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Taking out your first mortgage presents a major financial commitment, possibly the biggest one you'll ever make, so it's crucial that you get the best deal available. Getting a mortgage is often not a quick and straightforward process either, particularly since the options available to you will vary depending on factors such as your income, credit score and any past or current borrowings you might have.

#1. Save Up a Large Deposit

In almost all cases, you'll need to have a substantial deposit to pay towards the home you want to buy. Fortunately, those with higher deposits will be able to take advantage of better interest rates and a wider range of borrowing options.

#2. Choose the Right Mortgage Type

There is a broad range of mortgage options available, particularly to those with larger deposits and excellent credit ratings. Most importantly, you'll be choosing between a fixed- and variable-rate package. Fixed-rate mortgages lock you into a specific interest rate for a period of up to five years, making them the best choice during periods of low interest rates across the board.

#3. Understand the Extra Costs

When determining how much you need to borrow, you'll need to factor in the additional costs involved, most of which are unavoidable. Additional costs may include home inspections and real estate fees.

#4. Don't Borrow Too Much

It can make sense to borrow as much as you can if interest rates are at an all-time low, but only if you have something to invest the money in. After all, there's no point in having your borrowed money sitting in the bank while you're paying interest on it. If the home you're interested in buying needs a substantial amount of work done on it, make sure you get some estimates to find out how much you need to borrow.

#5. Check Your Credit Score

Your credit score determines your borrowing power, and this is one of the first things that potential lenders will examine when considering your application. You can check your credit score online for free using agencies like Equifax or Experian. If you have a bad or neutral credit score, your borrowing options will be fewer or even none at all, so it makes sense to work on improving it before buying a home.

#6. Don't Change Jobs

Potential lenders are likely to be turned off by applicants who have recently changed jobs, so it's wise to apply for a mortgage only once you've been in the same job for at least six months. If you're unemployed or still on a probationary period in your job, many lenders will not accept your application unless you have an excellent financial record. Once you have your application accepted, you're free to do what you want.

#7. Eliminate Debts

If you have any existing debts, they may reflect badly on your credit score, in turn making it more difficult to get a good mortgage deal. You may also find yourself in a situation later where your debts have reached such a level that you can no longer afford your monthly mortgage payments. As such, you should always make certain your financial situation is stable and debt-free before making an application.

#8. Provide Proof of Income

All mortgage lenders require applicants to present proof of income so they can decide whether or not the client is able to make the monthly payments. Your monthly pay stubs should provide all of the information you need. If you're self-employed, things can get more complicated, particularly if you haven't been self-employed for a long time.

#9. Overpay When Possible

When choosing a mortgage deal, it is essential not only that you can afford the monthly payments, but also that you will have plenty left over. Since a mortgage is typically a very long-term commitment, you should try to overpay as much as comfortably possible, in order to eliminate the debt earlier on. Paying your mortgage off sooner will look better on your credit score and improve your long-term finances.

#10. Contact a Mortgage Broker

A Mortgage Broker's primary expertise is locating funding for mortgage financing. They know where the best rates can be found. What's more, they have the knowledge required to present a proposal for financing to lenders in the best way possible to successfully obtain mortgage financing.

Final Words

Although you should dedicate plenty of time to researching the best deal, it is important to remember that you're not locked in for the entire duration of the mortgage. You can always remortgage your home later on with a more attractive deal should the opportunity arise. There will be charges involved in transferring your mortgage debt, but the long-term savings can be substantial.

When the time comes to consider a secondary loan, it may be worth considering your home equity position. Equity builds up in your home, or other property, over time, as you pay off a loan secured on it. This equity is the percentage of the property you own through repayments of the first loan.

It has become increasingly popular for borrowers to utilize this equity as a form of guarantee on a second loan. Home Equity Loans can be used for a variety of reasons. Depending on what you want, the loan is for will determine what type of home equity loan you should be considering.

Home Equity Loan

The standard Home Equity Loan (HEL) works much like a regular loan. You and the lender agree on a schedule for repayments along with interest rates, penalties, etc. On the whole, you may find the interest rate on a home equity loan is slightly higher than a standard loan. This is because it is the second loan on the same property. In the event of your bankruptcy, the first lender will be paid first from the sale of your estate. If there's nothing left after that, the second lender doesn't get paid.

To minimize the potential for paying a higher rate, borrowers are best advised to shop around. The major banks are a good place to start, but it’s also worth seeing what an alternative lender might have to offer. They can often equal, if not beat, bank rates and can be more flexible on terms, fees, and penalties.

Home Equity Loans are often used as a way to pay bills. If this is the case for you, keep in mind that most banks will want to see a good credit score and predictable future earnings.

Home Equity Line of Credit

A home Equity Line of credit functions in the same way as a HEL, the equity in your property determines how much you can borrow. However, instead of the loan amount being made available to you as a lump sum at the start of the schedule, it instead forms a pool of money you can draw from.

This form of loan is particularly useful for borrowers that want to undertake a period of repairs to their home. This may be part of ongoing regular maintenance and upgrades, or it might be in the year or so before putting a property up for sale.

Having a pool of money that you can borrow from as and when you need to allows borrowers to plan with confidence without the worry of how they will pay any particular bill for works as and when it comes. They can simply release funds from the line-of-credit pool, and know they're not going to overspend the initial borrowing figure.

Home Equity Lenders

As previously mentioned, Home Equity Lenders can sometimes get the worst part of a bankruptcy situation. When dealing with banks, their inclination is to penalize the lender with higher rates. This is their way of protecting themselves against the worst, even if it doesn't happen.

Many Canadians who take out Home Equity Loans find a better deal through alternative lenders such as credit unions or other financial institutes. The advantage of these lenders is their flexibility, where banks tend to lean towards rigidity. The downside? There are only a few major banks; there are a lot of alternative lenders.

At Canadalend, our independent experts have access to hundreds of different lenders and their financial products. Unlike advisors at a bank, they don't get incentivized to sell you a certain product. Their sole concern is finding the lender and product that meets your needs, whether that's a Home Equity Loan or a Line of Credit.

To find out how you can make your home equity start working for you and your future, contact Canadalend.com today and talk to one of our experts.

When it comes to getting a second mortgage, you’ll need to go through an approval process. Mainstream lenders, such as banks, will emphasize different things over alternative lenders. While there is no standardized process for either group, we’ll take a look at some of the factors that come up repeatedly so you can be prepared.

Canadalend.com can help navigate your mortgage needs no matter your Income

Lenders will want to know that you have money coming in to repay your loans. Mainstream lenders prefer to see borrowers with regular income. Such as a monthly salary. They may also ask that you undertake employment verification, depending on your circumstances.

Alternative lenders like to see regular income too, but they can be more flexible. People with irregular income, freelancers, or the self-employed, can find more accomodating arrangements with alternative lenders.

Utilizing Your Equity

When you take out an initial mortgage, the lender gets what is called a lien on the property. That’s the right to sell the property to settle a debt. Over time, as you progress through the schedule of a mortgage, you accrue equity. As you make monthly payments to pay down the outstanding amount, you start owning more of the property.

Lenders that offer second mortgage products have a consistent view. While they’re happy to leverage equity that you have accrued, they’re aware of that lien the other lender holds on the property. That means if you default on your mortgages, the first lender gets paid first, and the second may get nothing. Because of this, equity-based second mortgage loans carry a higher amount of risk for the lender.

If you intend to utilize equity against a second mortgage, you’ll need an up-to-date statement of account from the initial lender.

Canadalend.com can assist no matter your Credit Score

One of the earliest steps to take before beginning your search for a lender is to check your credit score. There are multiple ways to do this, but as you are about to enter a financial process, the more in-depth the better.

In Canada, credit scores run from 300-900 and are determined by Equifax and TransUnion. A score above 650 is seen by many lenders as the ideal scenario. If a score is below 600, then a borrower should start to expect some additional conditions or constrictions regarding their loan.

Credit scores are essential no matter who you borrow with. Working with traditional banks, they form a core part of the approval process. Alternative lenders place less emphasis on credit score, preferring the ability to pay over a solid credit history. This is particularly useful to those seeking a second mortgage for debt consolidation. Alternative lenders specialize in helping people recover from past errors of judgment.

Navigating the Process

Which documents to have prepared, and when, can be a frustrating part of the process. With each lender doing things differently, how can you try to bring some consistency to the process?

The one thing all lenders have in common is that you will need to provide identification documents. The number required, and their type, is at their discretion. But, as with most matters of identification, government-issued documents are best – passport, drivers license, etc.

At Canadalend.com, our independent experts are well versed in the approvals process with many different lenders. Decades of experience and access to hundreds of different lenders mean they can help you find the right product for you. It also means that they are experienced guides when it comes to finding your way through the approvals process.

By contacting Canadalend.com today, you can speak to one of our experts, find a product that suits your needs, and get support to navigate the approval process successfully.

In Canada, two credit bureaus are responsible for calculating credit scores. Equifax and TransUnion issue scores between 300 and 900 as a way for lenders to assess borrowers. As a general rule, 650+ is what a lender likes to see from a potential borrower. Anything below 600 is a concern for lenders and may limit a borrower’s options.

Credit scores are a mix of your current situation and your past behavior, such as missed payments. A critical factor in determining credit scores is debt. The Bank of Canada notes that Canadian household debt has been growing for thirty years. Average household debt now stands at 170% of household income.

A bad credit score can develop to the point where you can no longer get help to fix the problem. More households are carrying credit score damaging debt, and more are denied assistance.

So, what can citizens do if they need to borrow money but have a bad credit score?

Alternative Lending

Credit scores are essential across the financial industry. Yet, different lenders emphasize it differently.

The big six Canadian banks rate credit score as a significant factor in the approval for loans - this is partly business preference, and partly national legislation. The main problem with this approach is that it doesn’t focus on the main criteria for a loan. Can a borrower afford it with their current financial setup?

The problem can be even more acute for some borrowers - borrowers who are seeking a second mortgage, for example. The most common reasons for a second mortgage are to pay off outstanding bills and pre-sale home improvement. In both these instances, the borrower is going to be better off in the short term than they are today. Lending to them should focus on that and their ability to pay.

A citizen may have a period in their life where they have been financially irresponsible. So, they need to get a loan to merge and manage their debts. They will likely be turned away by the banks and left to face bankruptcy - this is where alternative lenders have made their mark. Ranking borrowers on their potential to pay means they can work with people no longer supported by the mainstream.

Alternative lending has seen consistent growth over the last ten years. Strict regulations and emphasis on credit scores are forcing lenders from the mainstream. What they find with alternative lenders is an emphasis on the role the loan will play in the borrower’s life.

Alternative Lenders

Besides offering services the big banks don’t, alternative lenders compete with them. Many alternative lenders are specialized businesses whose trade is lending. They fight for customers of all types and have a range of products that most banks do not.

With searching, borrowers can find better deals with alternate lenders than the mainstream. Recent surveys show that satisfaction with alternative lending is leading to permanent change. More than half of those approved for alternative loans said they would be unlikely to return to the mainstream.

Alternative lenders offer borrowers a way to improve their financial situation.

Taking an Alternative Approach

One of the biggest hurdles to finding an alternative lender is the choice available. Unlike the big six banks, there are many different kinds of alternative lenders. It can be hard to know where to start once the mainstream lenders reject you.

Canadalend.com has a range of independent experts. They have many years of experience in the mainstream and alternative financial markets. When you talk to someone at a bank, the bank incentivizes them to sell you a specific product. Our experts will help you find the right product for you.

If you contact Canadalend.com today, we can be your guide to the many alternative lenders out there. We can help you find the product you need to meet your financial aims.