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In 2018, Canadian homeowners had an average of 75% home equity available to them. Little surprise then that one-in-ten decided to take advantage with a home equity loan, up from 9% the year before. With the average Canadian home equity loan valued at $75,000, Canadian homeowners are increasingly taking advantage of the available cash tied up in their property. 

Renovating and Repairing Your Home

Using equity tied up in your home to improve the overall value of your home is a sensible way to invest in your own future. The most direct way to increase the value of your property is to renovate it periodically and keep on top of any required repairs.

A standard kitchen refit can add over 70% of the cost to the value of your home, as can upgrading the exterior panelling and features. Energy-efficient renovations, such as the installation of new insulation, provide a trifecta of potential cost benefits; lowering taxes, lowering monthly energy costs and increasing property value.

Investing in New Opportunities

By far the most common reason for taking a home equity loan in Canada is to create further investments or to take advantage of an investment opportunity. 

While the long-term goal of investing is always to get back more than you put in, you need to compare the timeframe of your loan with the expected timeframe of returns from your investment. Where possible, monthly/quarterly/annual returns on your investment are preferable to help with the repayments on your loan. If it’s going to be several years before you see a return from your investment take extra care to ensure that you can accommodate the additional repayments from your monthly budget before you take them on.

Consolidating and Repaying Debt

With the standard Canadian household debt now exceeding 170% of household income, home equity loans have increasingly become a route for consolidating debt under a single arrangement. Providing a better interest rate than the individual loans, debt consolidation gives homeowners more control over their debt. It also allows them to maximize the ratio of their repayments, increasing how much of each payment goes towards the principal debt, rather than interest on that debt.

Defaulting on a mortgage risks the loss of that property. Using the equity tied up within it to help get your finances in order, so that never happens, is a sensible option to protect your assets. 

Buying a Second Property

A second property can have many benefits, not least of which is the opportunity to open up a new line of monthly income. 

Buying a second property with the explicit intention of renting it out long-term can provide enough monthly income to cover repayments on the initial loan. It’s always worth considering in advance what additional hidden fees there might be with becoming a landlord. Whether you go down the traditional private renting route or a more modern option such as Air BnB, there can be additional costs such as insurance and tax status changes to be mindful of.

When Not To Take A Home Equity Loan

While the reasons given here are some of the most common, and the most beneficial to your personal finances, there are of course many reasons that people take out home equity loans that aren’t as beneficial. The two we see most often are luxury items that will depreciate in value and, conversely, everyday expenses such as groceries, gas, utilities and bills.

Taking a home equity loan out to pay for a luxury holiday, buy expensive clothes or the latest technology removes value from your home and places it in something that won’t grow that value. If your budget doesn’t stretch to paying for groceries and utilities, a home equity loan isn’t going to fix that (unless it’s used to free up monthly cash by restructuring debt.)

Getting a Home Equity Loan

Extracting value from the equity in your property and finding effective ways to maximize your use of that cash can sometimes be tricky.

At Canadalend our experts are independent. That means they’re focusing on what is best for you, not what’s best for the bank they work for. The advice they give you, and the products they suggest, are for your benefit, not so they can meet a monthly KPI.

With access to hundreds of different lenders, and a multitude of different products, such as home equity loans, our experts can help you find the product you need to achieve the aims you have for your future financial wellbeing.

To find out more, contact Canadalend.com today and start a conversation about how a home equity loan can improve your future.

One of the key elements of owning property is maintaining or increasing the value of your investment so that when it comes time to sell, you turn a profit. While general upkeep and repairs are essential, renovations, extensions and additional amenities can all add to the value of your property. But how can you free up the money to do that?

Refinance and Build

The most direct option is to consider refinancing your existing mortgage arrangements. By shopping around you can find alternate schedules or lower rates of interest that free up some of your income each month.

If you are embarking on a long-term project, where work will be undertaken (and services or materials paid for) monthly, then having that extra cash flow each month allows you to plan and budget more effectively. Alternatively saving the money each month for a period, such as a year, can total a significant sum that can be used as a deposit or full payment for improvement works.

When you consider alternative finance it’s best to begin by determining your budgetary needs. Once those are set, you can start looking for a financial product that will allow you to meet the targets you have. Also, be mindful of what fees you may incur for switching products and to include this in your calculations. If you are looking at a decreased interest rate, you should look to decrease by at least 1.5% to have the desired money-saving effect. 

Home Equity

Refinancing is an option during the earlier phase of your mortgage, but the later into the schedule you are, the less likely you are to be able to make a saving. At this point, a Home Equity Loan would serve your needs much better.

With a Home Equity Loan, you can borrow money against the equity that has accrued in your property. This type of loan comes with its own schedule of repayments and would allow you to put the borrowed sum directly to use for the construction plans you have in mind.

This is particularly useful if you have a large-scale project with constant work going on. Having a lump sum available for works means they can continue unabated and you can start to benefit from the additional value the works bring to your property.

Construction Mortgages

In general, a construction mortgage is designed to support people who are building their home from scratch. They differ from domestic mortgages in both their structure and the rigor taken by lenders during the assessment phase. Installments of the loan are then issued to the borrower at key stages through the building process.

Some lenders offer a variant of this type of loan for specific construction work. Additional buildings on your land for example. This loan is closer to a standard loan in structure as it does not build upon your existing circumstances, though in some situations you may be required to offer a guarantee against the loan. These kinds of conditions vary from product to product, as do the schedule length and interest rates.

Finding What Works

What’s clear when you start to investigate any of these options is that the variety of products is huge and that the criteria within them also vary greatly. It can become dispiriting having to plow through brochure after brochure, website after website, to try and find that elusive product that gives you what you need.

At Canadalend.com all our advisors are independent experts. Unlike other institutions, we don’t incentivize them to recommend products that aren’t right for you. Instead, they use their years of experience to find the best product for you from thousands of potential lenders.

Contact Canadalend.com today to find out how much time and money you could save.

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.

With the country still dealing with the COVID-19 pandemic, it is getting increasingly difficult for Canadians to meet their monthly financial obligations. Working through a job loss or reduction in hours has affected many of us, and government funded programs – like the Canadian Emergency Response Benefit (CERB) – can only cover so much. Households are finding it tough to keep food on the table, let along pay down their mortgages and other high-interest debt, such as credit cards.

Homeownership at times like these have its benefits. You can use the equity you have built over the years to consolidate some of your high-interest debts into one, easy to manage monthly payment. Even in a risky financial climate, like this one imposed by COVID-19, you can pay down your debts as well as cut down your overall monthly expenses. Interest rates are also currently at a record low, so it has never been a better time to start looking into consolidating outstanding debt. 

What Is Home Equity & How Can You Access It?

The difference between the current value of your home and the unpaid balance of your mortgage make up your Home Equity. Over time, your equity grows as you make more and more of your mortgage payments, and the percentage of ownership rises. Other factors, such as market activity, can also substantially increase the amount of equity that you have access to and can leverage. 

Homeowners looking to access their Home Equity have two options for financing: A Home Equity Loan or Home Equity Line of Credit (HELOC). A Home Equity Loan, or Second Mortgage as its often referred to as, allows you to withdraw a lump sum of money based on your available equity. You would then make monthly payments at a locked interest rate until the time of renewal. This is great if you are looking for a larger sum of money – anywhere from $20,000 to even a $1,000,000 depending on the home value.

If you choose to refinance, or take out additional equity, can use this extra money for anything from debt consolidation, investments, home renos, education, or other life expenses.

Borrowers looking to access their available home equity also have the option to pursue a Home Equity Line of Credit (HELOC). This allows you to withdraw cash from the line of credit and repay it as you find necessary, as long as the minimum monthly interest payments are made. You do not need to take out the whole line at once, it can be used more like a credit card, but at much lower interest rates. Like Second and Third mortgages, homeowners with multiple high-interest credit card debts, or high-interest loans find HELOC’s very appealing. This ability to allow the borrower to pay only one interest-only payment, at a much lower interest rate, can make monthly financial obligations much more manageable. 

Advantages Of Consolidating Debt Through A Second Mortgage or Mortgage Refinance:

Increased cash flow: Multiple high-interest debts consolidated into one lower interest rate can increase your available monthly income and help you save money over time.

Customized financial plan: Our Mortgage Professionals can help you create a loan and debt repayment plan, spread over a 2-5-year period, to help reach – and maintain – your financial goals.

Streamlined payments: Multiple larger monthly payments can be combined into one single lower monthly payment with a lower interest rate that can help you pay down your debts faster.

Credit score: Individuals with a poor credit score can qualify for a second mortgage. This can help Borrowers to pay off their high-interest debts and start rebuilding their credit. When applying for a future mortgage or refinance, these factors can make all the difference.

Principal repayment: When individuals are forced to pay off high levels of credit card debt using only their income, they are often not able to pay the whole sum. Instead, they are left paying the minimum payments which often pay solely for the interest itself. This endless loop can leave someone in a great deal of debt, stress, and substantially limit their financial standing. A Second Mortgage, or HELOC, can allow you to pay the total sum of your credit card debt and only worry about making the appropriate monthly payments.

As you can see from the examples above, tapping into your home equity through a Second Mortgage, or Refinance, can be quite advantageous. A Private Mortgage is also a great option for potential borrowers with bad credit that are worried about the often complicated approval process. Since homeowners are using the equity built into their home, they are seen as less of a risk to potential lenders. The application process becomes much quicker and more streamlined. Home Equity Loans can also be very beneficial to self-employed individuals who have a difficult time with reportable income.

If you are interested in accessing your home equity and consolidating your high-interest debts, the trusted Mortgage Brokers at Canadalend can help get you approved quickly and easily. With access to a very large pool of private lenders, banks, and credit unions, Canadalend will work tirelessly to get you the best mortgage rate for your individual needs.

Call Canadalend today at 905-881-0242 or email us at info@canadalend.com to speak with an experienced Mortgage Broker who can help you get out of debt faster.