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A home can be a great place to live as well as a valuable asset. Being one of the larger investments one can make, if you are in need of cash, your home can be used to secure funds for a range of financial situations. This is usually done by homeowners looking to take out a home equity loan or refinancing their current mortgage.

What is a Home Equity Loan?
A Home Equity Loan can also be seen as a second mortgage. These are great when you are looking to update your home through renovations or pay off outstanding high-interest debts from credits cards or car loans.

In order to be eligible for a home equity loan, you need to have paid down some of your mortgage. The difference between the appraised value and the amount left on the mortgage make up your home equity. Even if you just started paying down your mortgage, you could have a few thousand dollars of equity available.

Why a Home Equity Loan?
Home Equity Loans have very low interest rates compared to other unsecured loans. In most cases, it would cheaper to get one for your next car rather than financing through the actual dealership. If you are stuck paying high-interest credit cards, using a Home Equity Loan to consolidate will not only get the debt paid quicker, you could save thousands in interest.

What Does It Mean to Refinance Your Home?
By Refinancing your mortgage, you are essentially negotiating a new loan – usually with better rates and terms – to pay off your existing mortgage.  

Why Refinance Your Home?
There are several reasons why someone would want to refinance their home.

• To make the payments easier. If you are able to get a better interest rate, your monthly payments drop.
• To change the terms of the loan. For example, a mortgage term can last up to 30 years. If you wanted to pay it off sooner, you could refinance to a 15-year term at better rates.

How Should You Choose?
The best way to sort out your options is to speak to a licensed mortgage professional from Canadalend.
He or she can talk to you about your options and what your payments are going to look like so that you can make an informed decision that works best for your situation.

For more information call Canadalend.com today or better yet, Apply Online and one of our Agents will contact you!

With the current record-low interest rates, borrowers and homeowners find it more beneficial than ever to refinance. Even with a reduction of half a percent, Refinancing could save you thousands over the life of your term!

With the lower monthly payments and increased savings over time, even the smallest drop in your mortgage rate can be felt almost instantly. Depending on the size of your mortgage, Refinancing can free up hundreds of extra dollars every month to not only alleviate financial stresses but also make your payments easier to manage. 

While the instant savings is a great reason to refinance, the advantage comes from what you can do with those savings. Many homeowners find that Refinancing has helped them with much-needed home repairs or renovations, even business investments! Every dollar you save is one less that you need to pay the bank, and if you choose to invest, the combined savings and extra investment income could mean tens of thousands added to your portfolio.

As the months go by, and the equity in your home grows, you become eligible for a Home Equity Loan. Like Refinancing, you can tap into your equity to unlock funds for all of the above reasons, but at much lower rates. For example, if you take out a Home Equity Loan to upgrade your home, by the time you have paid it back, your home will have generally gone up in value because of it.

Again, there are many compelling reasons to take advantage of refinancing your mortgage. Everything from home repairs to monthly mortgage payments could be costing you more the longer you wait to get them done. There is no time like the present to start doing today what will benefit you tomorrow. 

Don’t worry; you won't be doing this alone. Either call today or Apply Online for a free consultation. One of the mortgage experts at Canadalend will walk you through the entire process and answer any questions you may have around mortgage refinancing and the equity available in your home.

The COVID-19 driven economic downturn has been hard on Canadians: unemployment rates have risen to record highs, with 44% of people across the country losing income due to the pandemic, and over  2.8 million enrolled for CRA benefits.

With loan and credit deferrals soaring, it’s clear that Canadians are more cash strapped than ever before.

If you’re a homeowner seeking extra or emergency cash, home equity financing allows you to access a line of credit or a lump sum deposit, at far lower interest rates than those available on personal loans or credit cards.

What is home equity?

Home equity refers to the total amount of your wealth tied up in your home, and is calculated by subtracting the outstanding amount owed on your mortgage from the current value of your home. For example, if your home is worth $350,000 and you owe $200,000 on your mortgage, you have $150,000 in home equity.

The longer you’ve owned your home, the more home equity you’re likely to have: home equity typically increases as you pay off your mortgage, and as the value of your home appreciates over time.

Most homeowners who make regular mortgage payments have a significant amount of home equity built up, particularly as values of homes across Canada have skyrocketed in the last decade.

The loan amount available to you will depend on the amount of equity you have accumulated in your home, and which home equity financing option you choose.

1) Home Equity (Second Mortgage)

As the name implies, a home equity loan is a loan secured against your home - essentially a second mortgage. Second mortgages allow Canadian homeowners to borrow up to 80% of their appraised home values, minus the balance on their first mortgage.

With a second mortgage, you’ll receive your loan as a one-time lump sum deposit.

As implied by the term second mortgage, you will now have two mortgages, both of which you will need to repay in fixed monthly installments. As home equity loans have fixed interest rates, your repayment amount for this second mortgage will be the same each month.

Whilst interest rates on home equity loans are usually higher than on first mortgages, these second mortgages still offer far better rates than either personal loans or credit cards.

Second mortgage rates are, however, higher than those on first mortgages. In the case of default, your first mortgage would be paid off first, which makes second mortgages an inherently riskier product for lenders.

2) Home equity line of credit (HELOC)

A HELOC is a line of credit backed by your home equity, which works pretty much like a credit card - but with far lower interest rates. You'll have access to a line of credit, from which you’ll be able to withdraw instant cash, up to a certain credit limit.

This line of credit will be available to you for a fixed time frame, typically around 10 years. At the end of this “draw period’, you must begin repaying the borrowed amount over the term of, usually the next 10 to 20 years.

Interest rates on a HELOC are variable, which means that they will fluctuate over the repayment period.

3) Cash-out refinance

Mortgage refinancing - also known as remortgaging - involves replacing your existing mortgage with a new mortgage, typically one with more favourable terms, such as lower monthly payments or lower interest rates.

In a cash-out refinancing, or home equity refinancing, homeowners refinance their mortgage for a greater amount than the amount owed on their existing mortgage and take out the difference in cash.

To qualify for a cash-out refinancing in Canada, you’ll need at least 20% equity in your home. You’ll be able to borrow up to 80% of the appraised value of your home, minus the balance on your mortgage or any other loans secured against your home, including any credit owed on a HELOC.

As interest rates on the refinanced part of your mortgage are calculated separately from interest rates on your original mortgage, cash-out refinancing is a particularly valuable option in the current low-interest environment.

4) Reverse Mortgage

For Canadians aged 55 and above, a reverse mortgage is a home-equity option that allows homeowners access up to 55% of their home’s value in credit. Funds can be advanced either as a lump sum payment, in pre-determined monthly installments, or as a line of credit.

Unlike other mortgage products, a reverse mortgage requires no repayment of the loan until the homeowner sells or no longer lives in the property. The proceeds from the home’s sale will go to the lender, repaying the principal, interest, insurance, and fees.

Any proceeds from the sale that exceed the loan amount will go to the homeowner or their estate, who will also have the option to pay off the mortgage and keep the home.

Interest rates on reverse mortgages may be fixed or variable, and are typically higher than those on a first mortgage, but significantly lower than interest rates on second mortgages.

Why choose a home equity financing option?

If you’re a Canadian homeowner seeking extra or emergency cash-on-hand, it’s important to keep in mind that credit cards and personal or payday loans are not your only option.

You’ll likely get far better interest rates - and equally fast and flexible financing - by choosing to leverage your home equity instead.

If you’re interested in home equity financing, feel free to give us a call or book a free consultation. At Canadalend, our mortgage experts are always glad to answer any questions or guide you through the process.

When your mortgage’s repayment terms are no longer suitable for you, it may be time to refinance. Fortunately, if you’ve been waiting for the right moment to do it, the moment has come. As of October 2020, mortgage rates are incredibly low. To the shock of many, this drop has been continuing for months. Rates may drop even further, or at least remain this low into 2021.

Good News For Homeowners & Homebuyers

As a reaction to the economic damage of the COVID-19 pandemic, the Government of Canada has focused on lowering interest rates to encourage spending. National interest rates have been lowered, and negative interest rates are seen as a possibility.

The goal of the government response is to encourage spending amid a time of economic challenges. For homeowners that are still overpaying for their mortgage, this is very good news. Amid rising rent prices, renters can also take advantage of low rates to end up spending less on housing.

Is Refinancing A Good Choice?

Refinancing your mortgage isn’t always the right option. There are a few reasons for you to consider doing so. Like your first mortgage, a refinanced mortgage is a serious, long-term financial commitment. So, you’ll want to make sure you have a good reason to apply.

If you’re about to make a serious investment such as a major renovation or buying a new property, refinancing your mortgage is a good idea. You can also use mortgage refinancing as a means to consolidate your other debts. 

The most straightforward reason to refinance your mortgage is to simply save money. If current interest rates are significantly lower than they were at the time you secured your first mortgage, refinancing will lower your mortgage expenses.

Low Interest & Refinancing

The logic behind refinancing your mortgage when interest rates are so low is clear. You simply save more money on monthly payments and end up paying less for your mortgage overall. But there are still other factors you must consider at the same time. Low interest rates will serve you even better if you have:

  •  A high credit score

  •  A low debt-to-income ratio

  •  A stable income

Refinancing with the above while interest rates are low is a great financial choice.

What Should I Do?

If interest rates and your personal qualifications are ideal, you have several mortgage refinance options you could take.

Bank Refinanced Mortgage

Banks are typically willing to refinance a mortgage with a balance that’s less than the property’s appraised value. Each bank will have a slightly different offer, but they all lend money based on the same criteria. With an attractive financial situation and lower interest rates, you can take a new mortgage to pay the first off and spend less money in the end.

Government Loans

The CMHC offers guides for government-issued loans. 

Mortgage Brokers

You don’t need to go directly to a bank to get a mortgage. Many professional mortgage brokers can help you get the loan you need. It’s their job to assess your credentials and match you with a mortgage that meets your needs at the lowest cost.

HELOC

You can leverage your property’s value to secure a more flexible financing option. A Home Equity Line of Credit (HELOC) is, as the name suggests, a line of credit secured by your home’s equity.

While you can use a HELOC for any expense, it makes more sense to take advantage of low interest rates and take them to pay for expenses that increase your property’s value. Because HELOCs are secured with equity, they typically offer competitively low rates.

Conclusions

It’s best to strike while the iron is hot. If your current mortgage isn’t satisfactory, it’s a great time to look for the refinancing option that will make homeownership less of a hassle. With the right choice, you can achieve:

  •  Lower interest payments

  •  Some cash-in-hand

  •  Lower monthly repayments

  •  A longer repayment term

For more information, contact the Mortgage Refinancing Experts at Canadalend today at 1-866 iCAN LEND or better yet, Apply Online and one of our agents will call you!