The housing market in Ontario continues to be very robust. House values have increased significantly throughout the height of the pandemic and into the second quarter of 2021. Housing sales are also showing little sign of slowing down as we enter the summer months of 2021.
The upward trend in the Ontario housing market has come as a surprise to real estate professionals. Predictions were to the contrary. The Government braced for a hard hit to the housing sector and real estate insiders had anticipated a significant drop in housing prices, coupled with a slow down in housing sales.
According to The Toronto Housing Report Numbers for July 2021, the average price for a single-detached home has increased to 1.1 million. Houses are sold at an impressive rate with an average of only 14 days on the market. These numbers are very encouraging for those that currently own a home in Toronto and GTA. These numbers also serve as an incentive to take out mortgage financing to purchase Toronto properties.
Different Mortgage Options
Once the decision has been made to take out mortgage financing a homeowner/borrower must decide which type of financing would best suit their financial goals. Within some parts of Toronto and the GTA, existing homeowners have profited during 2020 into the first half of 2021 by significant property gains in the double digits. With newfound equity, secondary mortgage financing can make financial sense. Secondary mortgage financing options can include:
- Negotiating new terms on your principal loan- A private lender can use the equity in your home using the same LTV calculations and assessing the appraised value to help change the terms of your mortgage or provide financing to help pay your monthly mortgage payments reliably. To calculate this type of mortgage, home equity will be factored into the equation.
- Debt Consolidation Loans- Debt consolidation loans can provide much-needed additional mortgage financing to merge all monthly debt payments into one debt payment calculated the same way as other secondary mortgages.
- Home Equity Line of Credit (HELOC)– A HELOC is structured as a revolving line of credit using the equity in your home. Funds become available once the balance is paid off and the homeowner must pay only the monthly interest on the balance of the loan. The degree of equity available to the homeowner is contingent on the calculated Loan-to-Value (LTV) and the degree of equity against the balance owing on the mortgage. A private lender will lend up to 75% LTV and need to see at least 25% equity to negotiate a HELOC
- Home Equity Loan- A home equity loan is a second mortgage that is calculated utilizing the equity in your home. It can be used for any number of purposes including paying off liabilities, using the funds for immediate financial needs such as home fix-ups. Just as a HELOC is based on LTV, degree of equity, and your home’s appraised value, so too is a home equity loan.
- Home Renovation Loans– A home renovation loan is a type of second mortgage leveraged against your property to be used for any necessary property renovations and updates. It is calculated based on the overall LTV (75% for most private lenders), the degree of the existing equity in your home, and your home’s appraised value.
- Bridge Financing- Bridge financing provides a bridge between selling your home and closing on a new tapping into existing equity. Bridge financing can also be used for other reasons including paying off debts or paying for house repairs and other expenditures that may be pressing.
If a homeowner has struggled with multiple debts and/or is in danger of falling into mortgage arrears, private mortgage financing can help in the short term. Private mortgage financing offers a faster processing time than the banks, and is short-term, based on both the existing equity and appraised value of your home. Private mortgage financing can also provide much-needed mortgage finance when a homeowner may have poor credit and been turned down by the banks.
Your Checklist When Working with a Mortgage Broker/Agent
Regardless of the type of mortgage financing that works best for your immediate financial needs, you can properly prepare for your meeting with a mortgage broker by being aware of what your broker should be addressing. Your broker must disclose various things to you and follow specific rules when negotiating the terms of a mortgage loan:
- Disclose in writing the inherent risks in any mortgage contract presented before you sign any document
- Disclose in writing the party(s) that the broker and/or brokerage is acting on behalf.
- Be able to demonstrate that appropriate steps were taken to negotiate a mortgage in your best interest and that is best suitable for you
- If there are any potential conflicts of interest with the negotiated mortgage, this must be disclosed in writing
- Any fees and incentives for the broker/brokerage must be disclosed and presented to you in writing.
- Disclosure in writing whether any fees or incentives will be allocated to another party (s) in connection with your mortgage contract
- Provide in writing a cost of borrowing disclosure for you to read and then sign
- All written disclosures must be written in a way that is clear and concise as to be straightforward for the borrower.
- You must be given at least 2 business days to be able to review all pertaining documents and disclosure agreements. If you choose to waiver your right to sufficient review then 2 days will no longer be mandated.
- You should never be expected to pay any deposit or payment about the mortgage amount to a broker/brokerage for their services if the mortgage amount is under $400,000.
- Make sure to bring all relevant documentation with you to a meeting with a broker. This will include pay-stubs, proof of any additional financial assets if applicable, a current appraisal of your property, and documentation about the degree of equity currently in your property.
Mortgage Broker Store Can Direct You in Your Search for Private Mortgage Financing
Mortgage Broker Store can help connect you to an appropriate private lender to meet your mortgage needs. We are also in the position to lend out private mortgage financing based on your overall financial picture. Mortgage Broker Store understands the concerns of the Ontario homeowner. We are continually striving towards finding the best match when looking at your particular mortgage and financing needs. We work with a network of private lenders across the GTA and are more than happy to guide you in important decisions that you will be making during the lending process. To obtain a bad mortgage loan, feel free to contact us at your convenience. We will steer you in the right direction in your mortgage search.
