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It’s a lot of financial responsibility to afford and fund a home. There’s the monthly mortgage, maintenance, insurance, taxes and maybe even condo fees. It can become quite heavy so homeowners should always be looking to lower their monthly fees and the amount of interest they have to pay.

Refinancing is one of the more conventional ways of doing this. There are a few pros and cons to review when making this decision

What is Refinancing?

Basically, this means applying for your loan all over again and hoping to be declared a stronger and safer applicant. With this will come the opportunity to negotiate better terms and can save you some money in both the short and long term.

Pro: Saving Money

This is a big one and is usually the main reason that people refinance their mortgage. As you improve your credit score, grow your career and achieve more of your earning potential, you could be viewed as a strong applicant by a lender. If this is the case then refinancing is worth considering.

Con: You Might have to Sacrifice Certain Aspects of your Mortgage

When going into a refinancing arrangement, it’s important to recognize that you might not walk away with a better deal in every way. You could move from a fixed-rate to an adjustable rate and end up with a higher interest rate. You could decrease the equity in your home. There could even be fees and penalties.

Pro: Access to Funds and Consolidation

Refinancing can free up more of your money for debt repayment or it can open more funds for you to consolidate all your debt. These funds can be used in any way you want including home renovations, travel, retirement or to pursue business ventures.  

When it comes to refinancing remember that you’re a customer. Lenders want your business and to see you in a good financial situation that benefits both them and you. To achieve this, they are often open to refinancing if the new financing deal is realistic.

Private mortgages are a valuable but under-utilized option for mortgage applicants. It’s especially useful for those who might not have the strongest application or want a little more flexibility that can come with working with a bank or traditional lender.

Strict Lending Rules Means that Alternative Options are Necessary

As more regulations are imposed on potential homeowners, there’s going to be a big pool of people who will have trouble qualifying. A portion of this pool won’t have access to a guarantor or be able to pay a higher interest rate.

The rules imposed by the Federal Government in October 2016 is a prime example of how private mortgages can fit into the business of lending and provide an intriguing option for many people.

How do I Apply for a Private Mortgage?

You can research, approach and meet with private lenders the same way you would with traditional. This is not a shady business but is out in the open and can be discovered through word of mouth or by searching the internet.

Each will have their own stipulations and regulations so it makes sense to shop around.

The Pros of a Private Mortgage

Not every applicant has a full-time job, T4, big down payment and strong credit rating. The big banks typically balk at borrowers who don’t check off enough boxes.

Financing through a private mortgage is a distinct alternative for someone (or a group of people) who fall into any of the following:

• Self-employed
• Foreign investors
• Applicants who are rebuilding their credit
• Applicants who owe taxes that are in arrears
• Anyone looking to flip a property
• Looking for equity for other ventures like starting a business

The Cons of a Private Mortgage

With this type of arrangement, the property matters as much as the applicant. You could be rejected if the property or location are not appealing to the lender.

There are always fees associated with working with private lenders whereas with traditional lenders, the banks typically pay the broker. It can be as low as 1% or as high as 5% so it’s best to ask each lender you are negotiating with.

If you’re having difficulty getting approved by traditional lenders than a private mortgage is worth reviewing. There are a ton of benefits using a private mortgage and it’s a proven way to get into the market.

What’s better than escaping the harsh Canadian winters to your own private villa in Mexico or a beach house in Miami? Or maybe it’s owning a cottage that your family can enjoy on weekends?

Wherever your dream vacation home is located, owning one takes money and a financial plan to achieve. The good news is that you might have options that don’t include winning the lottery or discovering you had a rich uncle.

Can you Fund your Vacation Home with a Loan?

Loans aren’t meant to be used frivolously and while a vacation home can feel like a luxury, it can also be an investment. Properties as assets are historically very secure, so using different loan types to invest in a vacation home could work in your favour.

If you plan on treating a vacation like a second home that will aid in your retirement than borrowing might be an option if you can afford the second mortgage.

Invest in the Proper Research

Scour the web and speak to realtors and travel agents to find an under-the-radar spot to buy a vacation home. You’ll pay less and potentially find an intriguing opportunity to turn a profit.

This might mean Arizona instead of Mexico or a cottage outside of Muskoka, but a bit of sacrifice could result in a vacation home and a sound investment.

Finding the Right Partner

Another option is to co-own a vacation home with another person or family. It could be in a timeshare situation, where you would own under specific circumstances with strangers. Alternatively, you could find the right person in your network to invest in the venture. 

Should I Apply for a Second Mortgage?

A second mortgage is a mortgage taken out on a property that is already mortgaged. Using this type of loan to finance a vacation home isn’t uncommon. You could then use a home equity line of credit for any repairs or renovations.

Finding a property for a reasonable price in a desirable area can turn a loan into both a vacation home and an investment.

Even if your savings account isn’t flush, a vacation home can be a reality. Speak with a mortgage expert to review your finances to see if you can make it work.

Only a few months later and we’ve experienced a significant interest rate hike from the Bank of Canada. To compound matters, other lenders have followed their lead and increased their interest rates.

This hike should affect all loans and saving products sold by Canadian banks.

What Led to the Interest Rate Increase?

This was the first interest rate hike in years and the resulting fallout is complex with potentially major implications.

Part of the rate increase is due to a rebound in the economy. As oil prices rebound somewhat since its 2014 plunge and the housing market’s dip seems minimal, there are signs that the Canadian economy has bounced back from its recession.

These measures are also an attempt to curb the debt load of Canadians, to spur savings and to strengthen pensions. These all suffered when interest rates were low and people took advantage by loading up on debt.

Where are Interest Rates Headed?

As we’ve recently learned, these things are tough to predict even for financial experts. Remember, pundits called for rates to stabilize beyond 2018 but a hike hit Canadians in July 2017.

Mortgage rates might continue to climb throughout the rest of the year and into 2018 due to North America’s economic expansion. Desjardins Bank has suggested that the rate could reach 5% by 2019.

It might be best to lock into a fixed rate, if possible.

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What will Other Lenders Do?

This will most likely be a case of follow the leader. In fairness to lenders, they have also lowered rates in conjunction with the Bank of Canada when they were not required to. It would be surprising to see any lender not try to keep pace.

There’s no need to panic. As easily as rates could increase, they could also lower or stabilize. This is an opportunity to look for some value in the housing market or to save for longer or at better rates.