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Did you know that it is possible to access the equity you have built up in your home as you have paid off your mortgage over time?

It’s true! Whether you are looking to do some home renovations, purchase a new vehicle, enroll your child in university, or consolidate your debt, having a considerable amount of cash is likely going to be key.

One way of securing that money is through a home equity loan, which makes it possible to tap into the equity you have amassed in your home while you have an active mortgage loan.

This loan could come in many forms, such as a closed second mortgage, which involves receiving a lump sum of cash that you must pay back in increments over a set period ranging from 5 to 15 years, along with interest.

Another common type of second mortgage is a home equity line of credit (HELOC). This works like a credit card, as it is a revolving loan that allows you to draw from your loan whenever you need, pay it back, and then continue to draw from it over time.

Since second mortgages are secured loans, meaning they use your house as collateral, their interest rates tend to be much lower than unsecured loans.

What effects can a home equity loan have on your credit score?

Although a second mortgage has a variety of potential benefits, it is essential to have a complete understanding of such a loan before you apply for one.

One factor that is particularly important to know is the impact that a home equity loan could potentially have on your credit score. The following are a few of the main ways that applying for and receiving a home equity loan could affect your credit score:

1. The impact of credit inquiries

Any time you apply for some type of credit, whether a credit card, a loan, or another form, it is standard practice for the creditor to perform a hard credit inquiry into your credit history. Each of these inquiries can, unfortunately, result in your score dropping.

The specific amount of points that your score will drop due to such an inquiry will ultimately depend on your credit profile. Most of the time, though, your score will only decrease by five points or less.

It is necessary to keep this in mind if you intend to get quotes from several lenders, as having multiple inquiries could substantially impact your score.

However, if you decide that shopping around for lenders is worth taking this hit, do your best to meet with these lenders in close proximity to one another, as inquiries for the same type of loan made within 14–30 days are generally classed as one inquiry instead of as several separate ones. Thus, the impact on your credit score can be kept to a minimum.

2. New credit lowers your score

Taking out a loan like a home equity loan will appear on your credit report as a new credit account. When a new credit account is added to your report in this way, it generally affects 10% of your FICO credit score, which is the most widely used credit scoring model. Most of the time, this will cause your credit score to drop.

Fortunately, as your loan ages, your score will recover over time. Still, it is good to be aware of this impending drop following the approval of your loan so that it does not come as a surprise.

3. Your credit mix will change

When it comes to credit, the ideal situation is for your credit report to show a mix of different loans and credit cards because lenders like seeing that you can successfully handle multiple forms of credit.

The variety of credit that is included on your credit profile is known as your credit mix, and this determines another 10% of your FICO credit score. If, prior to your home equity loan, your credit mix is primarily or solely composed of credit cards, adding a home equity loan will improve your mix and may even consequently boost your score.

4. Consolidating credit could be advantageous

A big determining factor in how taking out a home equity loan affects your credit is what you use this loan for. One of the most common reasons that people get such a loan is to consolidate debt.

If this is how you decide to use the money from your home equity loan, it could have a positive impact on your credit score.

Since your credit utilization, which is the amount of available credit that you use, makes up 30% of your FICO score, consolidating credit card debt and getting rid of the balances owing on your revolving credit will likely cause the score to rise.

5. Boost your credit with on-time payments

The most significant impact on your credit is whether or not you pay off your debt with on-time payments, as this makes up 35% of your FICO score. Therefore, if you continue to pay your home equity loan on time each month over the course of its lifetime, you will generate a positive payment history. In turn, this will have a positive effect on your credit score.

How Canadalend Can Help You Protect Your Credit While Securing a Home Equity Loan

If you would like to benefit from 5-star customer service while securing a home equity loan for you to use however you please, Canadalend has you covered.

Not only will you have access to great rates when you secure a home equity loan through us, but you will also have access to a team of skilled and experienced industry experts who can offer you extensive guidance and support throughout the process.

After discussing your personal needs and financial factors with you, we will do our best to find you a home equity loan agreement that will serve your unique requirements.

Unlike most big banks, we do not focus on a long list of different factors, such as your citizenship, credit history, or income level, before issuing a loan. Rather, we concentrate primarily on your home’s value and outstanding loans.

With this approach, it is much easier to speed up the loan process so that you can gain access to the equity in your home quickly. Our licensed mortgage professionals make the lending process incredibly transparent and easy to follow so that you can progress through it with complete comfort and peace of mind.

For more information on how we can help you secure a home equity loan that will meet your needs, or to learn more about the other types of loans that we offer, call Canadalend at 1-844-586-0713 or contact us here.

Most people are familiar with the term “mortgage”—taking out a loan from the bank to help cover the payment of a house when you cannot afford to pay the full amount in its entirety.

When you take such a loan from a lender, the property itself gets used as collateral. Thus, it is necessary for you to pay this loan back to the lender on a monthly basis in fixed increments along with interest to avoid losing the house.

While this process is common knowledge for most, as the vast majority of people cannot purchase property without a mortgage loan, fewer people possess the same level of understanding about second mortgages.

A second mortgage is a mortgage you can take out while your original mortgage is still in effect. This allows you to access a significant amount of cash, usually in the form of a lump sum.

Like a first mortgage, this loan must be paid back in increments over a set period of time at a fixed or variable interest rate. The amount that you are able to borrow depends on the amount of equity that you have built up in your house. Equity is the value of the portion of the house that you technically own after having paid off your first mortgage.

4 of the Most Commonly Unknown Facts About Second Mortgages

Most people are more comfortable applying for a first mortgage rather than a second one because of their level of familiarity with it. Still, it is important to understand second mortgages, too, in the event that you ever need one.

Because second mortgages share some similarities with first mortgages, there is a lot of grey area surrounding this type of loan. The following are some of the most commonly unknown facts about second mortgages:

1. Second mortgages typically come in two main forms

While there are technically a number of different forms that second mortgages can come in, the two main types are a revolving home equity line of credit (HELOC) and a closed second mortgage.

A HELOC, which usually has a variable interest rate, is a revolving line of credit secured against the equity of your home. This means that after using a portion of it and paying it back, you continue to have access to the funds should you require them again, functioning like a credit card.

On the other hand, a closed second mortgage will provide you with a lump sum payout all at once. This loan generally has an interest-only payment structure, which involves you paying it back on a month-by-month basis.

2. A second mortgage is a secured loan

Another element of second mortgages that most people are unaware of is that they are typically secured loans, which means that your house serves as collateral.

Thus, if you are ever in a situation where you cannot pay back the loan to the lender, they could potentially initiate a “Power of Sale” or put a lien against the property to guarantee that the outstanding debt will be paid.

It is incredibly important to understand the risk of losing your home if such circumstances arise before you sign on for a second mortgage, as this should not be taken lightly.

3. The most common uses of a second mortgage

How are people supposed to know if they could benefit from a second mortgage if they do not fully understand what this type of loan is commonly used for? The majority who opt for a second mortgage tend to use it for the following things:

Debt Consolidation

Getting access to a hefty chunk of cash can help those who are facing serious debt to pay off these debts and combine them into a single payment that is easier to manage.

Using a second mortgage in this way to pay off unsecured debt has a number of advantages, as it often helps reduce the amount you are spending on interest while also improving your credit score, thus increasing your chances of accessing more favourable lending options down the line.

Home Renovations

Another factor that encourages people to apply for a second mortgage is the prospect of renovating homes. Revamping a house is one way to really make it feel like home while also boosting its market value. However, it is difficult to take on such a project without a steady flow of cash to fund it, which is why a second mortgage could help.

4. Second mortgages come with fees

Although a second mortgage can be incredibly helpful to many people, it is essential to understand the cost, as there are several fees that must be paid as part of this process.

Some of the most typical costs associated with a second mortgage include brokerage, appraisal, closing, and legal fees, which could easily add up to several thousand dollars altogether.

This is why it is critical to consult with a reputable and reliable mortgage broker before making a final decision regarding a second mortgage. They can best explain the exact costs that you will be facing before any contracts get signed.

How Canadalend Can Help You Secure a Second Mortgage

Now that you know more of the specific details pertaining to a second mortgage, if you believe that you could benefit from this type of loan, and you would like to apply for a second mortgage in Ontario, Canadalend has you covered.

No matter the reasoning behind your desire for this loan, our lending experts are happy to advise you every step of the way to ensure that your needs are satisfied throughout this entire process.

Someone from our knowledgeable and experienced team would be glad to sit down with you to discuss your personal circumstances so that we can ensure our advice best suits the particulars of your situation.

We have access to a variety of second mortgage lenders located in Ontario, including many who do not require certain income or credit qualifications. With years of experience under our belts, we are used to fine-tuning our approach as needed, and it is always our top priority to ensure our clients get the financial support they need.

We will gladly set up an appointment for a free personal consultation to discuss your interest in a second mortgage and advise you about how we can help you reach your financial goals.

For more information on how we can help set you up with a second mortgage that works for you, or to learn about how we can connect you with top-quality lenders, call Canadalend at 1-844-586-0713 or contact us here.

Each time you contribute to paying off your mortgage, the equity in your home continues to add up, meaning you technically own increasingly more of your house over time.

The best way to figure out the amount of equity in your home is to determine your home’s current market value, and then subtract the amount you owe on your mortgage. So, if, for example, you have a home worth $550,000 and have $250,000 remaining on the mortgage, your equity would be $300,000. It is important to grasp how home equity works to understand how to utilize this equity to your advantage.

One of the main ways to benefit from considerable equity in your home is to take out a home equity loan, which is also often referred to as a second mortgage.

With a home equity loan, it is possible to cash out 80% to 85% of the equity you have in your house, thus receiving a lump sum. This is a fixed rate loan that uses your house as collateral, and generally requires that you pay it back over a period of 5, 10, or 15 years.

How to Plan for the Future by Using Your Home Equity Loan as a Retirement Income Source

There are a number of different ways that a home equity loan can be used, such as to consolidate debt, pay for another property or for renovations to an existing property, or pay for your children’s university education.

However, another way to leverage a home equity loan for your benefit is by utilizing it to improve your financial security in retirement. After you retire and your main source of income no longer exists, it is crucial to be fully prepared financially to continue living comfortably without running out of money. One potential way to do that is by accessing the equity in your home through a home equity loan.

Everyone takes a different approach when preparing for retirement. Although consistently putting away money throughout your career to build up your savings and benefit from compound interest will definitely give you an advantage, not everyone can take this approach.

In fact, many people struggle to save any money at all, or they burn through their savings before reaching retirement due to unforeseen expenses. Fortunately for homeowners in such a predicament, this shortfall can be rectified with a home equity loan.

Other Ways to Access Home Equity in Retirement

If you have examined the numbers or have spoken to a financial advisor about your situation, and they have helped you to see that your income after retirement will not be sufficient, then it is a good idea to start looking into ways to access your home equity.

Aside from a home equity loan, there are other approaches you can take to tap into your home equity for retirement. The method that is best suited for you will depend on the specifics of your situation. The following are some of the other potentially viable options that you may have:

A Home Equity Line of Credit

Another way that you can utilize your home equity to stabilize your finances after retiring is by taking out a home equity line of credit (HELOC). This will provide you with a line of credit that you can tap into whenever you need, rather than a lump sum payment.

Most of the time, you can continue to draw from this line of credit for a defined “draw period,” which usually lasts about 10 years. As well, you do not have to pay back any of the money that you borrow until after this period has ended.

Generally, HELOCs are variable rate loans. This means that the interest you will be charged on the portions of the line of credit you use will be determined by the movement of the underlying benchmark index that your lender uses.

Although a HELOC is especially worth considering if you have a big expense or costs that suddenly arise in your retirement (and you want more flexibility), if you have planned expenses in your future, such as a home renovation, it may make more sense to choose a home equity loan.

A Reverse Mortgage

While reverse mortgages received a bad reputation in the past as a carefree or risky way to access cash, the market for this type of loan is different these days. As rules and regulations have been set in place, this has become yet another good method for generating income in retirement.

This loan also involves borrowing money in such a manner that uses your home as collateral. However, rather than making monthly repayments, interest and fees continue to add on every month, and the loan must be repaid when you no longer live in the home.

Since there are many specific requirements and details that pertain to a reverse mortgage, it is a good idea to speak to a financial planner about the particulars of what you must and must not do before taking this route to access your home equity.

How Canadalend Can Help You Secure a Home Equity Loan

If you would like to protect your financial well-being in retirement and you are interested in accessing your home equity in Ontario to make that possible, Canadalend would be happy to help you in this potentially confusing and complicated process.

We understand the importance of having financial security, and we fully grasp the ins and outs of accessing home equity to establish such security. Thus, it is our goal to aid our clients throughout this process in order to provide them with everything they need.

Unlike the big banks, we do not fuss over matters such as your citizenship, credit history, or income level, as all we are focused on is your home value and your outstanding loans.

We can simplify the process of accessing the equity in your home that you deserve to receive so that you can get your finances in promptly and without unnecessary delays.

Our experienced in-house team can provide as much help as needed if you are uncertain about what direction to take in order to tap into your home equity, and will base our guidance on the specifics of your personal circumstances.

We can help you secure a number of different loan types, including a home equity loan, a HELOC, or a reverse mortgage.

For more information about how we can help you access your home equity in Ontario, or to learn more about the various other types of loans that we are equipped to assist you with, call Canadalend at 1-844-586-0713 or contact us here.

Purchasing a home is never a small expense, especially not in Canada these days, as the housing market has recently seen record-high prices for homes in many places.

Therefore, the vast majority of people require a sizable mortgage loan in order to make the purchase of a home feasible. When it comes to such major loans, many people’s immediate instinct is to go to major banks to get this money.

However, there is another possibly more viable option in Ontario that also exists: getting a loan from a private lender. This is also often referred to as a B lender or a subprime mortgage lender.

When a private corporation or individual lends out their own money, they are considered a private lender. This category includes mortgage investment corporations that pool together money from private investors in order to fund syndicated mortgages.

Private lenders are not federally or provincially regulated because they do not accept deposits from the public. Since private mortgage terms are generally shorter and come with higher interest rates and fees than from traditional lenders, they are mostly meant to be a temporary measure to use before transitioning back to typical mortgage lenders.

Who should seek help from a private lender?

While not everyone may require the services of private lenders in Ontario, there are a number of different categories of people for whom these types of lenders can be incredibly helpful.

Traditional lenders can be quite strict when deciding on who to lend to. However, as private lenders are much less strict, their biggest clientele base includes the different groups of people who are most likely to be denied a mortgage loan from a traditional lender.

Therefore, the following are the most common groups of people that are perfect candidates for a loan from a private lender:

1. New immigrants

Unfortunately, many recent immigrants likely do not have enough work experience within the country or a good enough Canadian credit score to be approved for a loan by a traditional lender.

Although not all private lenders will immediately accept mortgage loan applications from new Canadian immigrants, there are exceptions. Indeed, the chances of getting a loan from a private lender under such circumstances is still definitely higher than getting one from a traditional lender.

2. Self-employed individuals and those with irregular incomes

Since most traditional lenders want to see at least two years of employment history in Canada before offering a mortgage loan, if someone is self-employed or their income is irregular or commission-based, they may not be approved for such a loan. Thus, such people may also opt for a loan from a private lender.

3. Individuals with foreign income

These days, with remote work becoming increasingly common, it is more commonplace for Canadians to be employed by foreign companies. However, when it comes time to apply for a mortgage loan, if you only have foreign income, it will be difficult to get approved by a traditional lender, whereas some private lenders may still offer you a loan.

4. Individuals with bad credit scores

Another factor that deters traditional lenders from accepting a mortgage loan application is a bad credit score. However, private lenders may have mortgage loan options available even for those who have sub-par credit scores (below 600). That being said, if your credit score is particularly bad, the mortgage interest rate that you are offered may be especially high.

Important Factors to Consider When Deciding on the Right Private Lender in Ontario

If you have settled on going with a private lender to get your mortgage in Ontario, there are a number of different factors to carefully consider in order to find a lender that is the best fit for you. These factors include the following:

1. Private lender fees

Since private lenders are not subject to any regulations in Canada, they can each set their own fees and lending conditions.

Before you agree to a loan from a private lender, make sure you have a full understanding of their fees, including private lending fees, brokerage fees, legal and appraisal expenses, set-up costs, and administration fees.

Note that you may be able to find certain lenders that charge much lower fees than others. It helps to form a budget ahead of time, as this will guide you in the right direction and help you find a lender that is well-suited to your needs.

2. Interest rates

While the average interest rate you will be offered on a mortgage loan from a private lender will generally be higher than those from traditional lenders, shopping around for a private lender can be beneficial, as some of them offer much better rates than others.

It can be helpful to consider a given lender’s interest rate and fees as two parts of a bigger picture. For example, one lender may offer an 8% interest rate without fees, while another may offer an interest rate of 6%, but by the time all of their fees are added up, this may equate to about 9%.

3. Mortgage conditions

Another matter that is important to ask questions about before signing a mortgage loan agreement with a private lender is the conditions of the loan. For instance, it is necessary to understand exactly what will happen if you miss a mortgage payment.

It is also essential to understand elements of the loan such as prepayment privileges, or penalties and potential costs to get out of the mortgage. Never sign a mortgage loan agreement until you know exactly what you are getting into, and do not be afraid to ask questions ahead of time.

How Canadalend Can Help You Find a Reliable Private Lender

If you are searching for private lenders in Ontario who will work with you to meet your needs as you pursue a private mortgage loan, you can rely on Canadalend to keep your best interests in mind.

We have access to banks, credit units, and other alternative private lenders, and our agents always work hard to ensure you get access to the best, most competitive rates available.

If you ever have any doubts or questions, our agents would also be happy to answer your questions and offer guidance, as they have a thorough understanding of all products, features, and rates.

When you work with Canadalend for mortgage loan approval, you will never have to worry about frustrating delays. Our agents are available seven days a week to ensure that your application stays on track. We genuinely care about your needs and will always go the extra mile to get you the mortgage loan that you are looking for.

For more information on how we can help you find the best private lenders in Ontario, or to learn about the role we will play in the process of getting you a mortgage loan, call Canadalend at 1-844-586-0713 or contact us here.