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Mortgages, private mortgages, second mortgages, home equity loans—how does someone know what type of loan is right for them? Differentiating can be difficult and mind-numbing.

Second mortgages might be a touch less popular than other methods but that doesn’t mean that it should be considered less. A review of second mortgages can convey that this is a proven method to obtain funds and, more importantly, if this is right for you.

Here are some of the more important factors that a borrower should know.

A Second Mortgage is a Proven Way to Access Funds Quickly

Think of a second mortgage as a way to tap into the available equity in the investment of your home.  You can adhere to the terms of your first mortgage and most likely avoid any penalties associated with refinancing.

Remember, you need to have a good amount of equity in your home to leverage a second mortgage.

You can Pursue a Private Lender for a Second Mortgage

If you are having trouble being approved for a second mortgage by a traditional lender like a bank or even where you have your first mortgage, then you can consider private lending options.

Private lenders typically have less rigid qualification guidelines and are more open to different agreements that result in a borrower being approved.

The Different Types of Second Mortgages

Second mortgages can be accessed as a separate loan or it can be remitted in the form of a home equity loan or line of credit secured by your home.

How the funds are made available comes down to your preferences and circumstances.

Second Mortgages Work Best as Short-Term Solutions to Financial Problems

There are many situations where a second mortgage can be useful. Since it can come with higher interest rates, penalties and additional fees, it is best employed in the short term to get a borrower over a financial hurdle such as home renovations or to open a business.

Depending on the situation a borrower finds themselves in, second mortgages can be a useful lifeline. Make sure you understand the details and ramifications and that you go into the arrangement equipped with an exit strategy.

When applying for a loan, the application process and the lender’s checklist can be mysterious. Most borrowers recognize that factors like credit history, salary, debts, assets and price of home will play a part in whether you are approved or denied.

How do all these factors come together? What can applicants do to make sure they have the strongest chance at a mortgage, home equity loan, second mortgage or other financial products that are available?

Be Honest with Yourself About your Strength as a Candidate

Above all else, go into an application process understanding where your weaknesses might reside. If you don’t have a full-time job or you have a weak credit score or you have a large amount of consumer debt—these are all things you must speak to and rectify.

What do Lenders want to see in an Application?

Lenders want the process to be as clear and transparent as possible. They want to attract the right type of borrower, which means one that carries the least amount of risk.

At the top of the list, they want an applicant with a positive credit reputation, steady monthly income and one that can clearly demonstrate an ability to repay the loan.

Does it Matter Where the Money is Spent?

There are several variables that make a clear answer to this question murky.  If you are buying a home than the price and condition of the home matters, you might even be subjected to a home inspection.

If it is for home renovations, medical care or education, you usually don’t have to provide much further context.

Focus on these Parts of your Application 

To be a strong candidate, work towards bettering your credit score and ensuring you have some assets to your name. While these are easier said than done, small improvements in both can lead to a greater chance at approval.

For second mortgages and home equity loans, the more equity you own in your home, the more funds a lender can provide to you.

Applying for loans of all types can be complicated. The more boxes you check off, the more likely you are to receive exactly what you want with appealing terms.

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.

Apply online in 60 seconds & get approved now!
Call us for more information 905.881.0242

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.

IS IT DIFFICULT TO GET A HOME EQUITY LOAN in 2020?
A home equity loan is a great way to borrow against the equity you’ve built up in your home. Against the backdrop of a robust Canadian housing market and near record-low interest rates, it continues to be an excellent time for property owners to consider taking out a home equity loan.

Common Myths about Home Equity Loans
There are many misconceptions about what a home equity loan is and how it can be used.

Myth #1: A Home Equity Loan and Home Equity Line of Credit Are the Same
A home equity loan and home equity line of credit (HELOC) might sound alike, but they are very different financial products, even though they both use the equity you’ve built up in the property.

For starters, “home equity” is the difference between the value of your home and the remaining balance on the current mortgage—every time you make a mortgage payment, your home equity increases. Your home equity also increases as the value of your home increases.

A HELOC is a revolving line of credit that lets you borrow against the equity in your home. You can withdraw money when needed, and you only pay interest on the amount you borrow.

A home equity loan works like your primary mortgage and is sometimes referred to as a second mortgage. You receive a fixed amount that is payable over a predetermined period time with a fixed interest rate and set monthly payments. You start to pay interest on the entire amount as soon as you receive the home equity loan.

Myth #2: You Can Only Use a Home Equity Loan for Home Improvements
The money you secure for a home equity loan can be used for whatever you like. Many people take out a home equity loan for home improvements, but you could use the money to buy a second property, pay for a college education, consolidate debt, or anything else.

Myth #4: Approval Is Guaranteed
Just because you have a house does not mean you’re guaranteed to get a home equity loan. A lender might approve you for a certain amount, but they could back out of the home equity loan or renegotiate the terms after they take a closer look at your financial situation.

How Do You Get a Home Equity Loan?
The requirements for getting a home equity loan can vary depending on who the lender is. The bigger the lender (i.e. Canada’s big banks), the stricter the lending rules.

Canadalend Can Help You Get A Home Equity Loan Even If:

• - You are self-employed and cannot verify your income
• - Your credit history has weakened
• - You have taken on too much additional debt
• - The value of your house has dropped

Where there is a will, there is a way with Canadalend. We don’t let the small things get in the way of making sure you get the best mortgage product at the best price.

FAQ about Home Equity Loans

Q. Is It a Good Idea to Take Out a Home Equity Loan?
A. YES! There are many advantages to taking out a home equity loan. One of the most significant benefits is the lower interest rate. If you’re consolidating debt, credit cards can charge interest as high as 30%. A home equity loan will also have a lower interest rate compared to loans that are not backed up by the equity you’ve built up in your home.

Q. Can I Get a Home Equity Loan if I’m Unemployed or Have Unreliable Income?
A. YES! If you go to one of Canada’s big banks and ask for a home equity loan while unemployed or have unreliable income, chances are you’ll get turned down. Even if you are self-employed, the big banks can discriminate against you. But not at Canadalend. We specialize in working with the employed, self-employed, even client’s that are in-between jobs.

Q. Can I Get a Home Equity Loan with Bad Credit?
A. YES! Canadalend can help you.

We work with all incomes and credit scores to help secure home equity loans for our clients. There are many reasons why your credit can take a hit, and it’s not always your fault, but banks don’t care. Even if a traditional lender does offer you a home equity loan, they won’t be giving you their best rates.

The same thing applies if you have declared bankruptcy and want to take out a home equity loan. Traditional lenders see you as being a risk and could charge you a premium for a home equity loan, but not at Canadalend.

Q. Is it true that Canadalend has access to more lenders and more products than any bank or financial institution?
YES! Canadalend has access to private and alternative lenders, banks that specialize in providing home equity loans, and even caters to those who are self-employed, have unreliable income, or bad credit.

Private lenders do not have to follow the same strict lending guideless that Canada’s big banks and trust companies do. Unlike big banks, private lenders provide you with more freedom, flexibility, and options. At Canadalend.com, we have access to hundreds of different lenders. That means we can find you a lender that will provide a home equity loan.

It’s your equity, and you should be able to take out a home equity loan on your terms. If you’re a homeowner and are looking to take out a home equity loan, contact Canadalend.com today or apply online. A Canadalend.com lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.

Apply online in 60 seconds & get approved now!
Call us for more information 905-881-0242
Canadalend.com, Helping Homeowners Get a Home Equity Loan