Is Mortgage Refinancing Right for You?

Let’s face it, we all want to pay off our mortgage as soon as possible but sometimes you need a little help. Maybe you’ve gotten behind on your payments, maybe your interest rates are spiraling out of control – either way you need to know that you’re taking control of your mortgage, not the other way around. With interest rates now at the lowest they’ve been for years and soon to rise, now is the time to take advantage and get the deal that works out best for you.

The Good:

Sometimes mortgage refinancing comes with some great perks like:

Easy Access to Credit Means Cheap Money

When interest rates are this low, lenders are willing to work with just about anyone. Even if you have bad credit when you work with one of our Canada mortgage brokers you’ll get the help you need to find a mortgage that works for you. But while interest rates are low now, they aren’t going to stay this low forever!

Better Options than When You Started

When you first took out your mortgage you probably didn’t have the best credit – after years of timely payments you’re going to have a better track record that lenders will be interested in. All that hard work is finally going to pay off with better options for mortgage refinancing. Say bye bye to being a financial wallflower and hello to an option you can finally live with.

You Have More Leverage Now

You have something else you didn’t have when you started: equity. With equity in your home you’ll be able to secure a much better deal this time around. While you may have to give up a little equity to get a better interest rate, but for most it’s a great trade-off.

If you’re not sure what kind of equity situation you have, talk with one of our brokers.

The Bad:

Not everyone is going to benefit from mortgage refinancing.

Fees Can Cost You Big

Closing a refinance can be just as costly as getting a new mortgage – don’t do it just to save a point or two! You should be getting a seriously great deal on mortgage refinancing before you pay fees. Talk with one of our Canada mortgage brokers to find out if you’re getting the best rate for you.

Not Everyone Can Qualify

It’s important to understand that not everyone can qualify for a mortgage refinance their first time out – depending on your credit, how much equity you have and how much more time you’re willing to put into a mortgage will give you an idea if this is really the right way for you to go.

You’ll Extend the Life of Your Mortgage

If you’re trying to pay off your mortgage early, you might be hit with expensive pre-payment penalties and a few years of extra payments. Extending the life of your mortgage may not always be a great thing, especially if you want greater mobility (aka the ability to move out and move on).

Sometimes it’s a great fit, sometimes it’s not. Talk to one of our Canada mortgage brokers today or visit our mortgage refinancing page here to see if mortgage refinancing is really the right choice for you.

How Do Home Equity Loans Work?

Home equity loan or second mortgage allows you to treat the equity you have in your home for money. The sounds pretty straightforward, but it really is. You’ll be able to borrow up to 80% of their homes equity – but we don’t recommend doing that. Working with one of our Canada mortgage brokers we’ll help you understand your options, and here were going to explain both the benefits and disadvantages of this kind. From understanding the difference between fixed-rate mortgages and home equity lines of credit, you’ll learn the ins and outs of home equity loans work.

What is equity?

You’re going to first need to figure out how much equity you hold in your home. If you just got a first mortgage and only paid a 20% down payment, you only have 20% equity in your home (minus any interest from the first mortgage you took out).

You’re going to want to wait awhile before you start looking into a home equity loan if you’re in this boat. If you’d like to figure out how much equity you have, take the most recently appraised value of your home and subtract how much you owe your lenders or any liens on your house – et voila, you’ll know how much equity you have in your home.

What kinds of the home equity loans are there?

There are two main kinds of home equity loans that you can take out on your home. These fixed rate home equity loans, also known as second mortgages, and a home equity line of credit or HELOC. Each of these has its benefits and drawbacks, so you’ll want to be careful about which one you take out on your own home. One of our Canada mortgage brokers can help you find out which one is best for you.

What is a fixed-rate loan?

A fixed rate loan, or second mortgage, allows you to keep the same interest rate and terms over the life of your loan. These are the most desirable for borrowers because you don’t have to worry about your interest rate floating up and down with the prime – a big concern with HELOCs and variable rate mortgages. You’ll get this in one big lump sum that you use to pay off bills or complete a project.

What is a home equity line of credit?

A home equity line of credit is a kind of home equity loan that allows you to borrow against the interest on your home like a credit card; you can pay it off and borrow again as many times as you need over the life of your loan. This means you can open the line of credit and never use it until you need it – unlike a fixed rate loan or second mortgage.

Always borrow carefully

Before you borrow, speak to one of our Toronto mortgage brokers. We’ll be able to help you figure out if this is the right way for you to go.

Different Ways to Tap Into Your Home Equity

As a homeowner, you can put your home equity to much use. Converting this equity to cash is quite easy if you are aware of your options. Here’s a look at three common financing solutions that put your home equity to good use.

Home equity loan (HEL): Working pretty much like a traditional loan, a home equity loanprovides you a lump-sum payment at a fixed rate of interest. The borrowed amount plus interest must be paid over the loan term in the form of fixed periodic payments.

A home equity line of credit more is a credit line you can get against the equity built up in your home. There is a guaranteed amount of cash available to you; you can draw from this ‘money bank’ whenever there is such a requirement. The interest is paid on the actual borrowed amount, and the rate is variable over the loan term.

You can re-borrow the money that you just paid back, using checks or cards. A majority of home equity credit lines come with a variable rate, though you can also consider negotiating a fixed rate.

Cash out refinancing: Here, you take out a new mortgage of a higher value than the amount you owe on your current mortgage, and use the cash to pay off your existing mortgage. The difference is used as a home equity loan. The interest rate on such a financing solution is generally, but not always lower than that on a home equity loan.

Also, visit our home equity line of credit page today to learn more!

5 Reasons a Second Mortgage May be Right for You

Not sure where to get some much-needed funds or if you should go for a loan? If you’ve got home equity, then a second mortgage should not be a problem for you!

What is Second Mortgage?

Second mortgage is any other mortgage you make while you are still paying off your first mortgage. Usually, a second mortgage is backed up by a real estate property such as your home because it requires you to have something that has equity to borrow against. The equity can be from your home’s appreciation, your principal mortgage down, or from a large initial down payment you’ve made when buying property. By going for a second mortgage, you can refinance up to 85% of your property’s value!

So now that we know what a second mortgage is, let’s talk about the reasons why you’ll probably have to go for a second mortgage.

Buying Another Property

Buying a rental property is a wise investment because the rent from such can go into paying for the property itself, thereby earning you some profits once the property is fully paid off. The clincher is you often have to chalk up about 20% of the property’s value for your down payment – that’s where a second mortgage can come handy.

Investing

They say that it takes money to make money – so it goes without saying that to start a business or invest into something, you’ll need to first come up with a considerable amount of cash. You can use a second mortgage to start a business or beef up your portfolio. Just be sure to invest on something that will be worth your while.

Paying Off Debt

Debt that is left unattended can swell to unmanageable amounts because of high interest rates. Because second mortgages these days often have a low interest rate, it would be wise to use one to get rid of debts that have a high interest rate. You can also pay off several loans at once, leaving you with just a second mortgage to manage.

Renovating Property

Home renovations can get very expensive and getting loans for home renovations is often tricky. By going for a second mortgage, you can use your home equity to get what needs to be done, done!

Paying for School

Going for higher education can be very expensive. If you’ve got home equity, you can use that to get a second mortgage and go back to school or send your kid to school. Higher education also means better jobs and making more, so this is truly a wise way to use a second mortgage for!

Ready to get a second mortgage? Then be sure to contact a trusted mortgage broker! Our team of Toronto mortgage brokers can help you through all the steps to obtain a second mortgage fast and easy. Simply fill in your details via our online mortgage application form for fast approval and immediate assistance. Contact us and we’ll immediately get back to you answer your mortgage questions and to assist you with your needs.

Home Equity Loans for Small Businesses

Expanding or starting a small business means that you need to have the capital to do so, but not everyone have enough savings to cover the expenses and funds for that. If you own your home, then there is a chance that you can use a home equity loan to finance your business. Find out more about this below.

Why Use a Home Equity Loan

Home equity loans are ideal for funding small businesses because it offers the lowest interest rates, are very straightforward, and have flexible payment schemes. In fact, in Canada, investing, whether in the form of stocks or a small business is one of the main uses of home equity loans.

What are Home Equity Loans?

Home equity loans are just loans that are backed by residential equity. You can also look at it as a form of second mortgage either by your bank or by private lenders. Usually, a home equity loan is interest-only and short-lived, which means it only lasts 6 to 12 months because they are supposed to transition into a refinanced mortgage or something similar at the soonest possible time.

Home equity loans are available to applicants with poor credit history and can be as little as $25,000 to as high as $2 million. The loan’s value can be as much as 80% of your home’s value and interest rates are quite manageable, starting at 5.95%

Home Equity Loans for Your Small Business

A home equity loan is great for a small business primarily because of the short-term nature of the loan, ranging from just 6 months to a full year. It also allows you to adjust your payments according to your situation and needs because it is interest only. It also offers lower interest rates compared to unsecured debt.

A home equity loan is different from a typical mortgage because it does not require income qualification. If you are a small business owner, procuring a mortgage might prove to be difficult because it is common practice for owners of small businesses to write off as much of their income to lower their tax. Although that saves you (or any other small business owner) some money, it can affect your ability to obtain a mortgage even with good income and credit. Needless to say, a home equity loan would be great for small business owners and those who are self-employed as the loan is based on your existing equity and not what income is reflected on your tax return.

Getting a Home Equity Loan

Home equity loans are designed for homeowners with the main criteria by banks and private lender being your Loan-to-Value ratio or LTV. The home equity loan you want to avail of plus the value of your existing mortgage cannot exceed 80% of your home’s value (this is for security).

Applying for a home equity loan is actually quite easy and quick. In fact, you can do it right in the comfort of your own home! Contact us at Mortgage Central Canada and experience what it is like to have the best Toronto mortgage brokers at your side!

 

2 Smart Reasons to Get a HELOC this Year

Most of you reading this knows what home equity is but just a refresher, your home equity is the positive value that you get when you subtract what you currently owe on your mortgage from the current market value of your home. If the number is a negative one, then you’re underwater and do not have equity.

The reason why it is important to understand what home equity is because while there are millions of homeowners who are enjoying an appreciating asset, there are also millions who are trapped underwater and this post isn’t really for them. Now, if you’ve got equity with your home, then you can consider tapping it with a home equity line of credit (HELOC). Basically, a HELOC is a revolving loan that’s funded by your home’s equity. It works as a second mortgage that is often connected to a credit card or a chequebook.

Below are 2 reasons you should consider to determine if a HELOC is right for you:

Smart Reason #1: Your Home Needs Major Repairs

When important and expensive systems fail, then getting a HELOC is great to fund your required repairs. It can also be handy for avoiding minor catastrophes by funding expensive preventive maintenance. Examples of this are bolstering a worn deck, replacing old plumbing, and repairing a cracked foundation. Things like these are not covered by home insurance so having a way to get these taken cared of is always welcome.

Smart Reason #2: Your Home Needs an Upgrade

Paying for home renovations and remodeling projects are smart ways of putting your HELOC to good use. Anything that can add value to your home by using its equity for funding improvements makes a lot of financial sense in the long run, more so if you know how to choose wise home upgrades. Calculated home upgrades can add a lot of value to your home, but you have to be truly cost-efficient in your upgrades to have a fair return of investment.

As for home upgrades, repainting a kitchen gets you more ROI than a complete kitchen overhaul. Probably the easiest and most rewarding home upgrade you can do is to replace your front door. It is such a small thing but can mean a few thousand dollars added to your home’s perceived value.

Need help getting a HELOC? Contact our team of Toronto mortgage brokers today! We’ll answer your questions and help you with the whole process. Remember, managing your HELOC starts with choosing one with a good interest rate and other payment terms. Make sure you are tapping into your home equity for the right reasons to avoid falling further into the debt trap.