debt, and make major renovations and changes to your property. What’s the most important advantage? Lower interest rates!

If you’re a homeowner looking to benefit from any of these features, then take advantage of the low interest rates created due to the pandemic. However, is it the right move to do a mortgage refinance in Ontario? While this will depend on your personal financial goals and obligations, refinancing is typically a good solution for most homeowners.

Read on to learn about the benefits of refinancing your mortgage.

1.Historically Low Interest Rates

As mentioned, the COVID-19 pandemic has created an environment of historically low levels of interest. Thus, if you take advantage of this dip, you’ll be able to reduce your overall interest rate and lower your monthly mortgage payments.

If you’re unsure how much of a difference low interest rates are, then let’s look at the math. If you have 20 years left of your mortgage amortization period, then here is the total interest you’ll pay with different rates:

• 3.19% interest will result in $141,590 put towards interest

• 2.29% interest will result in $98,942 put towards interest

• 1.39% interest will result in $58,402 put towards interest

As you can see, what you pay in interest can significantly differ according to your interest rate. This proves the benefits of lower interest rates when refinancing your mortgage.

2.Lower Monthly Payments

Your low mortgage rate will allow you to reduce your monthly payments, which will, in turn, benefit your bottom line. You can do this by extending your loan term, thus spreading your payments over a more extended period. With less going out every month, you’ll also have extra income to use towards debt consolidation or however you please. The low monthly payments will be necessary for those on a tight budget looking for financial breathing room.

3.Access Equity

One of the most significant advantages of refinancing your mortgage is the access you’ll be granted to equity. Home equity is your property’s value minus the mortgage balance left to pay. Homeowners can access this home equity for use in many different ways.

For example, paying for education, purchasing a secondary property, and debt consolidation are great ways to use your built-in equity. You’ll be able to access up to 80% of your home’s equity. This can be done by increasing your monthly mortgage payments or using a mortgage calculator to understand how much equity will be available to you.

4.Debt Consolidation

By accessing the built-in equity of your property, you’ll be able to manage any high-interest debts that have piled up over the years. This can help you consolidate or reduce your debts. Homeowners with excessive debt may risk defaulting on payments, missing payments, or compromising their financial history and credit score.

This can be detrimental to your financial future, so it is better to consolidate through refinancing. You can do this by “cashing out” when refinancing. In other words, you can replace your primary mortgage with a new larger mortgage. The difference can be chased out, but up to 80%–85%. That can yield significant results and help you take out a loan or reduce your debt. In addition, the interest rate you pay on the money you owe will also subsequently come down.

5.Finance Major Life Expenses

Using the same principle as debt consolidation, you can use your equity for other significant life changes. Many Canadian homeowners will use their equity to finance other aspects of their life, such as investments, their children’s education, and more. By renovating or updating your property, you will also increase its value, which can come in extremely handy down the line. Many homeowners are working remotely right now, so making home improvements such as a property extension or setting up an office will be very helpful.

In addition, opting for a mortgage refinance in Ontario will provide you with a much lower rate of interest than a personal line of credit or a credit card. Using this method means you’ll be able to save money in the long run and build your credit history back up slowly.

6.Gain Stability

When you opt for a mortgage refinance in Ontario, you will also benefit from financial stability. Once you decide to go ahead with the mortgage terms, you’ll be locking in your mortgage interest rate for five years. That’s a long time to go with a guaranteed rate of interest that is comparatively lower! You will stay secure with your finances and can put away cash for emergencies or other pressing needs.

For many homeowners, their mortgage remains set in stone. They make the payments according to the terms and soon forget about it. However, refinancing your mortgage is a great way to get a better deal, and you don’t need to wait until your next renewal to do it.

As you can see, refinancing your home comes with significant benefits! You’ll be able to consolidate debt, access equity, make renovations, and so much more. If you’re looking for a reputable and reliable mortgage broker to guide you through the refinancing process, be sure to reach out to Canadalend.com. We offer the most competitive rates, with specialized industry knowledge from friendly and dedicated staff. You can also increase cash flow and save money!

For more information on getting a mortgage refinance in Ontario, call Canadalend at 1-866-422-6536 or contact us here.