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!

 

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!

 

6 Things You Must Know About A Home Equity Line of Credit

Getting a home equity line of credit is increasingly becoming popular for homeowners who need some extra spending money. It is also relatively easy to qualify for compared to other types of loans as long as what the homeowner owes is less than the equity built in the home.

The above are just some of the important things to know about getting a home equity line of credit. The following are a must read if you’re trying to finalize your decision about getting a HELOC.

Know Your Exact Equity

Because a HELOC lends you money against the value you already own in your home, you have to know what percentage of the home you already paid for. That value is your equity. To get that, you have to subtract what you still owe to the current value of your home. Divide the result by your home’s value and multiply by 100. The end result is your equity.

Example, your home is worth $300,000 and you still owe $210,000. Your equity is $90,000. $90,000/$300,000 is 0.30. Multiply that by 100 and you get 30% equity.

Find Out If You Are Eligible

A good credit score and a minimum 20% equity are usually the most common requirements. Your lending professional can also help you with this.

Understand Draw and Repayment Periods

Your HELOC has a draw period and a repayment period. The draw period is the span of time wherein you have access to the money and can be as long as 10 years. The repayment period is the span of time wherein you are expected to pay and can’t withdraw more money. This can last up to 20 years. Note that you are expected to pay the interest on the outstanding balance and the principal for both period.

Your Interest Will Be Variable

A HELOC will only charge you interest on amount withdrawn, no matter what full amount you have access to. This is why your interest will change by how much you withdraw along with other factors such as the prime rate. A HELOC’s interest is also lower by comparison to other types of credits or loans. Some lenders may also offer you a fixed rate.

Enjoy Spending Flexibility

A HELOC allows you to withdraw the amount you need when you need it (subject to terms and regulations). It gives you freedom similar to withdrawing from a savings account or using a credit card.

Use Your Equity in A Smart Way

Most people use a HELOC to invest on home improvement or for college funds. It can also be used to consolidate debt so you can save money in the long run. It can also be used to fund a dream wedding or a much deserved vacation.

Still have questions about getting a home equity line of credit? Let us answer them for you! Contact us for assistance about getting a home equity line of credit today! Your HELOC approval await you!

8 of the Best Home Updates to Get Your Money’s Worth

Nearly all home updates can improve the aesthetics and function of your home, but some give you more value to each of your dollar spent. We’ve compiled the best home updates that are worth your money to give you an idea which home upgrades to go for more so if you’re planning to sell in the near future.

Backsplash

Adding a backsplash can be as good as a remodel for your kitchen and obviously a lot cheaper. Subway tile backsplash is very popular amongst buyers too and can potentially increase a home’s asking price by as much as 6.9% according to statistics. They can also be installed in your kitchen in just a day or two.

Bathroom Vanity

The bathroom is one of the rooms that can make or break a sale. People truly appreciate bathroom vanities these days so adding one will not only give your bathroom an overhaul that has the same effect as a renovation but will also add to your home’s buyer appeal. A vanity can be installed over the weekend and relatively cheap compared to other home upgrades.

Barn Doors

Barn doors are not just for following trends but also a smart way to free up space while updating a room. They can be installed over closets or in rooms that have little floor space to begin with.

Cabinets

There is a huge difference between attractive functional cabinets versus new cabinets, with form and function winning most of the time. If your cabinets are already a good style, repainting or refinishing them will do. If your cabinets needs to be replaced, choose a Classic style as they tend to appeal to most people.

Energy Saving Thermostat

Using an energy-saving thermostat is not going to magically increase the resale value of your home but this is is an investment that you can benefit from in the long run in terms of potential savings on your energy bill. Some homeowners who did this reported a savings in their power bill of about $200 to $300.

Functioning Fireplace

Most home buyers still appreciate a functioning fireplace in a home. It isn’t just for beautiful holiday photos! Survey says that a functioning gas burning fireplace can increase a home’s buyer appeal, more so if you have a wood burning fireplace.

Landscaping

Your home’s curb appeal will not only increase your home’s resale value but will make you love your house even more (humans inherently love beautiful things). Get to planting some flowers, adding turf to your lawn, and trimming bushes. Its good weekend exercise, adds so much value for a little investment, and psychologically proven to improve your mood. What is not to love?

Paint

Painting a new color is the easiest and perhaps the cheapest way to update and freshen up a room, more so if you choose good colours with a nice contrast. Don’t get overboard though and keep most walls neutral. A pretty grey can modernise an otherwise outdated room in a jiffy!

Ready to go for the best home updates described above but need help with funds? We can help at Mortgage Central Nationwide. We’re here to assist you with mortgage refinancing, getting a second mortgage, accessing your equity via home equity loan, or applying for a private mortgage. Contact us for details!

How to Use Home Equity to Unlock Tax Deductions

Do you know that there is a way for the CRA or Canada Revenue Agency to allow something that would be akin to letting taxpayers deduct mortgage interest from their taxes just like what our American neighbours have down south?

How?

By using the Smith Maneuver, a way to deduct from taxes created by retired financial strategist Fraser Smith from Victoria, BC two decades ago. The Smith Maneuver goes around the fact that although mortgage interest is not tax deductible in Canada, loans on investment are.

How to Use the Smith Maneuver

By making use of the Smith Maneuver, a Canadian who has some substantial non-registered investments can use the funds from the investments to purchase a residence or pay off an existing mortgage. Now, you have to note that depending on your mortgage and whether it is closed or open, paying it off before the end of term may warrant prepayment penalties. You have to keep this in mind to assess whether using the Smith Maneuver would truly benefit you.

Let’s say that the numbers are in your favour. A few days after using the Smith Maneuver, you will be able to use your property as collateral when applying for a separate loan for investing purposes. Also keep in mind that a substitute of collateral may later be agreed to between you and the lender if you decide to move houses while this is ongoing. Once this is done, you can then reinvest funds from your loan into qualified, non-registered investments and deduct the interest on the investment loan from your taxes. Be sure to stay away from RRSPs and TFSAs as those are categorized as registered investments!

How the Smith Maneuver Can Benefit You

Strategizing using the Smith Maneuver allows you to use your home equity to invest and grow your assets over time because it lets you deduct from your taxes as you continue to grow your investments. It is making your money work for you and not the other way around while still keeping everything legal. Yes, this deduction is legal and permitted by the CRA though it would be best to ensure that you still keep a record of all tax deductions just so you have complete documentation in the event that your deductions are questioned.

When Would the Smith Maneuver May Not Work for You

The Smith Maneuver isn’t the answer everyone is hoping for. In the case of Canadians who take out mortgage loans to buy rental property, the high interest rates associated (because lenders usually add a premium to homes that are not occupied by the legal owners) may not make the maneuver worth it at all. It is therefore helpful to compare mortgage interest rates and really do your research to ensure that you won’t be at the losing end.

Just to add, under CRA rules, if you’re someone who does at least half of your work from home (in your home office), you may be able to deduct some or your home office’s cost from your taxes although note that this does not allow deductions of your actual mortgage. This is still a win, right?

Do you want to know more about how some loans can help you out? Contact the mortgage experts at Mortgage Central Nationwide or apply for your own home equity loan in minutes today!

Put the Equity in Your Home to Work with a Home Equity Line of Credit

With a home equity line of credit, or HELOC, you’ll finally be in the equity in your home to work. But if you were to find the lowest HELOC rates, fantastic and easy access to your credit line, and the flexibility that suits your life you’re going to need one of our Toronto mortgage brokers help you! Here were going to talk about how HELOCs work, the benefits and pitfalls, and everything else you need to know if this is the right decision for you. You want to make sure you’re getting the lowest rate possible – the lower the interest the less you have to pay!

How does a home equity line of credit work?

Instead of you having to worry about things like dealing with a large lump sum or planning far ahead, a HELOC works a little different. Open one for a rainy day and use it when you need it with the flexibility and easy access options you need. Open one right now and fund your retirement, start a business, pay your kids’ Uni tuition. Unlike a second mortgage or home equity loan, you borrow just what you need and pay it back when you use it, and borrow it again if you need to. If you never use it, you don’t have to worry about paying it back – it’s just that easy.

Who is eligible for a home equity line of credit?

If you have equity in your home, you’re eligible for a HELOC. The more equity you have the better the deal you’re going to get – but you’re also going to want to have good credit, a good job and proof to back it up. The lender needs to know that you’re going to be able to pay back this loan; if you don’t have good credit or a good income, you may still qualify for a HELOC – but you may have to pay more in less favourable terms and interest rate penalties.

Can I pay off my home equity line of credit early?

This depends on the lender you’re working with. When you choose us as your Toronto mortgage broker we’ll help you through the process. From figuring out whether you should go with Lender A that offers a great rate but a penalty if you pay early, or Lender B which offers the ability to pay it off early with a slightly higher interest rate, you might want to take Lender B.

Get the best rate with us

If you want to get the best rate on your next HELOC, you’ll want to work with us! As Canada mortgage brokers we can help you figure out how much you can save – you might even be surprised at how much it could be! If you’ve already worked with your current lender to find a HELOC, we can help you find a better rate – so give us a call today!

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

Planning to Turn Your Basement into an Apartment or Income Suite? Read This!

Plenty of people are converting their basements into an apartment or income suite to be a source of extra income to help pay for mortgage and many other things. Other people simply have too much space and don’t want to waste an income opportunity. However, before you pool your resources and start construction or renovation, keep in mind that there are so many things to consider before transforming your basement into a basement apartment.

Questions You Must Ask Yourself

  • Do you really need to do this?
  • Do you know where to get funds to push through with this project?
  • Will converting your basement into an apartment be legal?
  • Will your plan for the basement apartment comply with the retrofit guidelines from the fire code?

If the answers to the questions above are all favourable, then you are on your way to having a basement apartment that can increase the overall value of your home and give you extra income. Note that doing anything illegal such as failing to comply with local fire codes and zoning laws mean that you will have to pay thousands of dollars in fine once reported to authorities such as your Town’s Building or Fire Department.

Things to Check

In the event that you will be buying a home with basement apartment that needs fixing, keep in mind that just because it is there does not necessarily mean that it is legal. You will have to check with your local Fire Department or with the city municipal standards department to find out if your baseline apartment is registered as a second unit. If this isn’t the case, then you will have to research how to secure a permit for it to be legal and comply with the fire code.

Also note that your area may or may not permit the building or conversion of a basement apartment. An example would be that basement apartments that were rented out prior to the 31st of October 1995 are considered legal although the local zoning code does not permit it.

Toronto Basement Apartment Considerations

In 2000, the City of Toronto has permitted having second suites on all semi-detached and detached homes in the city as long as they meet the following conditions:

  • The house and any additions should be at minimum 5 years old
  • The second suite must have its own bathroom and kitchen, a self-contained unit
  • The second suite cannot have a floor area that is larger than the rest of the house
  • The home with the second suite on most cases, must have a minimum of two parking spaces
  • Existing second suites should comply with the property standards, zoning standards and Fire Code in Ontario

All homes that do not meet the above must apply to the City for permission and note that other areas such as Vaughan, Mississauga, and Brampton, still do not permit second suites unless built or rented prior to November 1, 1995.

The four basic requirements of the Fire Code must also be upheld as well. They are as follows:

  • The main home and the second suite must have adequate fire separation
  • The basement apartment must have its own separate fire exit
  • Smoke alarms must be installed
  • The Electrical Safety Authority must conduct an electrical inspection to ensure that all occupants of the home and basement apartment will have access to sufficient electricity

More technicalities have to be observed but the above are the main requirements.

Should you still wish to build a basement apartment and need extra cash to fund such a renovation, or need some funds to ensure an existing suite is made legally compliant, a second mortgage or a home equity loan would surely help. Contact us to know more!

Open Up the Tap on Your Equity with a Home Equity Loan

You’ve been making timely payments all these years, isn’t it time your home started to give a little back? With the right mortgage broker (us!) and a home equity loan you can get all the money you need to consolidate your debts, send your kids to university or even start a business. With any kind of equity loan the devil is in the details and you don’t want to try and negotiate this one your own. Let’s explore how they work and why you would want one.

What is Equity?

If you don’t know, equity is how much you have invested in your home. If your mortgage(s) are completely paid off you have 100% equity. If you’re still paying off half your house you have 50% equity. You can figure out how much equity you have in your home by subtracting the remaining debt from the most recently appraised value of the home. This way you’ll be able to know exactly how much of a home equity loan you can take out.

Don’t Take Out a Large Home Equity Loan

Just because you’re approved for a big amount doesn’t mean you should actually borrow that much! You’ll want to work with one of our Toronto mortgage brokers; we understand the market, the tricks lenders pull and we’ll work hard to help you get the best equity loan possible. Every situation is different, don’t take a cookie cutter mortgage that just isn’t in your best interest. Also be careful about what the terms are before you sign on that dotted line.

Plan Ahead

When it comes to home equity loans you need to have a plan for the future. Why are you borrowing this money? Will you get some kind of return on it? Are you going to be able to pay it back? How much will you need to pay each month to pay back your home equity loan? If you don’t know the answers to these questions one of our Canada mortgage brokers can help. We have a lot of experience when it comes to home equity loans and we’ll be able to show you how to get the right loan.

Your Equity is Important

Each time you make a mortgage payment you’re socking away money for the future – that future is now. Why should you get robbed of your equity because you didn’t know any better? We’ll work with you to help you understand your rights and obligations as a borrower and to really understand what you’re signing. From finding the right mortgage lender to signing we’ll be there with you for every step of the way.

You’ve worked hard for your home and you shouldn’t have to lose it. Working with us as your Toronto mortgage broker will help you not only get the money you need now but keep your home in your future for years to come. Don’t get a bad deal, get the right deal!

Discover our home equity loans today!