Is A Second Mortgage A Good Financing Option For You?

It is no secret that property values have gone up in Canada in the last 15 years. People living in certain areas like Toronto and Vancouver who bought their homes more than 2 decades ago have more than doubled the value of their properties.

The recent huge increase in real estate market values mean that the equity built in their homes by homeowners have gone up as well, making it a good source of funds that is just waiting to be tapped by getting a second mortgage.

Do You Really Need A Second Mortgage?

Getting a second mortgage is a good idea if you need a substantial amount of cash for financing a college degree for your child or funding a home renovation project. It can pay for any event or expense for which you don’t have the cash in your savings for.

Note that once approved, a second mortgage is still an obligation that has to be paid. Expect that the interest rates will be higher than that of a primary mortgage. You can try to negotiate a lower rate if you have verifiable and consistent income, good credit score, substantial equity, and the luck of having your property in a coveted neighbourhood. There will also be legal and broker fees that you’ll have to pay for the second mortgage to push through.

Who Lends Money for A Second Mortgage?

Private lenders and small financial institutions are the usual providers for second mortgages. They are not easy to seek out and bet, so most individuals who want to get a second mortgage is better off getting the assistance of a mortgage broker who specializes in second mortgages.

How About Broker Fees for a Second Mortgage?

It would be unfair to think that mortgage brokers do nothing to deserve payment for their efforts. The fees are not cheap and this is why mortgage brokers will typically make sure that the other party knows what the fees actually mean before giving an answer.

Broker fees for a second mortgage is affected by several factors such as how much time the broker will have to spend to secure the second mortgage and how much money is being borrowed. Generally speaking, the bigger the money being borrowed, the lower the broker fees are for the second mortgage in terms of percentage. Note that legal issues such as eviction, foreclosure, or marriage separation will mean a higher broker fee.

Will Appraisal Be Required?

It is typical for a lender to prefer a personal inspection of the property to ensure that it is worth the risk for the lender. You may choose to get your own appraisal though most lenders will have a list of professional appraisers that they trust.

Should You Hire a Lawyer?

Though you might feel that you don’t need the services of a lawyer to save on legal fees, getting a lawyer to review your second mortgage’s terms and ensure that everything is in place will protect you in the long run. The fees can range from $1,000 to $2,000 but it is an investment that will ensure you don’t have to pay for things that you were not informed about prior to signing the terms for your second mortgage.

We hope that this write up was able to answer most if not all of your questions about getting a second mortgage. Should you have more concerns that were not addressed in this, feel free to talk to us at Homebase Mortgages.

Looking for a professional mortgage broker to help you get approved for a second mortgage? Fill up our contact form and we’ll get back to you soon!

What is a Second Mortgage And How Will It Work?

A second mortgage is another loan taken with a different mortgage lender on a property that has an existing mortgage. The person who applied for the mortgage must still pay the primary mortgage with the addition of also having to pay for the second mortgage.

Reasons Behind Higher Interest Rates On A Second Mortgage

When a property is mortgaged for the second time, the lender who gives the loan takes on more risk because he/she is only in the second position to have a claim on the property. An illustration of this is when a homeowner fails to pay, the property will be taken into possession and the first mortgage’s lender will be paid out first. This means that the second mortgage’s lender may not get paid in full or not paid at all. This is why the interest rates for second mortgages are almost always higher then what is charged for a principal mortgage.

Why Do Canadians Get A Second Mortgage?

The usual reasons for getting a second mortgage are as follows:

  • To fund a home renovation
  • To have cash for unexpected expenses such as medical emergencies
  • To pay for high interest debts therefore consolidating those debts
  • To fund expensive tuition fees for post graduate studies or college
  • To have cash for a dream wedding or vacation

What Are the Advantages and Disadvantages of a Second Mortgage?

As with all types of loans, second mortgages have a set of advantages and disadvantages. Below is a summary of each to help you make a better informed decision.

Second mortgage advantages are:

  • It is easier to apply for because there are many providers for it like private mortgage lenders, credits unions, and banks.
  • You can tap up to 80% of your home’s appraised value provided the existing balance you have for your first mortgage has already been subtracted.
  • It is available in 1-year terms and most require interest-only payments.
  • There is no need to discharge your current mortgage so you won’t be charged penalties and fees for such.
  • Anyone who owns a home with a primary mortgage and a decent credit history can apply and be approved for a second mortgage.

Second mortgage disadvantages are:

  • You have an increased risk of foreclosure in the event that you default on your loan. The second mortgage lender can foreclose your home by purchasing the first mortgage.
  • Because it poses more risks for the lender, a second mortgage has a higher interest rate.
  • Repayment might be required in as little as a year but you’ll be bound by terms which can last as long as 30 years.

How Can Someone Qualify for A Second Mortgage?

Each lender has their set of terms before they approve your second mortgage application. They will look for the following:

  • Equity that is high enough to be worth the investment risk.
  • Income that is substantial enough for you to be able to make payments.
  • Credit Score that is good enough to qualify for a lower interest rate. They might consider those with a less than appealing credit score but they will surely charge hefty interest rates.
  • Property desirability is important. Lenders need to be sure that should you default on your payments, your property has good enough value on the market so they can cover their possible loses.

A second mortgage will greatly help you financially if you are cash poor but possesses substantial equity in your property. Allow our mortgage professionals to help you apply for a second mortgage by contacting us soon!

Who Owns the Home After A Home Equity Loan?

The issue of home ownership is often hard to understand for quite a lot of people who’ve never applied for a home equity loan before. In this article we will tackle the common misconceptions and cover the basics of home equity loans. We hope that after reading this article, you will be better equipped on making an informed decision whether applying for a home equity loan is for you or not.

What Really is a Home Equity Loan?

A home equity loan which is also known as reverse mortgage, is a type of loan that allows a homeowner to use the equity they have built up. The equity is the value of the difference between the home’s current market value and any amount still owed. That equity can be used as collateral for a loan, which gives us home equity loan.

How To Get a Home Equity Loan

Applying for a home equity loan typically requires that the homeowner possess a good credit and a good ratio of combined loans to assets. This is because these factors can make the transaction a lot less risky for the lender who will provide the funds for a home equity loan.

The amount that can be tapped for a home equity loan will vary depending on several factors such as repayment goals, value of equity, location of property, current economic and real estate climate, and the lender’s terms.

Debunking Home Equity Loan Myths

Here are the reasons why these common home equity loan myths are really just myths:

  • Pre-approval of a home equity loan does not guarantee that you will be fully approved. It is simply a screening step in the process.
  • You also won’t have to use the money on the house. You can use it anyway you want as long as you pay in the end.
  • Home equity loans are not expensive. The terms are often reasonable and will be discussed with you before you sign any papers.
  • You will not lose your home if a spouse passes as long as you are a co-signatory for the loan. The house will go to the lenders if the owner or person who signed the loan passes or moves out.
  • You also will not have to sign over ownership to the lender. Again, you are your home’s owner until you move out or pass away.
  • It is possible to apply for a home equity loan even if you have an existing loan. It is just that any existing loans will be deducted from your equity.
  • Your heirs will not end up paying more than what the home is worth as well because the debt cannot exceed the home’s value to begin with.
  • Lastly, you will retain full ownership of your home and the lender cannot force you to move out.

The best and safest way to go about getting a home equity loan is to get the help of mortgage professionals who will connect you with the right lenders and help you avoid the possible pitfalls.

Interested in applying for a home equity loan but do not know where to start? Let us guide you from application to approval! Contact us today!

Bank of Canada Expected to Make No Changes on Interest Rates

It looks like the central bank is not going to announce changes in interest rates soon, as can be inferred by economists regarding the matter.

Senior deputy governor Carolyn Wilkins and governor Stephen Poloz of Bank of Canada will provide an update soon; but experts are not expecting them to give an update on the central bank’s outlook that may hint on a future interest hike. This is in view of the cooling Canadian economy in recent months.

Economists Concur

Economists agree that the Bank of Canada is not likely to announce a drastic change anytime soon, and that any changes will be very small. The key target for overnight rate is currently at 1%, already boosted twice this year by 0.25% in July and again in September.

Nomura global foreign exchange analyst Peter Dragicevich shared in a recent research note that they are expecting that the Bank of Canada will give gradually increasing interest rates based on the central bank’s outlook.

Impressive Economic Performance

The strong growth in the Canadian economy is the background by which the bank’s 2 rate increases took place. It was ended in July after 8 strong months of increasing gross domestic product. The latest update was released on October 31 by Statistics Canada.

Economist Benjamin Reitzes of BMO Capital Markets said that there are likely to be changes to the growth outlook in the bank’s monetary policy report because the GDP for the second quarter was way above what the bank expected.

Reitzes shared in a recent commentary that changes in the growth outlook may result to 2017 revised by as much as 3.1%, a figure that will match the best pace in the past 12 years. He added that the GDP for the third quarter is likely to hold steady at 2% and that the same is expected for the last 3 months of 2017.

No Patterns and No Scripts

Bank of Canada governor Stephen Poloz said in a recent speech that the central bank won’t follow a script when it comes to rate hikes, even in view of the Canadian economy’s standing this year. He further said that what the bank will do is just to pay close attention to data changes in the economy to determine possible future changes in interest rate policy. He added too that monetary policy will almost always be data dependent and can swing in either direction with the data.

It should be noted that the bank is equipped to ascertain how things will turn out. They can model how today’s stronger exchange rate and interest rate may impact those with large debts to slow down consumption and housing.

Other factors may affect economic growth. Ontario’s new minimum wage might have a significant impact on inflation rates and the new mortgage rules might switch things around.

Want to know if these recent turn of events can affect your eligibility for getting a home equity loan or a second mortgage? Contact us today so we can talk about this with you.

Need Alternative Financing for Investing? Read This!

No matter how established you are as an investor, there will be times when getting a bank to finance a new property or other investments can be a hassle. Changes are always at play when it comes to financing and getting your loan approved by banks.

The above is how and why asking for assistance from private mortgage lenders can come into play. Thankfully, there are ways to get around with the changing economic climate, as we will share in this article.

Financing Today

It is not a new thing that those who happen to have a lot of properties may still have a difficult time getting a bank to finance a new venture. Banks like security and they will always go for the most ‘secure’ loan. As a result, fewer and fewer financing options are available for investors. Add to this the changing rules on private lending and declining property values, borrowing is simply not as it used to be.

Try a Private Lender

Enter private lenders who provide private financing. They make money from mortgage investment corporations and investors, so they are likely to be more receptive than banks. The interest they charge is a bit higher because they take a higher risk lending to those who were turned down by banks, but they do provide a solid solution for those who are in need of investing funds.

Even investors who have bad credit are able to apply for and secure a loan from private lenders more so with the help of mortgage brokers.. They can then use the loan to fund renovations for existing properties or for financing new investments.

Risk Reduction is Possible

Private lenders can do what banks cannot do because they can opt for lower investor payouts therefore not incurring a huge risk such as those in loans of higher value. Another thing is that because they in an equity-based market, they can decrease loan-to-value ratio with no issues.

Are they always like this? The answer is no. They’ve even become a bit stricter when reviewing a borrower’s financial history lately. With this said, private lenders are still a lot more flexible than banks and do not just rely on someone’s beacon scores, current employment status, or income when considering the approval of a loan.  If you know how to work with private lenders, you’re one step ahead in securing financing for your investment.

Dealing with Private Lenders

There are a few tips that work great with private lenders. These tips are meant to help with securing a loan and paying it back. Read about them below!

  • Transparency and honesty – be honest about your financial situation and other pertinent details. Hiding your true financial status is the biggest mistake you can make.
  • Be ready – find out all the paperwork you need. Get the help of a mortgage broker to be sure about this.
  • Be patient – securing a loan can be a lengthy process with a substantial amount of paperwork needed. Losing your cool won’t make the process go faster.
  • Know what fees needs to be paid – lenders and mortgage brokers do not work for free. Ask about the fees upfront for smooth-sailing later on.
  • Plan an exit strategy – an exit strategy allows you to have a secure financing in place. This is another thing that a mortgage broker can assist you with.

Looking for a mortgage broker? Whether you’re looking for a home equity loan, second mortgage, private mortgage and more, we’re here to help! That’s what we do! Contact us and let us help you with financing your investment!

 

CIBC Report Warns About House Price Increase in Vancouver and Toronto

Economist Benjamin Tal of CIBC World Markets shared that unless housing preferences and policies change, then the Vancouver and Toronto housing markets will continue to rise as increasing demand and tight supply put more pressure in said markets.

Transition Period

The economist also said that the Canadian housing market is currently in an important transition period, with Vancouver and Toronto being in the midst of it. He also stated that the market is likely to stabilize with activity and perhaps even soften as it adjusts to upcoming and recent regulatory changes, which included stricter rules for those wanting to get a mortgage.

Tal further said that conditions will be a lot tougher in the future if the trajectories continue and that it is just a matter of time before this becomes clear to everyone. He added that main centres such as Vancouver and Toronto are more vulnerable to this more so that he thinks the demand for housing in these areas are routinely understated. Is this a real certainty? Tal believes so. At least until some significant changes are implemented in housing preferences and policies because those may change where things are headed as of now.

Government Tries to Cool Down Markets

Housing prices are still rising in dramatic percentages all over Vancouver and Toronto, prompting the government to try to cool down the markets by introducing measures such as Vancouver’s 15% foreign buyers’ tax implemented in August 2016. This action brought in a period of adjustment, with the Vancouver market looking like it has now entered a period of recovery.

Meanwhile in Toronto, the Ontario government introduced the Fair Housing Plan which resulted in signs of slow down and a rebound. Proof is that the number of homes sold in September according to the Toronto Real Estate Board’s numbers is 27% less than the figures for September 2016.

How Demand is Changing

Tal mentioned in his report that a demand is expected to slow down by just 5% to 7% in view of newly introduced stricter lending rules. He added that this may be due to exceptions to the rule, creative borrowers, and increased involvement of alternative lenders.

He also mentioned that the actual housing demand is stronger than official estimates more so that Canada’s immigration quota is meant to rise to 300,000 from 250,000 and will eventually go to 450,000. Imagine how this will play out with how tight the current situation is.

It is to be noted that GTA’s official estimates are actually 10,000 below the real numbers. This is because non-permanent residents and immigrants were not really considered largely due to their younger average age compared to the general adult population. There’s another 9,000 unaccounted for estimates from young adults who are likely to seek having their own place soon.

The good thing about this is that with the above projected higher demand in the near future, then homes will continue to have an increased value. Yes, there is no projected price decline in the next few years.

Interested to know about how this can affect your plans to get a home loan or a second mortgage? Contact us and we’ll discuss it with you!

The Smartest Way to Tap Your Home Equity

Tapping your home equity is often the most convenient way to come up with a significant amount of cash in a relatively fast way. There is no need to sell taxable holdings and incur extra taxes and all you need is an approval.

Here are 3 ways to tap your home equity with secondary home loans:

Apply for a Second Mortgage

A second mortgage also goes by home equity loan and is considered to be the most structured among the home loans, more or less mirroring your primary mortgage.

Second mortgages can have a variable or a fixed interest rate with the rate oftentimes higher than the first mortgage. They can have a set term and are often amortized in the beginning. Note that payments are very much like in primary mortgage with the principal and interest listed separately. A second mortgage also can’t be further drawn upon after being issued.

Get a Home Equity Line of Credit

A home equity line of credit, also referred to as a HELOC, is the most flexible secondary home loan in this list. There is often a minimum amount that has to be dispersed although no funds is usually released upon approval because a HELOC acts like a credit card, not a lump sum loan.

When you are approved for a HELOC, you’ll have the flexibility to just withdraw whatever amount you need as long as it does not exceed your limit. Most HELOCs nowadays come with a debit card and/or a checkbook making your life even easier when it comes to accessing your funds. Another feature is that you can avail of future amortization because of this loan type’s structure. Payment isn’t as strict because you can choose to just pay for the interest each month as long as you can pay for your entire balance at the end of the loan term.

Go For a Cash-Out Refinance

A cash-out refinance is different from the two other secondary home loans above because this option doesn’t necessarily involve a second loan. In a cash-out refinance, the homeowner can just refinance the home for a larger sum and get the difference as a cash-out. A downside would be that this type of loan can have really high closing costs depending on several factors.

Tap Your Home Equity in A Smart Way

Don’t forget that failure to pay any of the 3 secondary home loans above will mean losing your home to foreclosure; so choosing an option that fits your ability to pay, and not just your desired amount to borrow is crucial. Amounts that will be granted to you will also be dependent on several factors such as the desirability of your location, your home’s value, and your ability to pay. You’ll have to have an idea of your future cash flow before signing anything. To be on the safe side, it is best if you can consult with refinancing or second mortgage experts before deciding on one.

Need help and more information about the smartest ways to use your home equity? Contact us and we’ll assist you soonest!

 

Are You A-Okay for Winter? Check Out These Tips to Winterize Your Home

Winter has officially started but it isn’t too late to winterize your home! We’ve compiled 15 amazing tips for a winter-safe home! Say hello to an energy-efficient warm and toasty haven that’s wallet-friendly and environment friendly too! Whether you’ve got only a few hours a day or just 1 weekend to fully prepare for winter, our list will take care of all your home’s winter woes.

Tackle Your Furnace

Have an HVAC Professional check-up and tune up your furnace before you even use it this year. An inspection is going to cost you around $100 but that’s nothing compared to the energy savings you’ll get and your family’s safety.

Clean Your Heating Ducts

The same HVAC Professional can take care of cleaning out your heating ducts. Leaks can cost you up to 60% more in your heating bill so better get that duct taped fast!

Reverse Ceiling Fans

A clockwise blade direction pushes warm air down, saving you a few hundred dollars in your energy bill.

Tweak the A/C

Drain any pipes or hoses to help extend the life of you’re a/c since you won’t be using it in winter. Vacuum up pools of water and/or any fluid to prevent it from freezing and damaging you’re a/c.

Trim Nearby Trees

Branches hanging over windows, cars, and roofs can cause major damage when they get too heavy with ice and break.

Regularly Replace Your Furnace Filter

Dirty filters impede air flow and are a fire hazard. You may also want to switch to reusable electronic or electrostatic ones to save some extra bucks in the long run.

Insulation Tune-Up!

Adding fiberglass insulation in your attic can really work wonders for your home’s energy efficiency. Just make sure that extra insulation doesn’t have a paper backing to avoid problems down the road.

Block Air Leaks

Up to 30% of your energy use can be wasted because of drafts. Caulking and lining places with draft can help keep your home warm and save you some cash.

Check Carbon Monoxide and Smoke Detectors

A home fire won’t be fun and not waking up from sleep forever is no joke either. Avoid fires and carbon monoxide poisoning by replacing batteries with new ones and making sure the alarms are working.

Have a 72-Hour Survival Kit

You won’t really know if you will get snowed in or if a major snow storm is going to hit your area so better be prepared and get yourself and your family members a 72-hour survival kit. Don’t forget your pets too!

Install Storm Windows and Storm Doors

This is an easy and clever way to reduce energy consumption by as much as 45%! Whoa! Just do it!

Inspect Your Chimney

Have your chimney swept by a professional before using it. A badly maintained chimney is one of the major causes of home fires during winter.

Make Your Gutters Pristine

Clean your gutters to prevent ice dams from forming on your roof. You won’t like the mess and the cost when that happens.

Wrap Your Pipes

Making your water pipes energy efficient can help conserve fuel, energy, time, and of course money. Think about no more waiting for the hot water for your shower!

Bring Out the Biggest Sweaters!

It won’t really be winter unless you’ve been spotted sporting some very winter-y sweaters. They’re not only cosy, they raise up your temperature by about 4 degrees and save you lots of dough on your heating bill!

Excited for winter? Then you’d love it at Oakville! Oakville has a wide array of winter attractions for the whole family. The community is extra warm and welcoming too! Contact us to help you find your perfect Oakville home!

Tap Your Home’s Value in Your Retirement

Are you near retirement but have not saved enough cash? Do you know that you can use your home’s value as extra retirement fund?

Your home is essentially a bank of wealth of the money you paid for it throughout the years.  The equity you’ve built up in it is a cash resource if only you know how to unlock it.

So, how do you unlock it? Below are 3 ways how.

Buy A Smaller House

Downgrading to a condo, a retirement facility, or a smaller house will leave you with plenty of spending money after you sold your current home. This is especially true for hot markets such as Toronto and Vancouver where selling now is very much in the favour of the seller right now.

But what if you wish to remain in your current home? Are there still ways to tap your home’s value then? There are! Two potential solutions are getting a home equity line of credit or getting a reverse mortgage. These are explained below.

Get a Reverse Mortgage

A reverse mortgage gives you flexibility because it allows you to get your money either as advanced in stages or as a lump sum. Another advantage is that there are no required  principal or interest payments. You won’t be required to pay up the loan until you sell the property, move, or die – in which case your estate will be charged. What you will be required to do is to keep paying the insurance and property taxes for the lender.

Reverse mortgages does have disadvantages, the most notable of which is the high cost because the typical interest rate is double that of a conventional mortgage. Note that although you are not required to pay interest payments, they will be added to your balance increasing it significantly over a few years.

Apply for A Home Equity Line of Credit

Getting a home equity line of credit is a less expensive option compared to other choices like a reverse mortgage. A HELOC will let you borrow up to 65% of your home’s value and you can choose to withdraw only the amount you need. You won’t be required to make regular payments nor withdraw an initial amount.

Note that a HELOC requires regular interest payments (you only pay interest on actual withdrawn amount) and that getting approved might prove difficult if you wait until you are actually retired before applying for one because a key factor that lenders consider is having regular income – something you won’t have if you apply for a HELOC too late. Know too that failure to pay down the road will mean that you’ll be forced to sell your home. This is why you have to really evaluate if this is right for you.

Unlocking your home’s value in your retirement can help you in a lot of ways, but understand that some solutions might be better for your specific needs. Ready to tap your home’s equity now? Contact us and we will assist you each step of the way!

 

Fraudulent CRA Phishing Scams Now Used for Identity Theft

Thousands of Canadians have fallen victim to scammers who pretend that they are from the CRA. Unsuspecting victims are usually contacted with threatening texts, emails, or calls telling them that a recent audit has uncovered that they owe a substantial amount to the Canada Revenue Agency. The CRA has been used as a front by fraudsters in the past as well.

Worrying Calls

One victim recalled that a fraudster identified himself as officer Craig Williams from the CRA and called her about discrepancies with her maternity leave and employment insurance. This left the victim confused because she knew her paperwork have been filed months prior and that the caller’s phone number showed that it was a toll-free number from Vietnam. Luckily, she googled the number and knew it was not from the CRA so she called the number and asked for which CRA department the caller is from. The fraudster cut the call.

The incident above could easily be dismissed as just another attempt to scam but one disturbing fact was that the caller knew that the victim is a new mom who’s receiving employment insurance. That is something that is rather specific.

The victim then proceeded to check her social media settings and double checked possible leaks of her financial details but found none.

Similar Scams

Barring details of the story above, many of which are a red flag about the authenticity of the caller, it should be noted that the CRA has been used in many similar scams in the past (and even now).

Extortion schemes are the most common ones, making targeted victims pay for supposed mistakes in their returns. The victims are threatened via email, text, and/or calls and informed that they will be arrested and/or reported if they do not pay via prepaid credit card, iTunes cards, e-transfer, or Bitcoin ATMs. Some victims have been targeted twice by the same scammers.

Alarming Criminal Activity

Identity theft and identity fraud have been identified by the Canadian Anti-Fraud Centre located in North Bay, Ontario. Their office tracks identity theft, mass-marketing fraud, and identity fraud. They recorded a loss of about $100 million from 30,000 victims of mass marketing scams last year and logged 26,500 individual cases of identity fraud where criminals used another person’s identity to scam service providers, stores, and banks out of $14 million. As for identity theft, they’ve received more than 10,000 complaints last year.

Identity Theft On The Rise

One targeted victim for identity theft remembered a call from someone claiming to be from Visa verifying recent transactions made with his car. He discovered that a deposit of $4,000 has been made in his account. Because he works in finance and knew how bad people may use his details, he changed his social security number and thought that was it. A few months down the road, he received a call from a detective following the arrest of a man who’ve been using his identity.

We’ve shared with you some alarming cases of identity fraud and identity theft. Luckily for the people involved above, their quick thinking helped minimize the harm done to them by fraudsters.

Want us to help you with a possible case of identity theft or identity fraud? Contact us today at  Haywood Hunt Private Investigation Agency and we’ll assist you with the private investigation services we offer.