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Due to fluctuations in the housing market, the value of your home is likely always changing. Depending on how long ago you purchased it, the price you paid may be drastically different from what it is worth now.

To best determine the present value of your home while taking a wide number of factors into consideration, it is necessary to have a home appraisal performed. This is an unbiased estimate of the property’s value conducted by a licensed or certified appraiser.

In order to form this estimate, the appraiser must visit your property and go through several important steps as they formulate their evaluation.

In most cases, one of the first things that the appraiser will do is inspect the property to determine its condition, size, layout, and any unique features. During this inspection, they will compile a collection of photographs, measurements, and notes.

Next, it is necessary for the appraiser to do some thorough research into comparable properties (comps) in the area that have either recently sold or are currently on the market, focusing specifically on properties of a similar size, age, location, and condition.

The appraiser can then use a combination of the data they gathered during their inspection and the information they gleaned from their market analysis to determine an estimated value of the property.

Is a home appraisal necessary to secure a home equity loan?

If you are interested in tapping into the equity that you have amassed in your home as you have paid off your primary mortgage over time, applying for a home equity loan is the best way to do that.

A home equity loan can free up a significant amount of cash, which you can leverage for various reasons, such as consolidating debt, paying for home renovations, or funding a university/college education.

In order to secure such a loan, though, there are certain hurdles that you must first overcome, such as a home appraisal. Similarly to when you first purchased your home, it is standard for a home equity loan process to involve an appraisal of the property’s value.

After all, the amount your home is worth is a major factor in determining the size of the loan you are eligible for.

For a lender to assess the maximum amount they can loan you, they must multiply your home’s current value by 80%, as this is the combined maximum allowance for a mortgage loan that you can obtain according to Canadian laws. Then, they will subtract this figure from the owing amount you have remaining on your primary mortgage.

Are there alternative ways to determine the value of your home when applying for a home equity loan?

Most traditional lenders will require that you have a professional appraisal done to determine the market value of your home so they can ensure that the loan amount matches up with your property’s worth and their risk tolerance.

That being said, if you choose a less traditional lender when applying for a home equity loan, they may be willing to accept an alternative means of determining your home’s value without a complete appraisal process. However, such alternatives may come with limitations or conditions that are crucial to understand.

The following are some of the potential alternative ways of assessing your home’s value that a lender could accept:

1. An automated valuation model

Certain lenders may use an automated valuation model (AVM) to estimate your property's value, which uses data algorithms and an analysis of public records to generate this conclusion.

Although AVMs are much faster than traditional home appraisals (and less expensive), they may not be as accurate. Thus, the estimate generated by this type of model could end up being much lower or higher than your home’s actual value, which could lead to various issues with your home equity lending process.

2. A desktop appraisal

Another method that a lender may accept is a desktop appraisal. This process still requires that you hire a professional appraiser. However, the main difference is that they do not actually visit your property to conduct a physical inspection. Rather, as a part of this process, the appraiser will use photographs, data, and other information to remotely assess the value of your property.

Although this option is faster and cheaper than a full traditional appraisal, desktop appraisals are also susceptible to evaluation errors since they are nowhere near as comprehensive and could miss out on some of the nuances of your property.

3. Loan-to-value ratio

Instead of a full appraisal, some lenders may be okay with relying on a determination of the loan-to-value ratio instead. This is the ratio of a loan to the value of the asset purchased. To determine that value, various means can be used, such as tax assessments or recent purchase prices.

Yet again, while this method may simplify the process of determining your home’s value, it leaves a lot of room for important factors to be left out and should thus be used cautiously.

How Canadalend Can Help You Secure a Home Equity Loan

Whether you would like to consolidate debt, purchase a new home, start a home renovation project, or put your kids through school, gaining access to the significant chunk of money that a home equity loan can amount to can certainly help you meet your goals. Fortunately, Canadalend can assist you along the way.

Our team of licensed mortgage professionals understands that the process of applying for such a loan can often be rather overwhelming, which is why we are here to help you every step of the way.

We would be happy to answer your questions or concerns about the process, and could offer you some advice that is tailored to your personal financial situation and goals. We offer a range of financial solutions that are sure to suit your needs and will work with you to ensure you get the best rate for your home equity loan.

We are dedicated to top-quality customer service, which is why we even offer free personal consultations. If you want to secure a home equity loan without having to face all the challenges of this process on your own, our services are the answer.

For more information on how we can help you secure a home equity loan, or to learn about the requirements we have for home equity loans, call Canadalend at 1-844-586-0713 or contact us here.

Did you know that, in Canada, it is possible to get a loan that is leveraged against a property that already has a pre-existing mortgage loan?

This loan, known as a second mortgage, can typically be taken out by any homeowner as long as certain criteria are met. Since this type of loan also involves using your house as collateral, when you receive it, you technically hold two mortgages on the same property at the same time. 

The main benefit of getting a second mortgage is gaining access to the equity you have established so far in your home in the form of either cash or credit, which you can use for various purposes, such as consolidating your credit or paying for home renovations. 

Generally, a second mortgage involves receiving a one-time lump-sum payment at the beginning of the loan period, and then paying this loan off in increments over a set period.

Alternatively, if you choose a home equity line of credit (HELOC) instead, which is another way to access your home equity, you would receive a revolving loan. The lender would agree to the loan up to a certain amount during an agreed-upon period, but this amount could be replenished as you pay it off (just like a credit card).

How can you get a second mortgage?

If you are interested in getting a second mortgage, you must go through an application process with an official lender just as you would for a primary mortgage. However, the qualifying process is a little different for this type of loan. 

While it is typically an option to go through this process and apply for the loan with the same lender as your initial mortgage, it is also possible to seek out a different lender if you can find a better interest rate elsewhere.

When you apply for a second mortgage, the lender will look into various factors before making a decision about their approval of this loan. These factors include your credit score, which typically should be above 620, or your debt-to-income ratio, which should be less than 43%.

It is also up to the lender to decide the size of the loan that you are eligible for, which they will typically base on your home’s current value and the amount of equity you have in your home. Since the value of your home must first be determined, you must apply to have your home appraised.

Once this has been done, and your lender has collected all the information they need pertaining to your finances, your debt history, and your home, their underwriter takes a few weeks to review your application before you receive a response.

The Main Rules for Getting a Second Mortgage in Canada 

Although the process of applying and getting approved for a second mortgage is relatively straightforward, there are a few cardinal rules pertaining to this particular kind of loan process that are important to be aware of. 

These rules dictate important factors, such as how much money you can get and how you must proceed as you pay the loan off.

1. How much you can borrow

One of the most important rules to understand as you partake in a second mortgage loan process is that there are limitations to how much you can borrow. 

Canadian laws stipulate that lending against real property can only be done to a maximum of 80% of that property’s value. This includes the amount you have borrowed already with your primary mortgage.

Therefore, the allowance for your second mortgage largely depends on the size of your first mortgage. For instance, if your home is valued at $500,000 and you still owe $200,000 on your first mortgage, you could figure out the amount you are allowed to borrow with a second mortgage using the following equations:

• $500,000 (house value) x 80% (mortgage limit) = $400,000 (maximum debt limit)
• $400,000 (maximum debt limit) - $200,000 (existing debt) = $200,000 (second mortgage limit)

Since another Canadian law stipulates that non-amortizing mortgages are limited to a maximum of 65% of the property’s value, if you are going the HELOC route, the HELOC portion of your overall mortgage debt cannot exceed 65% of your home’s value.

2. The terms of repayment

Much like a primary mortgage, when you receive a second mortgage loan, part of the agreement is that you must pay back this loan within an agreed-upon repayment period. Although the length of the period settled on may vary from lender to lender, it is common for the term to be somewhere between 5 and 25 years. 

In addition to complying with this repayment, it is also important that you learn and comply with the terms of the loan, which can also vary depending on who your lender is. For instance, certain lenders stipulate that you must pay a penalty fee if you repay your loan before the end of the term.

3. What happens in the event of a default

If you default on a loan secured against your home, such as a second mortgage, there is an order of priority that exists in terms of how these loans are repaid.

If a foreclosure occurs when you default, the loan that is top priority must be paid in full before any others. Since your primary mortgage was taken out first, it would be a top priority in this situation. After your primary mortgage is paid out in full, the remaining amount can be used to pay off the second mortgage, and so on.

How Canadalend Can Help You Secure a Second Mortgage in Canada

If you need some serious cash and have amassed equity in your home, Canadalend would be happy to help you secure a second mortgage so that you can take advantage of the many benefits of this loan.

By aiding you with such a loan process, we can help you do many things, such as lowering your bill payments, decreasing the amount of interest you pay on your debt, and locking in a fixed rate.

Whether you are interested in consolidating your debt, growing your investments, going back to school, renovating your home, or retiring, taking out a second mortgage can help with all of these things. We can ensure you get a loan that is well-suited to your particular needs.

Fortunately, we do not approach second mortgage approvals using the same method as big banks. Rather than meticulously focusing on all kinds of qualifying factors, such as your citizenship, income level, and credit history, we strictly concentrate on the value of your home and your outstanding loans. 

In doing so, we make the application process as easy as can be, which paves the way for streamlined results and ensures you get the money you need when you need it. 

For more information on the benefits of getting a second mortgage through us or to learn about our loan approval process, call Canadalend at 1-844-586-0713 or contact us here.

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.