No matter what the personal reasons may be, many Ontario homeowners are considering the option of refinancing by taking out a new mortgage on their property. There is no doubt that the Ontario property market is on fire and continues to outperform the expectations of real estate professionals.
What options exist for the Ontario homeowner who wants to tap into home equity to take out a new mortgage? Depending on a homeowner’s credit standing, household income, degree of equity, and overall debt ratio, different lending options exist. There are also various types of mortgage options open to the interested homeowner.
Types of Lenders Available
For the interested homeowner, several lending options are possible. The mortgage industry has classified lenders into three broad categories. Which category of lenders may be applicable largely depends on the homeowner’s unique financial picture. Lenders will ask:
- Is there sufficient household income?
- How high is the current household debt ratio?
- What is the appraised value of your home?
- How strong is your credit?
Credit remains the foremost criteria Ontario lenders assess when approving refinancing options using your home equity. Lenders in each of the three categories will be weighing credit differently:
- A Lenders– Represented by banks. To approve mortgage financing, strong credit, sufficient household income, and additional financial assets are required. Borrowers undergo rigorous mortgage stress tests that were increased on June 01, 2021.
- B Lenders– Represented by credit unions/trust companies. While mortgage approval criteria are less stringent than traditional banks, a credit score of at least 550 and stable, easily verifiable income are preferred over freelance or self-employed earnings.
- C Lenders- Represented by private lenders. Private lenders can consider criteria beyond income type and creditworthiness and arrange mortgage loans despite poor credit. The appraised value of the property and additional financial assets will be weighed when determining mortgage amounts.
Getting a New Mortgage by Tapping into Your Equity
Fortunately, motivated homeowners have a wide array of mortgage loan options when refinancing their principal mortgage. Consider a private lender (C lender) for a privately secured mortgage if your credit score is low.
Mortgage Broker Store is in a position to help negotiate private mortgage refinancing. We will also be able to point you towards a suitable private lender with access to a broad network of Ontario-based private lenders. Refinancing using existing equity will be based on the calculated Loan-To-Value (LTV) which will not exceed 75%, a recent appraisal of your property, and the degree of equity in your home.
Options for Homeowners Using Home Equity
- Debt Consolidation Loans- Using existing equity, a debt consolidation loan in Ontario can provide the funds necessary for any pressing renovation and updates to your property. By renovating and upgrading your property you will be increasing the value when it comes to resale.
- Home Equity Loans- By tapping into existing equity, financial concerns can be addressed, such as paying off outstanding debt payments, education expenses, or helping pay your primary mortgage payments reliably.
- Home Equity Line of Credit (HELOC) Acting like a revolving line of credit enabling funds to be available as the balance is paid off, a homeowner only needs to pay the monthly interest on the line of credit.
- Home Renovation loans– If you have multiple debt payments, a debt consolidation loan can help merge these payments into one manageable monthly payment. This will enable all associated housing costs to be covered more comfortably.
- Bridge Financing– Serving as a bridge between financial obligations or providing the necessary short-term funds to meet immediate financial objectives. Bridge loans are typically 3-6 months in length and are structured to provide a temporary financial solution.
Refinancing Your Principal Mortgage
Another option that utilizes existing equity is the ability to refinance your first mortgage. If you’re struggling to meet the terms of your first mortgage, a private mortgage loan can provide the funds to cover the costs. The same criteria used for other types of second mortgage options will definitely apply. Refinancing your principal mortgage can adjust term length and interest rates and cover arrears if the first mortgage defaults.
Unlock funds tied up in your property’s equity and reduce monthly housing costs for easier mortgage payments.
Mortgage Broker Store Can Negotiate Different Types of Mortgage Loan Options
With access to a broad network of well-established and experienced private lenders across Ontario, Mortgage Broker Store can connect an interested homeowner to private lenders to discuss various refinancing options. We will also be able to negotiate private financing directly, depending on your specific financial objectives. Poor credit and non-traditional income aren’t barriers to getting loans to pay pressing monthly liabilities. Don’t hesitate to contact us at your convenience to discuss the best options to suit your unique financial circumstances. Call 416-499-2122 or email ron@mortgagebrokerstore.com and gain expert advice!
