Our Blog

Buying a home is a complicated process that involves banks, real estate agents, lawyers and a ton of moving parts. The very first step a buyer should take is to get pre-qualified for a mortgage. It’s not a necessity but it helps remove murkiness and confirms that people can borrow funds to buy a home, and how much they will have to work with. It will save you time and possibly heartbreak as you search for your first or next home.

It’s a simple process and qualification is based on your financial profile. Here are some tips to help you get pre-qualified.

Credit Report

A credit report is a snapshot of a borrower’s credit history. It outlines their debt history and their ability to repay loans. It is a vital document for lenders to review as they make their decision.

Typically, you need to provide a credit report as part of your pre-qualification application. If you have a poor score, consider holding off for a few months as you work towards improving it. During this time, focus on paying off debts, pay incoming bills on time, and don’t borrow any money.

You can also meet with a credit counselor to create a strategy to improve your score.

Your Financial Information

Pre-qualification doesn’t require you to submit all your documentation but you need to have your numbers in order. Numbers refer to your financial information, which can include household income, assets, liabilities, down payment amount, bank statement and the previously mentioned credit score.

Before contacting your lender to start the pre-qualification process, consult with your bank to get your financial information in order.

Be Honest and Transparent

To get pre-qualified, a lender needs to assess your financial situation and history. To do so, you need to provide accurate information. Under no circumstance should you try to conceal a debt or lie about your credit score. Not only will a lie on your application result in rejection, it could put you in bad standing with the lender.

Contact us today to learn more about mortgage pre-qualification, or to start the process.

There are many steps involved in buying a home, not the least of which is securing a mortgage. While this is standard for most people as they seek to buy their first home or move to another home, some owners might need to apply for a second mortgage. That means, in most cases, that they want to take out a mortgage on top of the primary mortgage to pay off debts or make a large investment, which can include post-secondary education or starting a new business.

Why Apply for a Second Mortgage?

A second mortgage is also commonly known as a home equity loan. It may seem helpful to have this option to manage complex financial matters, but it is important to not enter this arrangement lightly. For some, despite taking on more debt, it can actually help improve your credit score if you use the money for debt consolidation.

Getting Approved

It may not always be possible to get approval from a financial institution in the first place. The interest rate is usually higher and there are often penalties for defaulting, so experts recommend comparison shopping both of these factors. Still, interest rates on second mortgages are usually lower than credit cards.

Be Prepared for Fees

Each financial institutions or lenders will charge different closing costs and fees. As a result, find out in advance what these parameters are so you can create a repayment plan. Qualifications for a second mortgage are first determined by the value of your home and its equity. Income and credit history are important, but not major factors like they are with most other loan applications—including a primary mortgage.

Value for Borrowers

There is greater freedom with a second mortgage compared to other loans. In fact, borrowers can often negotiate the terms and as much as 85% of your property’s value can factor into the amount you can receive. However, not everyone will provide this option as it is riskier for the lenders. That is because, if you happened to default on your loan payments, your primary mortgage lender would be paid before your second mortgage lender.

If you are considering a second mortgage application, contact us to help you ensure it is the right move.

Within Canada, for a variety of reasons, citizens are taking full advantage of second mortgages. Whether combining credit cards, paying for home repairs, or buying property, funds from a second mortgage improve a borrower`s situation.

The key question for many borrowers is, of course, who will lend me the money? A hundred, or even fifty, years ago the potential answers to that question were few. Banks had the majority of the loans with credit unions holding a small share of the lending business.

In 2020, there are three categorizations of lenders. The A-lenders are the traditional lending institutions, banks and credit unions. Next are the B-lenders, who despite their B status, often offer a service on a par with the A-class. B-lenders account for a smaller share of the market but can offer better rates and have a lower threshold for entry. They can work with borrowers rejected by the A-class.

Finally, there are private lenders who specialize in bespoke lending arrangements which may carry more risk. These loans can be highly specialized and are used when a different kind of thinking is needed.

Credit Unions

Credit Unions are formed by people pooling their money. They buy shares in the union and the money they use is put in a collective pool. This pool is then used to create loans with an emphasis on “people helping people.” The union is owned and operated by the people that buy shares. As such, credit unions enjoy tax-exempt status and operate on a not-for-profit model. Their loans can be structured in a way that a bank’s loan cannot.

One of the biggest changes to Canadian mortgaging in the last ten years has been stress testing. Stress tests are designed to make sure that people getting a mortgage can afford it. As a side effect, it also keeps people who could afford a mortgage, from getting one. Increasingly, credit unions have been filling that gap with loans that do not need stress testing.

B-Class Lenders

Often B-Class lenders are viewed as exactly that, B-Class. There are certainly some lenders that behave badly in both classes. Not being a bank doesn’t immediately mean a B-Class lender isn’t a good choice.

B-Class lenders are many different kinds of companies. Sometimes they can be businesses that are looking to loan money. They can be private groups operating in a similar way to a credit union. They might also be smaller financial companies specializing in loans and nothing else.

What these companies all have in common is a desire to lend money. As they are not financial institutions, they do not have to meet the same criteria as banks do. They can offer second mortgages without the need to stress test for example. B-Class lenders compete with the A-Class by offering a high standard of service to more borrowers than the A-Class can.

When you work with a B-Class lender you can expect a slightly higher interest rate on your loan as they do work with slightly riskier investments. Shopping around can help you find a good product with the right rates. It’s even possible to find rates that are equal to or lower than those offered by banks. Getting the best interest rate, fixed or variable, can save you tens of thousands of dollars on your loan.

Finding Solutions

Those who wish to borrow, face many choices. They could connect with one of the many Canadian credit unions. They may be best suited to working with one of the many B-Class lenders. Working out what’s going to be best, short and long term, can be tough.

Canadalend.com’s financial experts give you clear independent advice. This is because they are exactly that, independent. Unlike at a bank they’re not incentivized to sell you unsuitable financial products. Instead, they can find the lender and product that’s going to best serve your needs.

Get started by contacting Canadalend.com today to discuss your needs so that we can find the right lender for you.