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Buying a new house is challenging. It takes a lot of planning and funds. In most cases, you arrange for the funds for the down payment on the new home through a loan from the bank or a mortgage brokerage, and the loan amount splits into monthly payments with some added interest. After the down payment, families are cash-strapped. The debt makes managing additional expenses, like renovations, repairs, and other bills, difficult. 

This is where a cashback mortgage comes in. Cashback mortgage in Canada allows new homeowners to get a portion of their mortgage back in lump-sum cash when they finalize the mortgage. Before looking at the pros and cons of a cashback mortgage, it is essential to understand what it is and how it works.

What is cashback mortgage?

With a standard mortgage, the bank or a lender provides you with the funds to pay for the house you want to purchase, which is some percentage of the total cost of the property. For example, if you decide to pay 20% down for a house that costs 600,000, your down payment will be 120,000, and the rest is a loan from the bank. 

A cashback mortgage is a mortgage wherein you get some percentage of the loan amount back in a lump-sum payment as a cheque or a bank transfer. For example, for a house that costs 600,000, you can give 20% as a down payment, meaning you will have to pay 120,000, and the remaining 480,000 would be a loan from the bank.

On this loan amount, you can get anywhere between 1% to 7% cash back when you finalize the mortgage, which means when the loan becomes final and distributed funds become available. Therefore, after you receive the loan amount, you will get an additional 4,800 to 33,600 as cashback as a bank transfer or cheque.

With cash back mortgage explained, let’s move on to the pros and cons of this type of mortgage.

Pros Of Cash Back Mortgage

    

1. Any extra liquid funds are always a blessing. A cashback mortgage allows you to have just that. After making the down payment, you may become more conservative with your expenses and even push back some necessary investments into the new home. Yet, with the cashback amount, you can do repairs/renovations, pay some bills, and even furnish the house.
       

2. Help with unplanned expenses. You anticipate expenses and prepare for them as a homeowner. However, accidental expenses could make things more challenging, especially when you have made a significant down payment. These expenses can be for unexpected plumbing repairs, an appliance breakdown, or some unexpected bill that pops up. 


    

3. Cashback mortgages in Canada come with lower interest rates than other forms of loans. It includes auto loans, a credit card, or opening a line of credit. 


    

4. The higher the loan amount, the higher the cashback. Since the cashback depends on the loan amount you require, a sizable loan amount will result in a significant cashback. However, you should understand the terms and conditions of the cashback mortgage before proceeding. In some cases, there is an upper limit to the cashback the lender will offer.

Cons Of Cash Back Mortgage

    

1. Higher mortgage rates. Cashback mortgages in Canada can come with significantly higher mortgage interest rates than standard mortgages. Interest rates apply to the complete loan amount and not just the cash back you receive. It means in the long run, you will end up paying more. In most cases, you pay more over time in interest than the amount you receive upfront.


    

2. You need to qualify for a cashback mortgage in Canada. Typically, the requirements for a cashback mortgage include reliable employment with an hourly rate, which means it is more difficult for self-employed individuals to get approved. 

   
      

   A credit score of at least 650 is also required. Furthermore, getting approved for a cashback mortgage is challenging if the extent of purchasing the home is renting it out. 

   
        

    

3. There are penalties for cashback mortgages in Canada. If you break your cash-back mortgage, you may have to pay back some or all of the cash you received as part of the cashback, which will be in addition to the prepayment penalty. A prepayment penalty is a fee that lenders charge if you pay all or part of your mortgage loan off before the duration you took the initial loan.

Should you get cash back mortgage?

Even though cashback mortgages in Canada have drawbacks, the upfront funds are helpful for most people. They can supplement your income while you recuperate from the heavy down payment. 

The interest rates for cashback mortgages are typically higher. However, the extra amount will only be paid in the long run, giving you sufficient time to grow your finances and not feel the pinch of the additional amount you would have to pay.

Cash Back Mortgage 101: Final Thoughts

There are some pros and cons to cashback mortgages in Canada, and you, as a new homeowner, should take the time to understand all the details before signing the contract. Conduct your research and find the right balance between the best interest rates and the best cashback amount. 

Our experts can help you every step of the way so you make the right decision. So, don't hesitate to contact Canadalend for the best expert advice. For more information about different types of mortgages, call Canadalend at 1-844-586-0713 or contact us here.

The process of buying your first home may be daunting, but it is rewarding as well. Once you have acquired your first home and have returned to a comfortable financial position, investing your money in real estate is a great way to grow your finances. 

One way to do so is to buy a second home and rent it out. Buying a second home in Ontario for renting purposes is not uncommon, and even millennials these days have the potential to purchase a second home while residing in their first home and paying a mortgage. 

There are things to consider before going ahead with this decision. There are some advantages and challenges of renting a second home in Ontario. 

Let’s start with the advantages:

1. Tax advantages

As challenging as it is, being a landlord comes with its perks, and there are some significant economic perks. There are taxes you pay to the government because property expenses like insurance, property taxes, maintenance costs, utility bills, and more are from your rental income. 

You can also deduct losses against your other income, as well as deduct depreciation from your taxes. Furthermore, if you wish to, you can sell the rental property and use that income towards another rental property without paying capital gains tax. 

2. Growth of property value

The value of your property will grow over time. In cities like Toronto, Vancouver, and others, and Ontario in general, the increasing demand for real estate has fuelled property prices. Buying a second home in Ontario for rent will allow you to own real estate that continues to grow in value and become an asset. 

If you decide to sell the rented property, you can turn a significant profit to invest in a bigger property without having to shell out extra from your pocket. 

3. Regular monthly income

Rent becomes another source of income and is something you can depend on every month in addition to your other primary income. Some homeowners invest in multiple houses for rent, which becomes their primary source of income. Buying a second home in Ontario for rent will give you the peace of mind of having a regular monthly income even if your other sources of income stop or face delays. 

For working professionals with a typical 9 to 5 job, a second source of regular income is always welcome.

With the advantages covered, buying a second home in Ontario does come with some challenges. As mentioned, these are challenges instead of disadvantages, so you do not need to worry too much. However, as a landlord and the owner of a second home, there are things you need to keep in mind and deal with regularly.

4. Getting the funds ready

Buying a second home in Ontario, for rent or any other reason, is a costly affair. If you are already paying a mortgage on your first home, you may look elsewhere for the funds, like going to the bank for a loan or asking someone you know. 

Canadalend allows you to take a second mortgage on a previously mortgaged home. A second mortgage gains access to funds for various reasons, including paying off credit card debt, starting a small business, buying a car, or making a down payment for a second home. 

It is also a way to refinance your first mortgage and get more equity against your home, allowing you to get a bigger loan. A second mortgage from Canadalend can help you cover home renovation costs, pay outstanding bills, quickly get cash on hand, stop a power of sale, and more. 

5. Dealing with tenants

Every landlord wishes for decent tenants who respect the property and treat the home as they would their own. Yet, sometimes, a tenant causes issues for the landlord. You must tow the line between setting the rules straight and giving the tenants their freedom. 

It can be challenging as you, the landlord, may have to deal with issues like neighbour complaints, delayed rent, higher maintenance costs, and more. One way to avoid dealing with troublesome tenants is to vet them before signing the contract. Meeting with the potential tenant and understanding their mannerisms is essential as this would dictate your future interactions with them.

6. Complicated taxation

Filing income taxes is more complex with a second home and new avenues of saving on taxes. Not all homeowners know how to minimize income tax payments and maximize deductions. 

You may have to employ a third party to help you save money on income tax but, in turn, have to pay them to do the tax filing for you or give advice on what steps to follow.

7. Staying updated with property regulations

As the landlord and owner of the second home, you will be responsible for keeping the property up to code. It means you must stay updated with the rules and regulations that change in the real estate space. If there are some changes in local regulations, you will be required to be on top of them. 

Your tenant will inform you about any new changes, and it is your responsibility to ensure the house is up to code and you follow the new regulations.

Buying a Second Home to Rent: Final Thoughts

Buying a second home in Ontario to rent is a wonderful investment and an asset. It gives you an extra source of regular income but also acts as an investment that will turn a profit in the future if you decide to sell it. There are some challenges to deal with, but that is a small price to pay for the potential economic gain.  

For more information about buying a second home for rent or a second mortgage, call Canadalend at 1-844-586-0713 or contact us here.

For many homeowners in Canada, leveraging their home equity through a loan can be an attractive option to finance major expenses, consolidate debts, or embark on home improvement projects. Home equity loans allow individuals to tap into the value they’ve built in their homes over time. 

However, understanding the various costs associated with these loans is crucial for making informed decisions. 

In this article, we will provide an overview of the common closing costs that homeowners in Ontario should be aware of when considering taking out a home equity loan.

What is a home equity loan?

A home equity loan, also known as a second mortgage, is a type of loan that allows homeowners to borrow against the equity they have in their property. Equity is the difference between the home’s current market value and the outstanding balance on the primary mortgage.

Home equity loans are often used for significant or unforeseen expenses, such as home renovations, debt consolidation, education costs, or medical emergencies.

Home equity loans come in two main types: fixed-rate and home equity lines of credit (HELOCs). 

In a fixed-rate home equity loan, borrowers receive a lump sum with a fixed interest rate, and they repay the loan through regular monthly payments. HELOCs, on the other hand, provide a revolving line of credit that homeowners can draw from as needed with varied interest rates.

Understanding Home Equity Loan Closing Costs

While home equity loans can offer financial flexibility, it’s essential to consider the closing costs associated with these loans. Closing costs are fees and expenses that borrowers incur during the loan application and approval process. 

In Ontario, these costs may vary, so understanding them is crucial for budgeting and planning. Here’s an in-depth look at the key closing costs associated with home equity loans in Ontario:

1. Appraisal fees

When seeking approval for a home equity loan, lenders often require a professional appraisal of the property to determine its current market value. Appraisal fees can vary, and homeowners should be prepared to cover this cost.

2. Legal fees

Legal services are essential for processing the paperwork and finalizing the home equity loan. Legal fees in Ontario can include the cost of a lawyer’s time, disbursements, and other associated expenses. 

We suggest obtaining quotes from different legal professionals to ensure a competitive rate.

3. Title search and title insurance

Lenders typically conduct a title search to ensure there are no outstanding liens or legal issues related to the property. 

Title insurance may also be required to protect the lender’s interests. These costs contribute to the overall closing expenses.

4. Loan origination fee

Some lenders charge loan origination fees to cover the administrative costs of processing the loan application. However, not all lenders impose this fee, so it’s essential to inquire about it during the loan-shopping process.

5. Discharge fees

If you have an existing mortgage, there may be fees associated with discharging or paying off that mortgage to facilitate the new home equity loan. Understanding and budgeting for these charges are crucial for accurate financial planning.

6. Brokerage fees

If you choose to work with a mortgage broker to facilitate the home equity loan process, there may be brokerage fees involved. These fees compensate the broker for their services in connecting borrowers with lenders.

Tips for Managing Home Equity Loan Closing Costs

Research and Compare Lenders

Our number one tip for saving on closing costs is to shop around. Different lenders have varying fee structures and closing costs. 

Make sure to do your due diligence in researching and comparing offers from multiple lenders to ensure you are getting the most competitive rates and terms.

Understand the Terms of the Loan

Take time to thoroughly review the terms of the home equity loan, including any associated fees. Pay attention to interest rates, repayment terms, and any conditions that may impact closing costs.

Get Multiple Quotes

When it comes to legal services, appraisals, and other associated costs, obtaining multiple quotes can help you find the best rates. Don’t hesitate to negotiate or seek competitive quotes to keep costs manageable.

Consider No-Closing-Cost Options

Some lenders offer no-closing-cost home equity loans, where they roll the closing costs into the overall loan amount. While this may result in a slightly higher interest payment, it can be a viable option for those seeking to minimize upfront expenses.

Factor in Future Financial Scenarios

It’s important to consider potential future scenarios when planning for a home equity loan. If there’s a possibility of repaying the loan early, be aware of any prepayment penalties and factor in potential changes in interest rates or property value over time.

Choose Canadalend for All Your Second Mortgage Needs

At Canadalend, your financial goals take precedence, and as your trusted partner, we are here to support you every step of the way. With in-depth knowledge and understanding, our dedicated mortgage brokers are committed to assisting you in securing a second mortgage tailored to your needs.

Leveraging long-standing relationships with an extensive network of financial institutions, including banks, credit unions, and private lenders, you can rely on us to help you find the best mortgage rates in the industry.

Experience our 5-star client-focused service today. Whether you are seeking general information or have specific inquiries regarding second mortgage products, features, or rates, our team is prepared to provide clear and informative answers. 

Your financial goals are our priority, and we are here to help. For more information about how our agents can expertly guide you through the second mortgage process, or to schedule an appointment with one of our agents today, call Canadalend at 1-844-586-0713 or contact us here.

When it comes to borrowing against the equity in your home, getting a second mortgage can be a valuable way to utilize what is likely your biggest financial asset. Whether you’re looking to fund home improvements, consolidate debt, or invest in new opportunities, a second mortgage can be a helpful financial tool. 

However, qualifying for a second mortgage is a nuanced process that requires careful consideration and planning. This article will discuss the conditions for a second mortgage to determine if you’re eligible to take out such a loan.

Understanding a Second Mortgage

A second mortgage is a secured loan that allows homeowners to borrow against equity in their property, in addition to their primary mortgage. Unlike the initial mortgage used to purchase the home, a second mortgage is a separate loan, typically with its own interest rates and terms. 

Home equity is the difference between the property’s current market value and the outstanding balance on the first mortgage. This often serves as collateral for the second mortgage.

Why You May Need a Second Mortgage

Home Improvements

Many homeowners opt for a second mortgage to finance renovations or home improvements. This can enhance the property’s value in the long run, create additional living space, or make the home more energy-efficient.

Debt Consolidation

Individuals with high-interest debts may choose to take out a second mortgage to consolidate their outstanding balances into a single, more manageable payment.

Education Expenses

Funding education is a common reason for homeowners seeking a second mortgage. This approach allows individuals to tap into their home equity to cover tuition fees and related costs.

Investment Opportunities

Entrepreneurs and investors may leverage a second mortgage to secure capital for a new business venture or investment opportunity.

Emergency Expenses

Unforeseen circumstances, such as medical emergencies or sudden repair needs, may require quick access to funds. A second mortgage offers a financial safety net during unexpected crises.

How You Can Qualify for a Second Mortgage

1. Equity requirements

The primary factor in securing a second mortgage is the amount of equity in your home. Equity is the portion of your home’s value that you own. This is calculated by subtracting your outstanding mortgage balance from the current market value of the property. 

Lenders typically require a minimum of 20% equity. The greater your equity, the better your chances of qualifying for a second mortgage.

2. Credit history

Just like any loan, your credit score and history plays a crucial role in determining your eligibility and the interest rate you’ll be offered. 

A high credit score demonstrates financial responsibility and reduces the perceived risks for lenders. Thus, the higher your credit score, the more likely you are to qualify for a second mortgage with a lower interest rate. 

The repayment pattern of your first mortgage will also be assessed to determine if you’re a high-risk or low-risk borrower. We advise you to check your credit report for any inaccuracies and take steps to improve your score before applying for a second mortgage.

3. Debt-to-income ratio

Lenders assess your ability to manage additional debt by evaluating your debt-to-income (DTI) ratio. This ratio compares your monthly debt payments to your gross monthly income. 

Ideally, your DTI should be below 43%, with lower ratios considered more favourable. To improve your DTI, consider paying down existing debts before applying for a second mortgage. 

4. Loan-to-value ratio

The loan-to-value (LTV) ratio is a key metric that compares the loan amount to the appraised value of the property. 

Lenders typically prefer low LTV ratios, as it indicates a smaller loan amount relative to the property’s value. You can improve your loan-to-value ratio by increasing your home’s value or by paying down your primary mortgage.

5. Income and employment history

Just like with any other loan, lenders value stability. Demonstrating a steady income and employment history reassures them of your ability to repay the loan. 

Homeowners with unverifiable, variable, or uncertain incomes are likely to find getting approved for a second mortgage more difficult. 

In these cases, lenders may either reject the application or offer the mortgage at higher interest rates. If you are self-employed, be prepared to provide additional documentation such as tax returns and business financial statements.

6. Documentation requirements

When applying for a second mortgage, take care to prepare the necessary documentation, including proof of income, tax returns, and information on existing debts. Being organized and providing accurate information can expedite the approval process.

Choose Canadalend for All Your Second Mortgages Needs

If you’re looking for a team of professional mortgage brokers with in-depth knowledge and understanding of second mortgages, then you’ve come to the right place.

As a reputable and trustworthy mortgage brokerage in Ontario, we are dedicated to aiding clients in securing second mortgages that align with their financial goals. 

Our team of experienced mortgage agents leverage their relationships with an extensive network of financial institutions, including banks, credit unions, and private lenders, to ensure you gain access to the most competitive second mortgage rates available in the market. 

At Canadalend, we pride ourselves on delivering 5-star customer service. With a welcoming and client-focused atmosphere, we’re here to address any questions or concerns you may have about second mortgages. 

Whether you are seeking general information or have specific inquiries regarding second mortgage products, features, or rates, our team is prepared to provide clear and informative answers. 

Your financial goals are our priority, and we are here to help. For more information about how our agents can expertly guide you through the second mortgage process or to schedule an appointment with one of our agents today, call Canadalend at 1-844-586-0713 or contact us here.