4 Key Things You Need To Know About A Second Mortgage

General Faizal Garasia 6 Jul

Most homeowners are vaguely aware that you can take out a second loan on your home. Perhaps a family member close to you has gone through the process or maybe you hear your friends mention it. But do you truly know what it means to take out a second mortgage? We have taken all the questions commonly asked about second mortgages and compiled them into four key points.

A Second Mortgage is Based on the Equity In Your Home

The second mortgage lender will offer you the total loan amount depending on the equity that has been built up in your home. You can access up to 95% of the equity you have in your property when you get a second mortgage. For example:

House Value $850,000
95% LTV (maximum mortgage amount) $807,500.00
First Mortgage $550,000.00
Amount Available Through Second $257,500.00

Interest Rates Will Vary and Be Higher Than Your First Mortgage

When a lender agrees to a second mortgage, they are taking a higher risk because he gets second priority in case of default. However, we have options and solutions such as working with private lenders. This can help you obtain a reduced rate and the right product for your mortgage situation. You can expect an interest rate of 6.95%-19.95%, this includes lender and broker fees.

Your Payment Can Be As Low As Interest Only Payments

One of the benefits of selecting to use a second mortgage is the fact that the payments are attractive. You can select to pay the interest plus the principal loan amount or you can choose interest-only payments. Contact us to work with a mortgage broker in Canada to discuss options and what would work best with your situation.

There Are Additional Fees To Consider

It is important to know that setting up a second mortgage will require you to pay fees. To help you understand ALL the fees associated: *note dollar amounts are approximations.

An appraisal fee to assess the value of your home: $300
Legal fees to set it up: $2,000
Lenders & Broker fees: 1-5%

Second mortgages are a great option for many. This may also be a better solution than to refinance or a Home Equity Loan (HELOC). If you are interested in learning more or if you need a second mortgage in Canada, talk to us. We can guarantee that we will guide you in the process from start to finish!

Job Market is Tight, Does it Lead to Wage Growth?

General Faizal Garasia 6 Jul

December 2018 shows modest job gains and an unemployment rate that remains at a record-low 5.6%, according to Statistics Canada’s updated Labour Force Survey. There is a minor increase from the prior month, 9,300 new jobs were generated in December.

However, economists’ expectations of 5,500 jobs and a jobless rate of 5.7% have been beaten by December’s rise. This is a general sign of weakness because all of the warm increase last month was in part-time and self-employment. Wages remained idle and full-time work fell in December for the first time in three months.

The Increase in Employment

Employment increased in Newfoundland and Labrador, while it dropped in Alberta, New Brunswick, and Prince Edward Island in December. In other provinces, there was a little change in new jobs. They recorded increases in manufacturing, transportation, and warehousing, as well as in health care and social assistance. In wholesale and retail trade, there were job losses, especially in the Ontario province.

The economy added 163,300 jobs for all of 2018, all of them full-time, for a 0.9% increase representing a significant slowdown from the pace of job growth in 2017 when the economy was much stronger. In 2017, employment was raised by an out-sized 427,300 and has average annualized gains of 225,000 workers since 2010.

The Dropping Unemployment Rate

It is not surprising that labor shortages are emerging and businesses are having trouble filling job openings with the unemployment rate dropping to its lowest level since comparable data collection began in January 1976. The warm pace of wage growth is surprising. December’s wage growth reading was a weak 1.49% annual rate, well below the inflation rate even with the very tight labor market. Decelerating steadily since its May peak of 3.9%, year-over-year average hourly wage growth for permanent workers was only 1.46%.

The Worst Year for Real Estate

The local real estate boards in Canada’s biggest housing markets released data this week showing home sales fell to decade lows in 2018 reflecting higher interest rates and stricter mortgage rules.

In 2018, the sales in the GTA fell 16% while the average price decreased by 4.3% in Toronto. Since the financial crisis in 2008, this is the worst year for sales in Canada’s largest city. Full-year sales fell 32% in Vancouver, the lowest since 2000 and 25% below the 10-year average. Prices for detached homes in Vancouver dropped at least 10%.

Sales dived in the first half of 2018 after the federal government imposed more stringent qualifying rules for mortgages. Sales in Vancouver continued to suffer even while Toronto began to recover in the second half, as the British Columbia government introduced more measures to prevent speculation.

What Is A Refinancing?

General Faizal Garasia 6 Jul

People understand what refinancing a home is but they have trouble explaining how it works. Refinancing your home, to put it simply, allows you to access the equity you have built up by changing the mortgage amount.

For example, you bought a $300,000 condo and you paid 20%, which is $60,000, for your down payment and had a mortgage of $240,000. You continue making payments over the next 4 years and pay down the $240,000 you owed and now that amount is only $230,000. This is where a refinance could come into play – your mortgage is up for renewal in a year, but you want to do some renovations and you need to access the equity in your home.

This means that you will get an appraisal of your current home and submit that to a lender. Let’s say your $300,000 condo is now worth $350,000 and you owe $230,000. You have built up an additional $60,000 in equity: $350,000 less $230,000 less $60,000 which is your initial down payment. Your equity in the home is $120,000 because you have a mortgage of $230,000 on a home worth $350,000.

You can refinance your mortgage to access that $120,000. If you want to go back and take $50,000 from the $120,000 you have built up, your new mortgage would go from $230,000 to $280,000. You will be getting that $50,000 from the lender but that money will be added back on top of your mortgage.

Why Should You Refinance?

This is why people will refinance their homes to make higher purchases. The bank will let you borrow the money now and get it back in the future, plus interest because it is being added to the mortgage.

This is just one way on how people are able to use their home to access cash. There are other ways to do this, especially if you are looking to complete renovations. You can consider home equity lines of credit, collateral charges, and purchase plus mortgages. It can be extremely beneficial to know this before you buy. Working with a qualified Dominion Lending Centres broker for your home refinanceing in Toronto will surely give you an advantage.

Alternatives to Home Equity and Personal Loans for Home Renovation

General Faizal Garasia 4 Jul

Are there any alternative ways to get a home renovation loan from Home Equity and Personal Loans? You can also check these options if you’re looking for alternative options for the Home Equity and Personal Loans.

Home Equity Line of Credit

Home equity lines of credit, a type of home equity loan, allows you to use the equity in your home as collateral. Home equity lines of credit are revolving, unlike a home equity loan. This allows you to borrow and pay back a certain percentage of your home equity for the full term period.

Cash-Out Refinancing

A cash-out refinance, also similar to a home equity loan, is new to the mortgage. However, a cash-out refinance replaces your original mortgage with a new one instead of taking out a second mortgage. You’ll access your capital to get cash at closing. You can use this for home improvements. You will have a new balance, payment, interest rate, and terms for your refinanced home loan.

Government Programs for Home Improvement

Some government programs can also assist you in paying for a home remodel. These programs are federally insured so it may be easier for borrowers to qualify for the loan because it reduces the lender’s risk.

Connect with us to know more about the renovation mortgage options. One of the best mortgage brokers in Toronto will help you with the best available options as per your credit profile. We look forward to hearing from you.


Financing Options Home Renovation

General Faizal Garasia 4 Jul

Are you looking for a mortgage for your home renovation? You have a lot of options for financing your home renovations. Every option has its own pros and cons. To decide which is best for you, you should explore them all. Talk to your lender so they can further explain your options, tell you how much you can borrow and pre-approve your loan. Here are some of the best options on how to raise funds for your home renovation.

Your own savings or a credit card

If you’re doing the work yourself, you may want to pay for the materials for smaller plans on your own. You can also use a credit card to pay for the expenses. You should be careful not to carry the balance for too long. Credit card interest rates can go on the higher side.

Getting a Personal loan

The interest rates of a personal loan are much lower than a credit card. You can repay regularly over a set period, usually 1 to 5 years. You can reapply for another loan if you wish to borrow more once the loan is paid.

Personal line of credit

For ongoing or long-term projects, you can consider the personal line of credit. You can access funds as you need them and you only pay interest on the amount you use. Interest rates for a personal line of credit are more practical than a credit card. A line of credit lets you re-borrow funds, up to the line of credit’s limit, without reapplying, unlike a personal loan.

A secured line of credit and home equity loan

This offer combines all the advantages of regular lines of credit and loans. It comes with preferred interest rates. They are subject to set-up costs including legal expenses because they’re secured by your home’s equity.

The Mortgage refinancing

When looking to complete major renovations, the refinancing can offer some advantages. You may get a better interest rate than on a credit card or loan, but you’ll incur set-up costs. The mortgage refinancing repayment is expanded over a long time period.

Financing upon home purchase

Think about adding the cost to your mortgage if you’re planning major renovations to a home you’re about to buy. You’ll be able to pay a lower interest rate than with a credit card or a personal loan.

If you are you looking for a renovation mortgage connect with us to get help from the best mortgage broker in Toronto. We’ll give you the best available option as per your credit profile. We look forward to seeing you soon.



Is Using a Personal Loan to Pay for Home Improvement a Good Idea?

General Faizal Garasia 4 Jul

Is using a personal loan for some home improvement projects a good idea? Well, it totally depends on your needs and the interest rate you’re able to get. Interest rates on personal loans range from as low as 2.49% to as high as 36%. A personal loan with a cheaper interest rate could be very amenable to a home improvement project. However, if the interest rates are high, it’ll be very expensive.

Personal loans are usually unsecured loans. This can be helpful if you don’t want to put up your home as a security, which you must do with the home equity loans. Most personal loans have a fixed term between 1 to 7 years. A fixed term can be helpful when budgeting for a predictable monthly payment.

Where to Get Home Improvement Loans

You should always shop around to find the best personal loan for your situation as with any mortgage. To get an idea of what your local banks and credit unions can offer, you can shop around locally. It’s also important to compare with online lenders and peer-to-peer lending sites. You can pick the best option for your situation once you have a good idea of what you qualify for. Some lenders may offer discounts depending on the particular home improvement project.

Alternatives to Consider for Home Improvement Loans

Personal loans are not your only option for a home improvement project. You should consider other loans as well as alternative ways to pay for projects that don’t involve debt.

Home Equity Loans or Home Equity Lines of Credit

You can get the cash that you need for your home improvement project through a home equity loan or HELOC. After the loan is processed you’ll need a significant amount of equity in your home, usually 20%. A home equity loan or HELOC may be a good option for a more expensive project that raises the value of your home. Other options may better suit your needs if you’re considering a smaller project.

These loans come with lower interest rates than personal loans because they’re secured loans. The lender could foreclose on your home if you default on the loan. You might end up paying more interest than with a shorter term personal loan which has a higher interest rate. This is due to the longer term of the loans, ranging from 5 to 20 years. Also, interest on a home equity loan or HELOC may be tax deductible.

Credit Cards

You might also want to consider using your credit card for the home improvement projects. You could finance your home improvement project interest-free. This would be possible if you’re able to pay off the project in full within a short period of time, such as the next 18 months, and you qualify for a credit card with a 0% introductory APR on purchases offer. Of course, you’ll have to pay interest on the remaining balance if you can’t pay off the balance in full before the introductory APR period expires.

Alternatives Options Other Than Loans

You may want to consider saving up enough cash before you start your home improvement plan if you don’t want to take on mortgages. You won’t have to pay interest on a mortgage if you save some cash. However, it may take several months or years to save enough money to complete the renovation project.

Contact us if you’re looking for a home renovation loan and we’ll help you with the available options as per your credit profile. Talk to one of the best mortgage brokers in Toronto who specializes in construction and home renovation mortgages to clear up any concerns you may have. We will also help you explore all of the options available based on your goals.

Types of Construction Mortgage

General Faizal Garasia 4 Jul

A construction mortgage is a loan that covers the expenses of constructing your home. This differs from other types of loans in a number of ways. Here are a few options especially designed for construction mortgages.

1) Completion Mortgage

You can get two types of mortgages when you are constructing a new home. The first is completion mortgage where the loan isn’t transferred until construction is fully completed. You may still be required to pay a down payment.

A completion mortgage can give you peace of mind that the mortgage won’t be finalized until you have something in. You probably won’t have to wait that long if you want a completion mortgage. Most lenders who do these types of loans want the construction to be finished in 4 months.

2) Draw/Progress-draw mortgage

The draw or a progress-draw mortgage permits the builder to draw funds during the building process. Using a progress-draw mortgage, the loan is disbursed in installments. The first installment will be given when the build starts. The second installment will be given once the construction is finished at around 35-40%. The third installment will be given at around 65-70% completion of the build. The final installment will be given when the build is close to or at 100%. This option is also available if you’re building your own home.


Six Different Ways to Fund your Home Renovation

General Faizal Garasia 4 Jul

Thinking of renovating your home but you are lacking the funds to support your major makeover. Are you looking for a home renovation mortgage? Here are some amazing home renovation to help you turn your dream home to reality.

Home Equity Loan

This is the most common loan that you can get for your home renovation. You won’t be able to borrow the actual value of your home with this kind of loan. However, without mortgage insurance, you can usually borrow up to 80% of its value if you own it outright. The possible problem with this is that the cost of your renovation plan may be bigger than the equity you have available.

Construction Loan

This is also comparable to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be able to get the full loan value upfront. The loan amount will be disbursed via installments according to the renovation plan.

Line of credit

This is ideal for long-term renovation plans. You can set up a revolving credit line that you can access whenever you want up to your approved limit. You are only charged interest on the funds you use. You can re-borrow the unused funds without reapplying as you pay off your balance. However, in terms of serviceability, the application must be taken not to get in over your head. Ensure that you can make repayments on the line of credit that will reduce the principal amount.

Homeowner mortgage

This might be the best option for you if you’re planning to undergo a significant makeover for your home. It is possible to borrow up to 90% of the value of your home and take advantage of mortgage rates, which are often lower than credit card and personal loan rates.

Personal loans

Personal loans are usually capped at around $30,000. This might be suitable if you’re only doing minor renovations. However, interest rates on personal loans are higher compared to other loans since they are unsecured loans.

Credit cards

This option is only for miniature renovation projects. The interest rates are usually much higher compared to any other mortgages. However, for a very small project, that higher interest might actually be less than loan establishment fees.

Contact us if you’re looking for a renovation mortgage and we’ll help you with the available options as per your credit profile. Speaking to a certified mortgage broker who specializes in renovation mortgages will help clear up any concerns you may have. Let us help you explore all of the options available based on your credit score.

The Most Common Questions on Construction Financing

General Faizal Garasia 4 Jul

It is more complicated to get a construction loan than other mortgage processes.  Here are the most common questions and answers on construction finances:

1) How much is the interest rate and service charges?

Interest rates and services charges vary from one lender to another. They will likely require a minimum 1-2% service charge if the lender is institutional. A private lender will require a minimum of 2% service charge. A private lender will charge 8-15% interest only and they will go behind a bank but not a private lender. A second mortgage rate will start at 10%.

2) What about mortgage payments?

You don’t make monthly payments in construction loans. The interest is calculated and taken away from the construction draws.

3) How much I can borrow?

You can usually borrow up to 100% depending on your current net worth. We can be very accommodating if your net worth is weak but you have a good location.

4) How do we get started?

A mortgage agent will be able to tell you if you’re going to qualify or not.  The agent can start the process with an application by preparing an Executive Summary for the lender if you’re qualified. Your mortgage application is under process from there.

5) Do I have to give a deposit to get the loan?

Although there is no need to provide a deposit for the loan, the lender may ask for enough deposit to cover legal fees if you change your mind and the lawyer has already worked on the deal. The deposit amount can usually, go up to about $1,000 to cover legal fees. This is applied to the legal fees of the lawyers.

Contact us to know more about construction mortgages in Toronto. You can also drop your questions in the comment section below and we’re happy to help you with a reply.

How Is Construction Loans Work?

General Faizal Garasia 4 Jul

Do you need a construction loan for your new home? Getting a construction mortgage is not as easy as a personal loan. You need a lot of patience to navigate through the process of finding the right builder and obtaining a construction loan. Here is a step-by-step guide for a construction mortgage.

1)  Finding the right agent.

When financing new construction, this step may not be an important one. However, it can help you to avoid contract headaches in the future if you work with an experienced agent who isn’t affiliated with the builders. You should find someone with experience in negotiating new construction deals.

To know more about construction mortgages in Toronto, contact us by following the link below:

2) Get your credit in order.

The important part of any home financing or other mortgages is your credit score.  This is all about pulling out your previous credit history from any of the major credit bureaus (Equifax, Experian, and Trans Union). Please remember that your credit score is the key player that will lead to your mortgage approval from the lender.

3) Collecting your documents.

Make sure you have proper documentation of your expenses and financial history, including annual income, total debt, investments, other assets, and 401k funds in addition to your credit score. Your agent will provide a detailed list of all the documents.

5) Research builders.

You know what you can afford with a pre-approved mortgage.  Now it’s time to look for a builder. Remember that the builder with a better track record is also a key to the final approval of your mortgage application. Go online and check the builder profile and the reviews of their previous customers before you finalize. We also suggest that you check their previous work in person.

6) Purchasing the land.

The land price will affect your overall pre-approved budget if you’re planning to build the home on a newly secured land. In this case, you have to think carefully about how the cost of securing land, an architect, and a builder will add up.

7) Choosing a builder and get a signed plan.

You now need to work with the builder and a blueprint you love in a neighborhood you want. You also need to make sure that the plan falls within your pre-approved lending limits.

The information you’ll need to acquire a mortgage will vary by every lender. However, you have to include the builder’s work history, insurance and references, home blueprints, specifications, a line-item budget, a draw payment schedule and a signed construction contract with beginning and end dates.

8) Applying for the loan.

Now you can bring your proposal to the lender you have chosen to receive the loan from. It’s also better to consider your builder’s preferred lender. Working with them may make the process smoother and faster. Choose the lender who gives you the best rates for your current financial situation.

9) Draw and pay interest.

Construction loans are paid out in monthly terms to your builder based on the amount of work they have done. Pay interest on your draw amounts once you have secured the necessary credits, and wait for your home to be constructed!