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Purchasing your first home is one of the most important investments you’re likely to make. Like any substantial investment, there are a number of benefits you accrue.

Aside from the stability and comfort afforded by being a homeowner, owning your home also allows you to build equity over time. You can use this equity as collateral to purchase another property or even borrow against it in the future.

This article will break down the different types of loans to help you decide which is right for you.

Why do people take out second mortgages?

Homeowners borrow against their home equity for various reasons. Some of the most common reasons include needing to borrow money to pay for major home renovations or expenses like school, vacations or weddings.

While a traditional mortgage requires a substantial down payment to act as collateral, with a second mortgage, you’re using your home as collateral.

The most common ways of borrowing against your home equity are through a home equity loan or second mortgage or by opening a home equity line of credit.

Common Methods of Accessing Home Equity

A home equity loan is different from a traditional mortgage. As mentioned, when prospective buyers apply for their initial mortgage, they’ll need to offer collateral to the bank or lenders.

However, when applying for a home equity loan, they use the equity they’ve built in their home for collateral. While this can be referred to as either a home equity loan or a second mortgage, they effectively mean the same thing: a loan has been taken out against your home’s equity.

While a home equity loan and a second mortgage refer to the same thing, there is another option commonly considered by homeowners looking to access home equity: a home equity line of credit.

There are benefits and drawbacks to both methods, and to choose which one to pursue, you’ll need to evaluate your individual situation and determine which makes the most sense for you.

Home Equity Loan/Second Mortgage

A home equity loan is a lump sum loan that uses your home as collateral. The loan amount is based on the equity you have in your home, which is the difference between the appraised value of your property and the outstanding balance of your mortgage.

Home equity loans typically have a fixed interest rate, meaning that the payments stay the same throughout the life of the loan.

Pros:

• Home equity loans can be easier to qualify for than other types of loans because your home is used as collateral.
• The interest rate on a home equity loan is usually fixed, so you know exactly how much you will need to pay each month.
• Home equity loans can offer lower interest rates than other types of loans, such as personal loans or credit cards.

Cons:

• Home equity loans are secured by your home, so if you default on the loan, you could lose your home.
• The interest rate on a home equity loan may be higher than the interest rate on your mortgage, depending on the market conditions at the time you take out the loan.

Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit that uses your home as collateral. You can borrow up to a certain limit and make payments as you go, much like a credit card. The interest rate on a HELOC is usually variable, which means it can go up or down over time.

Pros:

• HELOCs can offer a lower interest rate than other types of loans, such as credit cards.
• You only need to make payments on the amount of money you borrow, so it can be easier to budget for your monthly payments.

Cons:

• The interest rate on a HELOC is variable, which means it can go up or down over time. This makes it difficult to budget for your monthly payments.
• Like a second mortgage, HELOCs are secured by your home, which also puts your home in jeopardy if you fail to make payments.

Comparing HELOCs and Home Equity Loans

There are several key differences between home equity loans and second mortgages. Here are three to help you compare both:

1. Home equity loans have fixed interest rates, while HELOCs have variable rates.
2. With a home equity loan, you receive the entire lump sum all at once. With a line of credit, you can choose when to access the money and how much you use each time.
3. You can typically borrow more money with HELOC than with a home equity loan.

What to Consider When Choosing Between a Home Equity Loan and a HELOC

The type of loan that is right for you will depend on a number of factors, including your financial situation, your plans for the money, and how much equity you have in your home.

If you need a large sum of finances all at once and you have good credit, a home equity loan may be the best option. The interest rate on a home equity loan is usually lower than that of a personal loan or another type of unsecured loan.

However, if you want more flexibility in order to make monthly payments or only need to borrow a small amount of money, a HELOC may be the best choice. With this method, you only pay interest on the money that you borrowed, making it easier to manage your monthly payments.

No matter which type of loan you choose, it is important to investigate and shop around and compare interest rates before borrowing.

The Importance of Finding the Right Lender

Whether you are looking to obtain home equity or a second mortgage, choosing the right lender is essential to getting the best deal possible.

At Canadalend, we are dedicated to helping you find the best possible loan for your needs. We have a team of experienced mortgage brokers who will work with you to find the right loan and get you the best rate possible.
For more information on home equity loans and second mortgages, call one of our specialists at Canadalend today at 1-844-586-0713 or contact us online today!

Mortgage brokers are experienced and knowledgeable financial advisors in the housing industry. These professionals can guide you throughout the entire mortgage process including pre-approval, finding a house, your mortgage application, underwriting, commitment processing, pre-closing, closing, and (potentially in the future) refinancing.

Every mortgage broker in Canada goes through specialized training and licensing in order to receive official qualifications. Continue reading to learn more about the advantages of using a broker for your home equity loan.

What is a mortgage broker?

A mortgage broker assists prospective homeowners in securing reliable home equity loans approved in the home-financing industry. These professionals work with both the lenders and the individual in order to find the perfect loan. Their primary goal is to find multiple mortgage options and present you with the top recommendations.

Additionally, they can help throughout the entire application and closing process, and ensure that you submit valid paperwork. If you have any questions about loans and financing, you can ask your mortgage broker for information. It is their job to explain both the process and the different loan options to you in detail.

What does a mortgage broker do?

Brokers have advanced expertise in finding the best loans based on your current income, credit history, and market. They are especially beneficial for first-time homeowners who don’t have any previous experience with the complicated process of buying a home.

Mortgage brokers can also negotiate interest rates and terms with potential lenders that can save you thousands of dollars in the long run, and help you reach the amortization period faster.

What are the top benefits of using a mortgage broker?

1. Access to a network of lenders

Mortgage brokerage companies have built trusted relationships with a large network of lenders. This gives you a much better chance of finding a home equity loan suited to your specific financial needs. Brokers have decades of experience in equity financing and have many connections in the home-financing industry.

2. Less stressful for our clients

Not only is finding a home incredibly stressful and full of red tape, so is finding a quality mortgage. This should be an exciting time for you, and the last thing you should be worried about is getting the best deal. That’s what a mortgage brokerage company is for.

While you’re finding your dream home, picturing your furniture beautifully set up, and imagining a future, your broker can be dealing with the logistics. They will present you with the most affordable options, review your finances with you, and help you come up with the wisest financial decision.

3. Can save you money

Going directly to a financial institution isn’t always the best option as interest rates can be very high. Mortgage brokers have your best interest at heart, and will be determined to find you the most favourable offers. This can save you money now and down the road. They can assess your needs and come up with the most suitable recommendations.

4. Application and paperwork assistance

Your mortgage broker will help you throughout the application process, which increases the likelihood of your application being approved. They can also bring to your attention any delays in the process and get it moving along when necessary. Additionally, you may need help with closing paperwork, which, again, your mortgage broker can happily assist you with.

5. They specialize in complex financial cases

If for any reason you have bad credit or are in a complex financial situation, working with a mortgage broker is highly advised. This can save you from extremely high interest rates at a financial institution. Mortgage brokers have specialized training to help those in challenging financial situations.

A few of the most common reasons people get turned down for a home equity loan include past bankruptcy, income discrepancies, self-employment, low-income jobs, temporary job layoff, and a poor credit score. Most banks cannot approve such large loans if you fit into one of these boxes. That being said, a mortgage broker can find a solution and help you succeed in getting approved for a loan.

When should I see a mortgage broker?

If you’re looking to get a full picture of what your mortgage options are, we recommend you contact a mortgage broker for a consultation. Whether your credit isn’t fantastic or you’re in a complex borrowing situation, a broker can give you the expert advice needed to successfully buy a home with a low interest rate home equity loan.

Many people choose to go through a mortgage broker even when they have a stable income and amazing credit due to the few commercial loans available.

Contact Canadalend for More Information

For further information about the advantages of using a mortgage broker for your home equity loan, please call Canadalend at 1-844-586-0713 or contact us online. Our team of mortgage brokers would love to help you find and finance a home with equity that works for you.

Canadalend has access to a vast network of banks, credit unions, and private lenders. Our agents have specialized industry knowledge that will guarantee that you get the best rates available. We look forward to hearing from you soon and assisting you as you find your dream home!

The popularity of investing in Ontario real estate has increased substantially in the last few years. 

Considering the rates in Ontario, it is understandable that Ontarians would want their savings to be invested in assets rather than place them in the bank. See where you can invest in real estate in Ontario in 2022 by exploring the list below.

The following are the best real estate investment opportunities in Ontario for 2022.

1. Toronto (GTA)

Toronto is a highly desirable place to invest in Ontario for 2022

Although the prices for this key region of Ontario are higher than those in other cities, long-term demand is unrivalled.

Most new arrivals to Ontario land in Toronto, where business growth is so strong that interprovincial and intra-provincial migration isn't affecting demand. 

Even if tenants move away and leave the city, there's a big pool of potential tenants looking for rentals, which is a great opportunity for investments in real estate.

In Toronto, more graduates are skilled in technology than anywhere else. Toronto had the highest percentage of new tech jobs in Canada and the United States. 

Healthy, desirable growth is evident in the city, making our list of the top places to invest in real estate in Ontario in 2022.

Typical house price in Toronto:

City of Toronto: $1,190,300
GTA: $1,172,900

2. Durham Region

The Durham Region is growing rapidly east of Toronto. There is a projected growth of 10+% per year for the next 30 years, totalling 80%.

A growth rate this high is hard to ignore. Despite the high house prices in this area, with a long-term investment approach, it still has a lot to offer investors willing to look five, ten, or fifteen years down the road.

The average house price in Durham has risen 33.4% since the beginning of the year. The house prices may not increase that fast in the long run, and they could fall again in the future.  

Durham has a lot of potential if you think long-term and understand the market's fundamentals.

Typical house price in Durham Region: $968,500

3. Hamilton

One of the top places in Ontario to invest in 2022 is Hamilton.

Hamilton continues to be a very prosperous city for investors. Buying or renting a home here will be a wonderful experience as the city continues to grow and evolve.

In Spring 2020, Hamilton experienced a large jump in unemployment. But it has bounced back, and new businesses have sprouted in all city parts. The city is poised to grow significantly in the years to come.

Prices may be higher, but rents are generally higher, so homes are cash-flowing quite well for investors.

Homes with second suites, or those that can add a second suite, are excellent investments that generate high rents.

Student rentals around Mohawk College and McMaster University have also traditionally been successful. Despite the discontinuation of in-person learning, the student housing market did not experience a significant impact.

Hamilton is a large city with a variety of neighbourhoods. 

Before investing in Hamilton, it's important to work with seasoned investors who know the city to maximize their understanding of what's possible in the city.

Typical house price in Hamilton:

The Hamilton Mountain: $789,085
Hamilton West: $698,829
East Hamilton: $667,033
Hamilton Centre: $625,038

4. Niagara Region

Niagara is no longer a well-kept secret among investors as it once was. Property investment demand is high in the area.

Due to its proximity to the United States, easy highway access to Toronto, and the expanding GO train transit system, Niagara has become an enticing investment opportunity.

The best cities to invest in have been St. Catharines and Welland for the last several years. Investors have great success with property investments in the region because there are several hotspots.

Investing in Niagara Falls and Port Colborne has proven profitable. Not only are prices lower, but the demand for rentals is also higher in these areas.

A population boom above provincial forecasts is planned for Niagara. In 2022, it will be among the best places to invest in real estate in Ontario because it is actively working on densification while growing its tourism industry.

There are low vacancy rates across the region as well. In good areas, good homes seldom sit vacant. 

Due to the high level of competition for rental properties, potential tenants offer several months' rent in advance.

The Niagara Region offers fantastic opportunities for living and investing in 2022!

Typical house price in Niagaran Region: $701,700

St. Catharines: $654,900
Welland: $571,300
Port Colborne: $541,300
Niagara Falls: $649,800

5. Kitchener–Waterloo

Another of the best places to invest in Ontario 2022 is Kitchener-Waterloo. Kitchener and Waterloo's tech sector has flourished in recent years. 

Large tech companies have opened offices in the region, similar to Toronto. New people and money are coming in as a result.

Some tech companies are experiencing issues hiring fast enough, as there are more jobs than applicants. As a result, the Kitchener-Waterloo area is becoming more appealing to a growing educated population.

More people are already living in the Waterloo Region than anywhere else outside of the GTA, and it's expected to grow slightly faster than the provincial average. In the next five years, 56,000 will be arriving, and in the next 30 years, 305,000.

Additionally, Kitchener has accessory dwelling units. 

Tiny houses, laneway suites, and backyard homes are considered Additional Dwelling Units (Detached). Most properties zoned R-1 to R-7 are allowed to have these buildings."

Waterloo has a rental licensing system in place.  A licence is required for any investment made in the city of Waterloo. 

You need to follow a simple process with specific HVAC and electrical inspections and payment, a criminal check by the landlord in the first year, and yearly renewals are necessary.

Typical house price in Kitchener-Waterloo: $825,000

For more information on arranging a second mortgage in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

You're living inside a golden vault if you've held on to your property during this last year.

The question is, how do you get your hands on some of that money?

Canadian Bankers Association data indicates the average homeowner has about 74 percent equity. Price growth in many markets means a lot of capital to work with.

The three most common methods to access it without selling your home are listed below.

Borrow money from your home equity

To qualify for one, you must request a specific amount of cash and use the equity in your home as collateral. 

If your loan provider is willing to accommodate you, you'll receive the entire loan amount at once, and then you'll make monthly payments on a set schedule at a set interest rate.

You must have enough equity built up in your home to serve as collateral. Take a look at your credit score for free and see whether any issues need fixing to get the money you need.

A home equity loan can also help you increase your home's value in addition to paying down debt or covering your child's education expenses. 

Home equity loans generally have lower rates than credit cards or personal loans, so upgrading your home can add value.

Open a HELOC

With a home equity loan, you get a one-time cash injection and pay a fixed interest rate, whereas, with a home equity line of credit, you pay a variable rate. 

It's a little more complex with HELOCs (Home Equity Lines of Credit).

The borrower's credit line is divided into two periods: the draw period, during which you can take cash out at your convenience until your borrowing limit is reached, and the repayment period. 

In the case of repayment, both phases may extend for years. In either case, your HELOC borrowing is over after the draw period has ended.

While it's called the draw period, during that loan phase, you must make payments. Luckily, they're usually fairly manageable due to the interest-only nature of the payments. 

After you start making repayments, the principal of your loan is included in your payments, which increase significantly.

That's one of the most prevalent risks of a HELOC: uncertainty. With a home equity line, payments won't be fixed, and interest rates won't be fixed, making budgeting difficult.

Refinance

At under 2.5 percent, home equity lines of credit and home equity loans are hard to come by, so refinancing your home might be your best and most affordable option to access your equity.

In a refinance, you can select a new, larger mortgage to replace your current one - and make the difference in cash. A new mortgage is taken out to repay the existing mortgage and repaid in monthly installments.

With a refi, you can generally borrow up to 80 percent of the appraised value of your home. 

If your home is worth $400k and your lender accepts an 80 percent refinance, you could get as much as $320k. If you still owe $200,000 on your first mortgage, you would be able to pay it off and have $120,000 in tax-free cash at your disposal.

Talk to a financial adviser regardless of how you plan to access equity. Whatever type of refinance you choose, your home is your collateral. If you fall behind on your payments, you could lose your home, and all your equity will evaporate.

Financially, owning a home can be a constant struggle. No day goes by without some major expense taking up a bit of your mind space, whether it be your mortgage, taxes, or maintenance costs.

The six best uses of a home equity loan

Although you can use your home equity in various ways, there are a few good ways to maximize your loan. Some good uses for your home equity include:

Renovations to the home

The home's value may increase, drawing more interest from potential buyers when you sell it later. Upgrades are not only beneficial to you but also the home's value. 

Fees for college

A home equity loan to pay for college can be a great, low-interest option if the interest rate you find is better than what you'd get with student loans. However, it could also be riskier. 

The risk is that you will lose your home if you default on the loan.

Consolidate debts

If you have a significant amount of unsecured debt with high-interest rates and you are struggling to make payments, you will likely save money each month by consolidating that debt into one with a substantially lower rate of interest.

However, you are converting unsecured debt, such as credit card debt, into debt secured by a home. That means you could lose your house if you default on your loan. 

The expense of an emergency

In an emergency, if you do not have any other means to raise the necessary cash, home equity can serve as a solution. 

The risk is that the application process is lengthy and may not be appropriate for an urgent situation.

Expenses associated with a wedding

Home equity can pay for wedding expenses at a lower cost than a wedding loan. 

Alternatively, you can adjust your wedding celebration, save up for the wedding, and ask family and friends to contribute rather than give you gifts.

Charges related to business

If you need more capital to grow your business, you may be able to save money on interest by utilizing the equity in your home instead of obtaining a business loan.

However, if your business has not been tested, it could fail, and you still have to pay for what you borrowed - regardless of whether you earned money.

The Bottom Line

The advantage of accessing your home equity is that it doesn't force you to sell your home, take out expensive personal loans, or rack up credit card debt.

Taking out home equity debt to cover recreation expenses or monthly bills is not a good idea, but it can be lifesaving if you find yourself in a bind. 

Investing in the future with home equity is also a good option. If you don't repay the loan, you might lose your home in foreclosure. So make sure to borrow at the lowest possible interest rate.

For more information about home equity Ontario, call Canadalend at 1-844-586-0713 or contact us here.