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Equity Takeout vs Mortgage Refinance

Equity Takeout vs Mortgage Refinance

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Contemplating an equity takeout vs mortgage refinance is simple once you gather the correct information.

A HELOC or home equity takeout or 2nd mortgage is usually your cheapest option if you are in a closed mortgage with time left in the term.

What to consider when looking at refinancing your mortgage

A second consideration would be your current rate you are locked into and today’s best rate offered by your bank.

Step 1: determining if your 1st mortgage is a fixed or variable.

Step 2: determining how long is left in the term of your 1st mortgage

Step 3: determining what the penalty is to break your 1st mortgage

The Costs of refinancing your mortgage

Consider using a mortgage penalty calculator to get an idea of what it would cost to break your 1st mortgage. The largest cost is usually associated with a fixed rate mortgage and the payout penalty; interest differential penalty (IRD) or Three-month interest penalty.

Once you have determined the cost of breaking your 1st mortgage you can start to evaluate if there will be savings in a 1st mortgage refinance.

Additional Costs of refinancing your 1st mortgage

The costs of refinancing your home are many. After determining the penalty there are Discharge fees, Legal fees, Appraisal fees and more.

Home Equity Loan or HELOC

A Home equity loan or 2nd mortgage can mean two things. Either a HELOC up to 65% through a bank. (you must income & credit qualify for this style of mortgage) or a straight equity lender which is not focused on your income or credit rather they rely on the equity in your home. These lenders lend up to 75% of your homes value in major centers.

Cost of a Home Equity LOC or HELOC

HELOC or home equity line of credit is an affordable solution but not all banks offer the product. HELOC maximum loan to value is 65%. You must income & credit qualify. Costs for HELOC are generally legal and appraisal costs and if it’s a strata additional documentation will be required.

Cost of a Home Equity Loan or 2nd Mortgage

Costs of a home equity loan or 2nd mortgage are appraisal costs, legal costs both for the borrower & lender as well as broker &/or lender fees on top of a higher interest rate.

Using Your Mortgage to Payout a Consumer Proposal in BC

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You can use your home equity to get a mortgage to payout a consumer proposal. Usually when people use a consumer proposal it is to assist them with restructuring their debts into a manageable payment. Once they have done this home owners usually see significant cash flow relief, but they still have this monthly bill looming over them and wonder how to payout this consumer proposal.

Benefit of paying out a consumer proposal early

The benefit of paying out a consumer proposal early is it allows your credit to recover instantly. Major banks will want to see a min of 24 months discharged from a consumer proposal. However, B-Lenders do have some products that will allow you to refinance your 1st mortgage to payout a consumer proposal and assume the consumer proposal into the mortgage. This enables you to clear out the consumer proposal fast and start improving your credit years earlier.

Types of Financing & mortgage to pay out a consumer proposal

There are a variety of ways to payout a consumer proposal with financing:

  • Mortgage financing is one way. While the large banks do not get involved with financing out consumer proposals mortgage brokers have access to B-Lender mortgages & Private mortgages that will in some cases consolidate a consumer proposal into a first mortgage. Keep in mind that this requires you to payout your 1st mortgage to consolidate into the mortgage to payout a consumer proposal.
  • Second mortgage financing is another way to use a mortgage to payout a consumer proposal using a home equity loan. With home values going up you can tap into the equity built up in your home to payout a consumer proposal. In some cases, this is a far cheaper way to go. It allows you to keep your 1st mortgage in place at the best rate possible and allows you to payout the consumer proposal instantly. Once your 1st mortgage comes up for maturity you can consolidate the 1st & 2nd mortgage usually back at a major bank usually within 2 years.
  • There are also financing companies that will provide you a loan to payout a consumer proposal. These loans are sometimes at a very high interest rate and a short term. The benefit is you are paid out of the consumer proposal right away. The con is you are stuck with another high rate loan with a large payment which can trigger a payment issue moving forward.
Mortgage Deals November 2018

How To Get A Home Equity Loan Bad Credit

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Canadian Home Equity Loan Bad Credit

Home equity loans can be used for a variety of reasons even bad credit. When you have bad credit a home equity loan can allow you to payout or negotiate your debts which should improve your credit and improve your chances of qualifying back at a bank in as little as 12 months. Second mortgages are mostly used when consolidating your debts into a bad credit mortgage loan.

How to Negotiate debt into a home equity loan.

We can show you how to negotiate debts with an R5 to R9 down and in some cases, paying 50% to 35% on the dollar. We also work with secondary debt management companies that can help assist you. Many times, the home equity loan can pay for itself with the money you save in negotiating these debts.

What is Bad Credit

Credit scores in Canada range from 300 to 900. The higher the credit score the better your chances of getting approved. A bad credit score is 600 or below and if you are in this range your application usually will have to be serviced by a private mortgage lender.

What Causes Bad Credit?

Bad credit can happen from a combination of issues:

Payment History, late payments and missed payments can negatively affect your credit score.

Delinquencies continues late or missed payments

Balance & limit: Keeping balances over 50% of the limit and constantly running up the limit of your credit card can have a negative impact on credit score.

To Many enquirers: Credit seeking has a negative impacted on your credit score. Applying for car loans or multiply credit card application or other applications for credit can impacted your credit.

Account History: Credit is a history of you using credit. If you have very new credit this can be a false credit score. As well if you close old credit cards you are wiping out history that can be vital to showing your history.

 What is a good credit score?

Good Credit scores start at a rating of 650. Depending on your income and debt servicing levels you should be able to obtain many options of financing.

What do the Credit Rating symbols mean?

This information is provided on office of consumer affairs of Canada website

R0: Too new to rate; approved but not used.

R1: Pays (or paid) within 30 days of payment due date or not over one payment past due.

R2: Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due.

R3: Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due.

R4: Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due.

R5: Account is at least 120 days overdue, but is not yet rated “9.”

R6: This rating does not exist.

R7: Making regular payments through a special arrangement to settle your debts.

R8: Repossession (voluntary or involuntary return of merchandise).

R9: Bad debt; placed for collection; moved without giving a new address or bankruptcy.

NOTE : Other rating indicators that might be found on a report are “I” for installment credit or “O” for open credit line.

Source : Equifax Canada

Information on How To Stop Foreclosure in BC

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If you are a home owner in British Columbia and you have fallen behind on payments or your bank will not renew due to previous payment history here is some options you can consider.

Mortgage Lenders That Assist with Foreclosures

Your BC Mortgage Broker has options through alternative mortgage lenders that can assist with reinstating your mortgage & if require refinancing your entire mortgage.

Lawyers to Consult

Dial A Law library “is prepared by lawyers and gives practical information on many areas of la in British Columbia.

What is a Foreclosure?

A Foreclosure is an action from a money lender when the borrower has stopped paying back the mortgage.

What is a Mortgage?

Mortgages are contracts between lenders and borrowers to pay back a loan or mortgage.

What are missed or late mortgage payments?

Lenders do not want to foreclose on properties so missing or being late on a few payments doesn’t necessarily mean you will loose your home. Lenders usually start the process of foreclosure after the 2nd or 3rd month after of non payment.

What The Process if Lenders Start Foreclosure?

Petition: Lawyers file a petition to court and you will be served with a copy. It is sent to all interested parties. You can file a response to the petition.

First Hearing: At the hearing the lender will be looking for the judge to give them an “order nisi”. Most cases the borrower will be granted a “redemption period” usually 6 month redemption period.

What Happens at the End of Redemption Period: Typically at the end of a redemption period the lender can choose to have he property listed for sale by the court. The other options for the lender is to request “absolute order for sale”.

Court ordered Sale: Court ordered sale is when the courts list the property for sale and approves the sale of the property. If there is a short fall to pay the petitioner in full the petitioner can seek a deficiency judgment form the court against the borrower.

Order Absolute: Absolute order of Foreclosure is granted to the petitioner and they become the new resisted owner of the property. This happens when when the property value equals or exceeds the debt. No other action an be taken against the borrower.

To review your situation please feel free to contact us or apply online and we will be happy to discuss options.

What to Consider When Looking at a 2nd Mortgage in BC

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Second Mortgages are a fast and easy way to obtain money using a home equity loan to do things like: debt consolidation, home renovations, create fast business capital if your self employed, pay outstanding bills like taxes or liens. These are great for reducing payments, paying out debts or increasing cash flow but what else should you consider?

Rates on Private 2nd Mortgages

Consumers are fixated on rates, this shouldn’t be a surprise but as a mortgage professional we can or should be able to see a larger picture.

Take for instance a blended rate. What is a blended rate you might ask? By looking at your 1st mortgage balance and rate and considering a smaller second mortgage usually at a much higher rate you can compare your blended rate. Here is a link to a blended rate calculator.

Example of How a Blended Rate Works

Look at it this way, your 1st mortgage is larger (lets use $350,000 as an example at a rate of 3.25%) and you are looking for a 2nd mortgage which is usually smaller (lets use $50,000 as an example at a rate of 10%) your Blended rate between the two loans are 4.09%. So why are you focused just on the 2nd mortgage rate at 10%? It’s a smaller amount of money.

Costs in Breaking a 1st Mortgage (IRD)

Now consider what is the penalty of breaking your 1st mortgage? Most Fixed mortgage terms have an interest differential penalty (IRD). This penalty can be many thousands of dollars depending where you are in the term and the interest rates offered by your bank.

Costs associated with a 2nd Mortgage

Now 2nd mortgages do have a higher rate of interest depending on the loan to value. As well there are legal costs such as title insurance, Insurance Binders plus strata Form B’s if you are in a strata or bare land strata. Onto of this Mortgage Brokers do not get paid by the lender so the borrower does have to pay a fee associated with 2nd mortgages financing. In a lot of cases these costs of doing a 2nd mortgage are a cheaper option than breaking the term on your 1st mortgage.

What a mortgage expert should be doing when looking at your application:

  • Review the length of term left in your 1st mortgage to determine if its in your benefit to refinance now or obtain a 2nd
  • Review your credit to see how long you will require funds if you have poor credit.
  • Consider what lender would work best. (some lenders work with clients longer who have a history of late or missed payments while others have little patience for this type of borrower) Of course costs and rates will be higher for lenders that offer a more patient approach but the over all savings of a lender not renewing is usually far greater.

For a review of your situation feel free to call us.

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B Lender Mortgage Rates BC Canada

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Mortgage Rates vary from B lender to B lender

B Lender Mortgage Rates BC for a 1 year fixed rates can start as low as major banks 5 year fixed rate. Keep in mind B Lenders do charge a lender fee plus you are responsible for all legal & appraisal costs. There may be additional costs so call for a complete review of your situation.

Why Use B Lender Mortgages 

B Lender Mortgage RatesB Lender mortgages are you next best option if your bank has turned you down due to lower than average credit score or income issues.

What do B Lenders Mortgages do?

B Lender Mortgages are ideal for:

  • Self employed B Lenders mortgages have higher debt servicing ratios than banks
  • New Immigrants to Canada who do not have established credit history yet
  • High home equity but income does not support TDS & GDS ratios for the big banks
  • Lower than average credit scores.
  • Previous bankruptcy 1 day discharged
  • Payout consumer proposals, income tax arrears, property taxes

Best B Lender

“Who is the best B Lender” being a question we get all the time. The answer is not as simple as rate. Each lender has slight differences and choosing is best lender & terms should be left up to your mortgage broker.

B Lender Mortgage RatesWho are B Lenders?

Some of the major B Lenders in BC are:

  • Home Trust
  • MCap
  • Optimum
  • Peoples Trust
  • Xceed Mortgage Corp
  • Equitable Bank
  • Bridgewater Bank

As well as alt products through some smaller credit unions & trust companies

Rates vary from B lender to B lender

B Lender 1 year fixed rates can start as low as major banks 5 year fixed rate. Keep in mind B Lenders do charge a lender fee plus you are responsible for all legal & appraisal costs.

Best B Lender

Who is the best B Lender being a question we get all the time. The answer is not as simple as rate. Each lender has slight differences and choosing is best lender & terms should be left up to your mortgage broker.

B Lender Mortgage RatesWhat cities do B Lender Mortgages go to In BC?

B Lender Mortgages lend typically in major centers in BC.

  • Metro Vancouver
  • Major Cities in the Okanagan
  • Major Cities on Vancouver Island

B Lender turned you down. What Now?

If you do not qualify under a B Lender mortgage your next choice is a Private Mortgage lender. Now if you were looking to refinance your current mortgage and you are not at the end of your term a second mortgage may be a more cost-effective options.

This articular is for information purposes and details in this articular can become outdated with mortgage rule changes. Call us for the latest information.  
Self Employed Home Equity Loan

You Can Get A Home Equity Loan If You are Self Employed in BC

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You Can Get A Home Equity Loan If You are Self Employed

For the self employed it is common to wonder if you can get a home equity loan if you are self employed and have low income. Many self-employed individuals think due to their business for self income that banks & other lenders are less likely to approve them for a home equity loan. Banks do have tougher criteria for approving a HELOC and usually look at things like credit & income documents but there are many products out there that can help.

We have groups of products that take your home equity into account rather than solely focusing on income & credit. Our lenders understand that self employed home owners regularly take advantage of write-offs and other ways of income tax deductions. We also can assist with personal income tax, GST and PST arrears where some banks are less likely to assist in the payout of.

Many self-employed home owners don’t claim a lot of their income and this makes it difficult if a business opportunity presents itself. We have innovative products to assist with loans for business capital. Again, your credit and income are not an issue these types of loans focus more on your homes equity.

 

What’s the Process?

B-Lenders MortgageIf you are self employed and require a Home Equity Loan or HELOC the process is simple. You can apply 2 ways. Through our secured online application or by calling 1-877-744-3436 and one of our mortgage brokers will be happy to structure your home equity loan.

Home Equity Loan Rate Shopper DIY Mortgage Specialist

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DIY Mortgage Rate Shoper

Mortgage Rate Shopper or Work with a Mortgage Professional?

Mortgage BrokerRate Shopper “What is the lowest home equity loan rate you have” is a question I get every day. As rate shopper looking for a BC Home Equity Loans (this does not apply to Home Equity LOC’s to 65% LTV at a bank or financial institution) you are dealing with a product that means for  one reason or another you do not qualify under conventional mortgage criteria. Although rate should play a part in every transaction your Mortgage Brokers knowledge in lenders & negotiating terms and conditions is going to be the major factor in determining costs associated with arranging the financing now and possible costs in the future.

mortgage broker BCLet’s look at a few scenarios, why you do not qualify for conventional financing and why you should use a mortgage expert rather than becoming a rate shopper and get a better understanding of your needs and the difference between Home Equity Loan rates & lenders:

  • Self-Employed Rate ShopperYou are self employed and do not want to claim all your income due to the cost savings in taxes. This is true in some cases but if you are stuck with a very low max mortgage (lets say $150,000) and you have to top this up with a larger home equity loan (lets say $150,000) at a higher rate of interest this might be a good time to start paying the government and stop paying the high rate home equity loan. An experienced mortgage professional can help you run the numbers and make an informed decision. A direct lender may not work with you to better your current situation because they do not provide conventional financing options to their clients. It is not about rate it’s about dealing with a true professional mortgage broker independent from the lenders that can show you the cost associated with the mortgage rather than being just a rate shopper.
  • BC Debt Consolidation Equity LoansYou have bad credit and you are looking to borrow money to payoff debts. That is great!! But do you know some of the pitfalls or techniques to do it correctly? Credit can recover quickly if you do it right, for example sometimes it is best to pay off and entire card and other times it is good to just pay the balance down under 50% of the limit. Paying off cards or other loans and closing accounts can have devastating impact on your credit. Trade lines tell a story about your payment history over time, like it or not. But bad credit is sometimes a moment in time and not a reflection on you over a long period of time. Deleting that history can have a larger impact than the missed payments. For many DIY client rate shopping for home equity loan does not take into account the costs they incurred when not taking a look at the whole picture.
  • How Much is Too muchHow much is too much to borrow? Great you were approved for $100,000 2nd mortgage to pay off credit card debts pay your property taxes and do some home renovations. Will you be able to refinance your 1st mortgage to include this $100,000 in the future? Credit and debt servicing ratios (TDS & GDS Ratio) play a massive roll in your future financing options. Borrowing too much now can affect your future refinance, but equity lenders only look at equity to qualify your approval. There is more to consider and a mortgage professional can provide options for you to consider.
  • Interest Rate Lender FeeIs the interest rate you have affected by a lender fee? Lender fees may affect your financing at the end of the term. Many lenders use a lender fee as well as a broker fee when providing an offer sheet. While the practice is not bad in all cases, in some it can be a surprise if that lender fee was to offset your rate to appear lower. For example a $100,000 home equity loan at 6% with a $2,000 lender fee is 2 % higher than a rate without a lender fee. At the end of the term what if the lender wants to yield 8% on the loan again? That means a lender fee of 2% is required to renew that mortgage. A $2,000 cost to the borrower at renewal can be a shock and may not be manageable leaving you to refinance your mortgage again to pay for those costs. In those cases focusing on rate doesn’t prepare you for the true cost of borrowing money.
  • Equity Loan Bad CreditYou have bad credit and you always have had bad credit, that’s just the way you are. Ya there are people like this and there are bad credit mortgage lenders that are better to use for late payers than others lenders. The management of a home equity loan is un-measurable costs and many private lenders that offer great home equity loan rates do not want to see late payment, held payments or any other sort of management of the mortgage. These lenders may not a renewal at the end of the term to people with payment issues. So understanding a client’s history by a complete review of their credit history and setting the client up with a lender at a rate they are comfortable managing payment delinquencies at can be a significant cost saving to you the borrower. You might think “why pay for a higher rate if I don’t have to for a home equity loan”. Well being matched with the right lender at the right interest rate can be far less expensive than the cost of refinancing your mortgage every year if the lender does not want to deal with payment issues. Be honest with yourself if you lose track of payment dates constantly you need someone that understands you, and there is a cost associated with that.

Don’t try to be a DIY Mortgage Professional When dealing with Home Equity Loans. Leave it to independent mortgage experts!

Home Equity Mortgage Specialist BC

DIY Mortgage Rate Shoper

Paying Down Debt Top Financial Concern For Canadians in 2015

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Paying down debt Top Financial Concern for Canadians in 2015

Make A List Of DebtsIn a CIBC pole Canadians were asked, what is the top financial priority for 2015. This year like the past four years it is to pay down consumer debt. The focus for most mortgage brokers is educating clients on how to pay down or consolidate debts.

Steps To Consolidate Canadians Debts

Equity Loan List

 

Where to start, is most Canadians biggest challenges when starting to look at how to Consolidate Debts.

 

 

  1.  Collect Your Personal Information: Make a list of current debts but wean out the debts that might not qualify for debt consolidation.
  2. Check Credit Score: Applying to Equifax Canada will give you an idea how good or poor your credit score is.
  3. Look into Loan Options: There are several avenues to look at when dealing with debt consolidation. If it is unsecured financing you are looking for check with a few banks. If you are looking for a home equity loan to consolidate debts check with a mortgage broker who specializes in equity take out financing. Equity Loans are not all the same and it is important to have a professional research between banks & alternative lenders to find the best product for your needs.
  4. Get Rid Impulse Purchasing: Take credit cards out of your wallet or any other credit or overdraft that could tempt you in making foolish purchases. Remember a consolidation loan isn’t there so you are able to manage a payment and spend more. It is there to lower your payment so you can attack your debt more effectively.

EQUITY LOANS VERNON BC

 

If we can be of any assistance to you in your search to reduce your debt give us a call we would be happy to give you a no obligation assessment of your situation.

BC Debt Consolidation Loans Home Equity

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Pros Cons Debt Consolidation BCDebt Consolidation & Home Equity Loans Pros & Cons BC

 

child tax credit iconIf you are a home owner in BC with a mortgage, credit card debt, store cards, interest free deals that are expiring soon, personal (LOC) lines of credit, car loans or personal loans you could uses this how to techniques to better your cash flow and help improve your credit score. If you are a home owner with only a mortgage and low debts these debt consolidation techniques probably do not apply to you.

HOME EQUITY LOANS BCDebt consolidation is a simple process and this process happens every day in Canada. Debt consolidation can be a life changing for individuals looking to reduce their monthly payments. What are the signs that debt consolidation might be right for you and how should you determine what debt consolidation program you should undertake?

debt consolidation iconIn simple terms the combining of several small debts or different institution facilities into one more manageable payment is debt consolidation. This often means paying out higher interest or shorter amortization debts like personal credit cards, car loans, unsecured lines of credit, taxes, medical bills into on lower interest mortgage loan usually an interest only loan.

BC Debt Consolidation TipsThe Benefits of Debt Consolidation Mortgage Loans:

 

  • Lower Payment & Payment Management – By eliminating multiple payments at different times of the month and replacing these payments with one simple payment.
  • Lowering Your Monthly Payment – By providing an interest only loan or stretching out your amortization to reduce your monthly payment intern increases your cash flow.
  • Saving You Interest – In some cases when credit card interest rates are very high a much lower mortgage rate can give consumers greater interest savings on debt.

Tapping Into Saving Image

Now a single monthly payment may be a bit misleading in terms of the true cost savings of a debt consolidation. The saying “if it’s too good to be true it probably is” applies. The catch is you can not significantly lower your monthly payment AND save thousands in interest costs. Debt consolidation can be an important step in managing your debts but home owners must understand a few vital facts:

 

  • Debt Consolidation & Mortgage Refinancing often to payoff bills is a poor idea in terms of a financial strategy. It is a bit of a yo-yo affect that keeps you in a cycle of debt consolidation.
  • Credit Cards & other debts used irresponsibly can lead you into a game that you will end up losing. The mounting costs of interest rates and costs associated with refinancing debt will eventually erode your saving or home equity.
  • Using debt consolidation to lower your monthly payments means banks & other lenders benefit by lending you money. If one end benefits by earning interest on their money then the borrower looses by paying higher rates to borrow money.

Debt Consolidation Home Loans ImageThe availability and easy access to debt consolidation can have a negative impact on borrowers in Canada. If it is so easy to consolidate debts then it is also easy to accumulate debt and this leads into old habits. Every time someone uses home equity to consolidate debt it lowers the equity in there home. Next time you look to put something new on your credit card or pay for a vacation on credit without the means to pay it off immediately you need to ask yourself “is this how I want to live?.

Mortgage BrokerFor a free assessment of your financial situation feel free to call me your Vancouver BC Mortgage Broker.

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