We've answered some of the most frequently asked questions about private lending, home equity loans and second mortgages in Canada:
Home Equity Loan FAQ
- What is a home equity loan?
- What is the purpose of a home equity loan?
- Why would I want a home equity loan?
Private Lending FAQ
- What is private lending?
- Why would I use a private lending firm?
- Is private lending right for me if I'm self-employed?
- Can private lending save me money if I'm self-employed?
- What is a second mortgage?
- What is LTV?
- What is "term" in reference to a loan?
- What is an interest only loan?
- What are open/closed loans?
- How much equity can I use?
- What if my credit score sucks?
- Does Home Equity Solutions offer home equity loans in Alberta? What about Manitoba, Saskatchewan and Ontario?
- Can I complete this transaction from the comfort of my own home?
- Do you offer small business loans?
- Do you offer assistance with overdue taxes?
Debt Consolidation FAQ
- If I am in debt, how does another loan help?
- How much debt can I consolidate?
- How much can I save by consolidating my debt?
- Will debt consolidation hurt my credit rating?
- How does the debt consolidation process work?
- I have other questions about debt consolidation in Canada
Home Renovation FAQ
Home Equity Loan Answers
A home equity loan is just that, a loan that is backed by the equity in your home. The equity in your home is simply the difference between the market price (what you could reasonably sell it for in a fair market transaction) and how much you owe on it (the existing size of your mortgage).
For more information on home equity loans, click here
At its heart, a home equity loan is a conversion of your wealth from a form you can’t spend to one that you can. If your house is worth a lot more than you owe on it, that’s great – but the grocery store doesn’t accept equity.
Home Equity Solutions allows you to access the hard earned savings you have put in your home so that you can put it to more productive uses.
There are a multitude of reasons. As we have said, a home equity loan converts savings you can’t spend to savings that you can. Building equity in your home is a great way to save and its the primary avenue of savings for many Canadians. However, it is a long term strategy that does not always fit with life’s short term changes.
The money in your home can be used for:
- Debt Reduction
- Home Renovations
- Small Business Loans
- Paying Off Back Taxes
- Initial purchases
- Or a long overdue family vacation
If you are interested in a home equity loan and would like to know more, but don't want to apply, you can fill out some basic information by clicking here. We will review your situation and let you know how we can help.
Private Lending Answers
Private lending is simply the act of lending when the lender is not a bank. We are not a bank and therefore, we are a private lender.
Many of the same mortgage services are available from a private lender, but we are more flexible than a bank when it comes to underwriting policies and can thus lend to a broader range of clients.
Perhaps most importantly, using a private lender does not exclude you from the services of a bank. Our experts are licensed mortgage brokers and can place you with whatever loan is best for you. This could be a private loan or it could be a mortgage from a traditional bank.
Major banks are governed by overly restrictive lending guidelines. At Home Equity Solutions, we can provide a wider range of loan products.
We can arrange all of the traditional mortgage products through your bank and we can also offer a number of private loan products.
Our loans are short-term and interest-only and are designed to be as flexible as posssible.
Private lending is ideal for self-employed Canadians.
Self-employment is becoming more and more prominent in Canada. We are entrepreneurial and very hard working.
The problem is that it is also becoming more and more difficult for self-employed persons to get a mortgage, even with good credit.
Typically, a major bank will only give you a loan up to a maximum of 65% LTV. However, you can still buy your home with just 20% down by topping up your traditional bank mortgage with a loan from Home Equity Solutions.
Absolutely. This might surprise you, but it's absolutely true.
Major banks impose a number of restrictions and stipulations on self-employed persons looking for a mortgage. For instance, if you want to buy a home, you might only be able to get a max LTV of 65% (you might need a 35% down payment).
There is a lot of nuance around this, but you generally have 3 options: Saving more, declaring more income to CRA, or a private loan.
Compared to declaring more income to CRA, a private loan can save you $1,000's of dollars (see chart below).
For a detailed explanation and more information on our solutions for self-employed persons, click here
If you want to speak with one of our experts about it click here.
If you are taking out a home equity loan and you have an existing mortgage, then that home equity loan is a second mortgage. It allows you to finance investments, consolidate debt, repair your credit, renovate your home, or go on a family vacation.
The amount of money you can borrow using a home equity loan depends on the value of your home and the size of your current mortgage (your current LTV).
Our max LTV is 80%. So your available equity is your max LTV (80%) minus your current LTV.
In the example below, the individual has $150,000 in available equity.
"Term" is the length of time that the loan's terms are in effect. Most mortgages in Canada are 5 year terms, meaning that the terms agreed upon in the contract (fees, interest rates, etc.) are in effect for five years. At the end of this period, the terms of the loan are re-negotiated.
Our loans are typically 6-12 month terms, meaning that you are not stuck in them for long if you want to renegotiate or roll the loan into your mortgage.
An interest only loan is one in which you are only required to pay the monthly interest. Most loans also require that you pay some portion of the principal.
As an example, your credit card company will stipulate that your minimum payment is 2%-4% of your balance owing. Part of that (not much) goes towards your principal and part of it (most) goes towards paying off the interest on your debt.
Your mortgage payment is structured similarly, with a portion going towards paying down your principal and a portion going towards paying off interest.
Our loans are interest-only. This doesn't mean that you can't pay down your principal, in fact, we highly advise it. It means that you don't have to.
This provides the borrower with greater flexibility. While we recommend paying down your debt, we recognize that circumstances can change and there may be a period during which lowering your monthly payments is needed.
Open/closed loans refer to whether or not you are allowed to pay off your loan at any time without a penalty.
As an example, your mortgage is most likely a closed loan. This means that, should you win the lottery and wish to pay off your mortgage or you just want to transfer to another bank, you will have to pay a fee.
Open loans allow you more flexibility, but typically come with higher interest rates. This is because the lender wants to make sure that they make a good return.
Not to worry. Our loans are based on the equity you have accumulated in your home, so less than perfect credit ratings are not a hindrance. If you are looking for some tips on how to repair your credit, click the link below:
Furthermore, consolidating your debt will allow you to improve your credit rating, giving you access to even better interest rates. This is what we call the 'Virtuous Cycle of Debt Consolidation'.
A higher credit rating will improve many aspects of your life and let you sleep better at night.
Does Home Equity Solutions offer home equity loans in Alberta? What about Manitoba, Saskatchewan and Ontario
We are currently expanding in Alberta and look forward to serving customers from Calgary, Edmonton, and all regions of Alberta.
We are proud to serve clients in Ontario, Manitoba and Saskatchewan
Absolutely. The process is fast and simple and we handle almost all of the work.
You can start the process now with our easy, no obligation, online application form.
Of course, you can always just give us a call to ask us any questions you have and to see how we can help. We look forward to hearing from you.
Absolutely. Our small business loans are a great way to finance an expansion, start a business, or pay off some debt.
Find out more about our small business loans here
Or, just fill out some basic information and we will let you know how we can help you by clicking here
I'm glad you asked, because we absolutely do.
As the chart below shows, overdue taxes can be extremely costly if not dealt with quickly. Our home equity loans can save you thousands.
Find out more here.
Debt Consolidation Answers
This is a common question. The key here is a confusion between the number of loans and the amount of loans. Consumer debt charges interest rates that can be oppressively high, making the prospect of paying off your debt seem unobtainable.
The key to a home equity loan is that you pay down your consumer debt, thereby changing the composition of your debt and lowering your monthly interest payments. This frees up more money to go straight to debt reduction. This process lets you improve your credit rating which will eventually allow you to secure an even lower interest rate.
All of it. If you have outstanding consumer debt there is no reason not to shift all of it to a home equity loan that offers a much lower rate. Consolidating your debt allows you to pay down your debt faster, repair your credit and improve your overall financial standing.
A lot. The specific number depends on how much debt you have and what you are currently paying.
We offer a free debt consolidation calculator.
See what it looks like in the link above or get your own here.
No. Debt consolidation will not hurt your credit rating. Quite the opposite in fact - our debt consolidation process is designed to improve your credit rating.
In broad strokes, debt consolidation is just transferring your debts into a lower interest loan. This let's you lower your interest payments, increase your principal payments, reduce your debt faster, raise your credit rating, and consolidate again. All without increasing your monthly payments.
This last part is critical and is the true strength of the process. You do all of this without spending any extra money.
How is this possible? Simple. There are people that are willing to lend you money at lower interest rates than your credit cards. That's it.
The chart below shows how much you can save in interest payments:
- As you can see, your interest payments fall by more than half in just the first year alone
- By the end of the process, you have reduced your debt by 50%-75%, without spending any extra money
For more detail, click here
Not to worry, we provide a longer, more in-depth debt consoldation FAQ here.
Beyond that we have a lot of information on debt consolidation. If you like, you can sign up for a free, educational email series
If you want to speak with an expert, just fill out some info here
Home Renovation Answers
Renovations can increase the value of your property and improve the quality of life for you and your family. A well chosen renovation is a good investment in your home and your life. If you have been thinking about renovating your home but are not sure how best to finance it, give us a call and we would be happy to help.