Turning Your Mortgage Into Assets

Not many are aware that a home mortgage can be turned into an asset builder with the right mindset and know-how. Most people view their mortgage as an obligation or a money pit, not seeing the fact that paying mortgage is similar to building a huge savings fund.

The above is true because the more a homeowners pay towards their mortgage, the bigger their equity becomes. Equity can be turned into cash that can be  used for further growing one’s assets without having to sell one’s home. Below are the common ways of accessing home equity.

Get a Second Mortgage

Do you know that a second mortgage can get you access to as much as 80% of the home equity you’ve built up? That is quite a substantial amount that can be funneled to finance major home renovations (that can drive up your home’s value) or perhaps spend for a much-needed large expense (such as debt consolidation) that can improve your overall finances.

Getting a home equity loan (another term for a second mortgage) may prove to be quite challenging if you do not have good credit.Professional mortgage brokers can help you get one from other lenders if banks decline. The most important thing to remember is that applying for a second mortgage means having two mortgages instead of just one and that both have to be paid on a monthly basis.

Get a Home Equity Line of Credit (HELOC)

Just like a second mortgage, a HELOC is a loan secured by your property but instead of a lump sum, you’ll be given a line of credit that you can use for a specified length of time as long as you do not exceed the approved ceiling amount.

As much as 65% of a home’s value can be tapped for a HELOC. Payment is usually just for the interest for a period of time and once that time is up, the repayment must be done. A HELOC is perfect for paying recurring big expenses such as medical treatment or university tuition.

Get a Mortgage Refinance

A mortgage refinance is a way to overhaul your current mortgage contract and convert it to a mortgage that more manageable for you while also giving you access to your home equity.

Penalties might be incurred for certain reasons and so a refinance isn’t for everyone unless refinancing will result to significant savings in the long run. It is best to talk this through with a mortgage professional to ensure that you’ll be making the right financial decision.

Get a Private Loan

80% is usually the highest percentage of tappable equity you can get access to by going through traditional lenders. If you are in need of more than that, you might be able to get access to as high as 90% of your home equity with a private lender more so if your property is in a desirable location and in good shape.

Are you thinking of tapping your home equity to fund possible investment opportunities? Talk to us at Mortgage Central Canada and we’ll be more than happy to explore possible options for you. Be it about getting a mortgage loan or the things you must be aware of before getting a home equity loan, feel free to contact us soon!

 

Comparing Rates – Home Equity Line of Credit in Canada

Getting a Home Equity Line of Credit in Canada means tapping into the equity you’ve built in your home through a line of credit. It is a way of utilizing the value of your home that you truly own. Note that it only sounds similar but is not the same as an unsecured line of credit.

HELOC Explained

A Home Equity Line of Credit is a type of revolving loan that is secured by the equity of your home. It is not the same as a home equity loan because a home equity loan is a one-time loan of your home equity that will have to be paid back in full before you can use it again.

A HELOC can be reused again and again as long as you don’t exceed the ceiling amount within the time agreed for your HELOC. Interest rates for a HELOC are more manageable as well because only the exact amount withdrawn gets computed for interest. This means that if your HELOC has a ceiling of $100,000 and you only used up $1,000, you only have to pay interest for the $1,000 you used. As you pay back that $1,000, your ceiling goes back to $100,000. Think of a HELOC like a credit card with a high spending limit that is tethered to the equity of your home.

HELOC Interest Rates

Interest rates for a Home Equity Line of Credit has been made a little bit higher since the Bank of Canada increased its key interest rate to 0.75% on July 12, 2017. This is still easier to manage than interest for credit cards which are more than 10X higher than that.

Those who have a HELOC can expect that their variable interest rates will be a little less predictable but ultimately they will still end up saving upwards of a few hundred dollars a month in interest as compared to more traditional loans.

How to Get a HELOC?

Applying for a HELOC may be a bit tricky if you’ll be doing it on your own or will be approaching big institutions to get one. Requirements vary by lender and some lenders (such as banks) can have very strict requirements.

If you are self employed, have variable income, have a non-perfect credit history, or have other debts, going the bank route may not be the best option for you. A good option is to apply for a Home Equity Line of Credit to private lenders or smaller lenders with the assistance of professional mortgage brokers to ensure that you’ll get higher chances of approval and that all your bases are covered.

If a HELOC is not for you, you can also look into a home equity loan or second mortgage, a private mortgage, or even home refinancing. The key is to ensure that you’re talking to the right people and that you really do your due research to determine what is right for you.

Care for an estimate of rates before you apply for a Home Equity Line of Credit or other possible ways to help you manage your finances better with a loan? Contact Mortgage Central Canada today!

What is Home Equity? And How You Can Use It!

Home equity is a great asset to have. It is computed as the difference between the home’s market value and the sum the homeowner still owes. A large home equity is built over time as the homeowner is able to pay mortgage. It is largest when the homeowner is totally debt-free.

Understanding Home Equity

With the above said, home equity is the percentage of the property that the homeowner truly owns. It is the value of the property asset that the homeowner can use because any mortgage left unpaid is ‘owned’ by the lender.

Say you bought a $500,000 home and placed a $100,000 down payment on it with the remaining $400,000 in mortgage. This means that you ‘truly’ own 20% of your home’s value at this point. As you pay your mortgage, the percentage that you ‘truly’ own increases, more so when property values go up.

Does  this mean that the lender owns 80% of your home in the beginning? It would look like that but technically you own your home all along only that the house is your collateral for the loan that you take to buy it.

What does the lender gain in this set-up? Well, you pay for interest rate. The lender may also end up owning your home if you fail to pay according to terms set up and agreed by both your parties.

How to Build Home Equity

You can build equity by paying off your loan and improving your property so that it gets a higher market value.

Your equity will increase as you pay off the balance in your loan. You have to ensure that you’re paying more than just the interest and that you’re paying towards the principal. This way, you build equity over time.

Your equity will also increase during surges in the real estate market or when you take on home improvement projects that has a positive effect on home value.

How to Use Home Equity

Like any other asset, you can tap your home equity when in need. You can do this by getting a home equity loan or a HELOC. You can also use the equity you’ve built when you sell your current home to buy another one that’s better suited to your needs.

Another possibility is to use your home equity to fund your retirement by getting a reverse mortgage. This will allow you to use your home equity like a savings fund. You get to stay in your home and not have to sell it to enjoy the equity.

The most popular ways to use home equity is by applying for a HELOC or applying for a lump-sum home equity loan. Both have pros and cons and are good solutions for needing a large sum of accessible cash. What’s best for you will depend on several factors such as how much cash you need, your ability to pay, and for what purpose you’re taking the home equity loan for.

Do you want to use your home equity but still unsure whether you want to apply for a HELOC or apply for a second mortgage? Speak with our professional mortgage brokers so they can help you determine which one would be a better way of using your home equity for you! Contact us today!

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!

 

4 Genius Ways to Use a Home-Equity Loan

Owning a home comes with the benefit of being able to build wealth through home equity. The good thing with having a good amount of home equity is that you can tap your equity when you need funds or need extra cash. However, you must be careful that you don’t end up using it for frivolous things. Here are 4 Genius Ways to Use a Home-Equity Loan so that you’ll use yours the smart way!

Use Your Home Equity Loan to Invest

Home equity loans usually have a low interest rate, which would be at around 5%. If you take out some money from your home equity loan and use it for investments that yield a return of more than that, then you’d be making quite a considerable amount of money.

The problem with using your home equity loan to invest is that losses could be great if you don’t know what you’re doing. However, if you research and think through investments before picking one, the returns can be very rewarding. The key is in not putting all your eggs in one basket. Diversify!

Pay for a Child’s Advanced Education with Home Equity Loan

Whether you’ll use your loan to fund a child’s college education or post graduate studies, it will be a smart move because higher educational attainment typically means better work and income opportunities in the future.

A word of caution, though. Make sure that you save enough for your retirement and don’t bank on your child’s education taking care of your needs when you’re older. You can also save your home equity and tap it later as extra retirement fund.

Use Your Home Equity Loan to Pay High-Interest Debts

Debt consolidation is perhaps the smartest way to use a home equity loan if you want a low risk option. You can’t lose when you use your home equity loan to pay off car debts or credit card debts because no matter how you look at it, you will be saving money in the long run if you consolidated a considerable amount of loan, to begin with.

The key to make the most out of this is to ensure that you only agree on terms that you can honor. This is important because you can lose your home if you fail to make agreed payments. Remember too that this will usually give you the most benefit if you’ve garnered a lot of high-interest debts because you’ll have to ensure that the benefits should outweigh the risks.

Finance a Major Home Improvement with a Home Equity Loan

Carefully planned home improvement can increase the value of your home and build you more equity. The best returns are usually a result of a kitchen makeover, the addition of a bathroom, or the renovation of the master suite. Some home improvement will work better if you’re planning on a renovation to help sell your home. You can discuss this with your mortgage broker so you can choose the best way to go forward for you.

Thinking of applying for a way to tap your home equity? Contact us today so that we can discuss the best ways that will fit with your needs!

How to Use Your Home Equity to Consolidate Your Debt

Debt in Canada has reached a record high. Canadians now owe $1.7 for ever $1 of disposable income, as shared by Statistics Canada. These numbers are alarming and it is a consolation that our housing market is strong. You might love to know that there’s a huge possibility that you’ve built up more equity than what you initially thought.

Equity built up in your home can be used to help you get out of debt if you use it the smart way. It isn’t easy to get out of debt when you’re simply trying to stay afloat keeping up with paying high interest consumer debts like credit cards and auto loans. Why not borrow your home equity to consolidate your debts then?

Why Borrow Your Home Equity?

It sounds counterproductive to borrow money to pay off debt, but know that using your home equity to consolidate debt means swapping huge interest-rate debts for one with very low interest rate. It helps too that once you do this, you’ll only have one easy monthly payment to think of instead of trying to track several.

Consolidating debts using home equity isn’t a new concept, but not many are aware of the different ways this can be achieved. We’ll talk about those ways below.

Apply for a Second Mortgage

A home equity loan, also called a second mortgage, is one of the easiest ways for you to use your home’s equity for debt consolidation. It will also allow you to use up to 85% of your property’s appraised value minus any outstanding mortgage balance from your first mortgage.

Getting a second mortgage will enable you to get a fixed amount of money that you can pay for a fixed amount of time as stated in your loan. It doesn’t replace your first mortgage so you’ll be responsible for making 2 payments per month once approved but the benefits are immense!

The interest rate of a second mortgage is really low so most of the payment you’ll be making will go towards the repayment of the loan. Compare that with credit card interest of about 30% and you can see that by not consolidating you are actually paying nothing but the interest in your credit card.

Get a Home Equity Line of Credit

Applying for a HELOC to use your home’s equity for debt consolidation is another smart move. It is different to a second mortgage because this one doesn’t give you access to funds in a lump sum, rather this gives you a limit as to how much of your home’s equity you can use. You are free to use as little or all of that limited amount at any given time.

Because of the revolving credit nature of a HELOC, you are free to use a huge chunk of it to consolidate debt, pay off a portion of that, and take out small amounts for emergencies and the like. This option gives you more flexibility and freedom as compared to a second mortgage.

Try a Traditional Line of Credit

A traditional line of credit could be great but know that it is very challenging to qualify for. You’ll need an impeccable credit history and possess a great credit score. We all know that most of those who have a lot of loans don’t have that, to begin with.

Need more information about how you can effectively consolidate debt? Contact us and we’ll be sure to discuss possible mortgage related financing options for you.

The Best Ways to Use Your Home Equity

Many people have been fortunate that their homes’ market values have increased since they bought them, resulting in a marked increase in home equity as well. This is possible because equity is defined as the difference between a property’s market value and the mortgage still owed by the home owner.

So You’ve Got Lots of Equity, Now What?

Some people choose to sell their home to capitalize on the marked increase in value. There is nothing stopping you from doing the same but do you really want to move out of your home and restart again in a new neighbourhood?

If the answer is no, then fret not. There are a lot more other ways you can tap into your home equity without going for a home sale. You can choose to refinance, go for a Home Equity Loan, or try applying for a Home Equity Line of Credit.

But here’s the thing. Cashing out just because there is money available for you is the wrong approach to using your home equity. You have to make tapping into it worth the trouble since going for any of those mentioned will incur fees.

The good news is that if you have plans or project that you’ve been putting off because you don’t have the funds to pursue them, then using your home equity to turn those projects and plans into reality is a smart solution!

Below are the best ways that you can use your home equity to improve your life:

Funding A Home Renovation

Paying for a home renovation is perhaps the most popular way for homeowners to use their home equity. In fact it is estimated that $12.8 billion of the $41 billion worth of equity that was taken out in 2016 was used by homeowners to fund home repairs and home renovations. This is a smart move because improving your home in any way will only serve to further increase its value.

Investing in Education

Investing in your or a family member’s education is a great idea. Further education means better professional opportunities that will result to a higher potential income in the future.

Purchasing Another Property

Your existing equity could be used to help finance the down payment for an investment property as well as needed renovations. You just have to be sure that you’re not spreading your finances too thin and that you have enough cash flow to pay back your equity within a reasonable amount of time.

Consolidating Debt

It may sound absurd to use a loan to pay for debts but if you do the math, you’ll see that using your home equity to consolidate debts is actually a very smart move. Why? Because doing this will allow you to pay high-interest debts and improve your credit score. This means that you’ll be saving thousands of dollars worth of interest payments!

Want to tap your home equity? Let our professional mortgage brokers help you. We assist clients from application until they are approved. Contact us today to find out more details!

Build Home Equity Fast in Toronto With These 4 Tips!

Building your home’s equity as early as you are able can be of great advantage for you in the future. This is true though a lot of people don’t really know what equity is and how to build it.

Equity is the value of your home that you own. It is the difference between the property’s market value and the money still owed. Once equity is built, it can serve as a possible cash cushion should a need arise in the future or could be used to get fast cash when investing in another property.

Home equity is typically built up over a period of years as the homeowner continues to make payments on the property. However, do you know that building your home’s equity doesn’t have to take years or even decades? We’ll be sharing with you our top 4 tips to building home equity fast and easy!

#1  Go For A Larger Down Payment

It is tempting to buy a property and just pay a low down payment because you were given the chance to do so. That is okay but consider that doing that will also mean taking longer to pay for the home in question. Try putting in as much down payment as you can afford. This way, you’ll be off to a great start!

#2  Appreciate At A Faster Rate By Paying More Monthly

By paying more towards your principal, not only will you end up fully owning your home faster, but you’ll also be setting yourself to building your equity. Do you know that by paying an extra month’s worth towards your principal each year you’re potentially shaving off more than 5 years from your loan’s schedule? Sure another month’s worth of payment might not be easy on the pocket but a few hundred dollars extra payment per month would have the same effect while being easy to do for you.

#3  Go For A 15-Year Mortgage Plan

Most people automatically get a 30-year mortgage plan because they think that a 15-year one will mean having to come up with twice the ‘usual’ for payments each month. The truth is that the difference may not be as big as you think so better ask your mortgage lender to compare the needed monthly payments for both a 15-year loan and a 30-year one. This way, you will be better informed to make the right decision.

The above is true because the longer you take to pay for a loan, the more the initial value is inflated by the interest rate. A longer term means you end up paying more for interest as the years add up. More so, the difference of the monthly payments between the 15-year mortgage and the 30-year mortgage might be as little as a couple of hundred dollars. Imagine the savings in both money and time when you’re able to pay for your home faster.

#4  Be Smart About Home Improvement Projects

The right home improvement projects add a lot of value to your real estate. A few thousands worth of upgrades can increase your home’s value by $20,000 to $50,000 more so if you choose to go for a kitchen upgrade or adding another room to the house. Landscaping is a huge value-booster too, with possibilities of adding 4x the value of what you spend. By increasing your home’s market value, you’ll be increasing your equity as well.

Interested to know about how you can use equity you’ve built in your home? Contact us today so we can talk about the various types of home equity loans and how they can help you in the future.

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!

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!