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.

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!