The most obvious application would arguably be for funding a residential mortgage requirements where the applicants fail to qualify for an institutional mortgage due to some combination of bad credit and strained cash flow.
A private mortgage, by definition, is a home equity loan due to the fact that the primary lending and funding criteria revolve around the equity in the property being offered as security and where credit and cash flow are more secondary issues.
But there are other situations where a private mortgage may be the preferred choice, even in scenarios where the borrower(s) can qualify for a residential bank mortgage.
For instance, any situation where cash is required in less than two weeks, a private mortgage can be the only option as its too unpredictable as to whether or not an institutional lender is going to be able to move fast enough. And if cash is required to complete a transaction or avoid some sort of penalty or opportunity loss, then the incremental cost of a private mortgage may be very small in the overall picture of what is at stake for the borrower.
Another very common situation where private mortgage financing on home equity is very popular is in construction financing scenarios.
Once again, the borrower may very well be able to qualify for bank financing, but chooses private funding instead to the benefits it has to offer.
More specifically, private mortgages for residential construction can be arranged, on average, faster than from a bank with more predictable draw advance schedules that are typically key to the an uneventful cash flow during the construction period.
In both the cases of borrowing speed and construction, there is an additional cost for private mortgage financing, but there are also added benefits that come with the cost.
Those added benefits typically revolve around speed, flexibility, and predictability that are not always available through lower cost lenders, especially in the time you have to get something arranged.
So if you are looking for a home equity loan and want to better understand both your bank and private lending options, I suggest that you give us a call and go through your situation with a member of our team. We’ll make sure we get all your questions answered right away as well as providing you with a list of the most available solutions for your particular situation.
A Toronto home equity loan mortgage basically refers to the fact that any loan provided to a home owner that is equity based will be secured by a mortgage. The mortgage can be in first, second, third, or even higher positions.
There are basically two types of home equity loans.
There is a home equity line of credit or secured line of credit, and a home equity term loan.
A home equity line is going have a variable rate versus a home equity term loan that may potentially have a fixed or variable rate, depending on the program and applicant requirements.
With a home equity line, the principal amount approved can be drawn on at any time, provided the borrower upholds the lender’s requirements for the line of credit to be active.
For a home equity term loan, the principal amount is dispersed all at once and then paid back over time according to an amortization schedule.
The interest term for the term loan will be fixed or variable for a defined period of time, after which the mortgage will need to be renewed.
In many cases, both the line of credit and term loans are second mortgage financing facilities where the mortgage registration taken for security by the lender is behind a residential home mortgage that’s already registered in first position.
A home equity line of credit can only be obtained through banks and other institutional lenders.
A home equity loan mortgage can be obtained from both institutional lenders and private mortgage lenders.
When private lending is being utilized, its also typically in the form of private second mortgage financing where there already exists a first mortgage that will not be impacted by the new home equity loan.
The home equity loan option of financing behind an existing first mortgage can be a preferred approach over a home mortgage refinance strategy as a new second mortgage will not generate any prepayment penalties that can result from refinancing the first mortgage, and the rates for a second mortgage will be at or very near what you would be able to secure for a new first mortgage anyway.
In order to work through the different options that may be available to you, we suggest that you give us a call and we’ll go over everything with you.
A home equity mortgage typically refers to the act of getting additional financing out of your home. This would imply that there is a current mortgage in place, but that the equity in the home is sufficient to support additional residential mortgage financing against the property.
This can be done in one of three ways.
The first way to get a Toronto home equity mortgage is to get a new first mortgage at a higher loan amount, repay the old mortgage and then have access to the additional funds for whatever purpose was intended. With a new mortgage, the additional funds will be advanced in a lump sum, so you should have a ready application for the additional financing as you will be paying interest upon disbursement.
The second way to get a Toronto home equity loan is by securing a second mortgage against the property. From a qualifying point of view, you may be eligible for either a new first mortgage or a new second mortgage. The choice of taking a new second mortgage can relate to benefits from interest rate, prepayment penalty avoidance, amortization, and so on. There is likely to be very little rate difference between a new first mortgage or a second mortgage as well, so the choice is more about how the incremental home equity mortgage financing will minimize your costs and fit into your cash flow and long term repayment plans.
The third approach to securing a Toronto home equity mortgage is through a home equity line of credit, or HELOC. This type of residential home loan is very similar to new second mortgage in terms of mortgage registration and loan amount qualifying. The big difference comes in the flexibility that is provided to you when accessing funds and also paying them back.
A Toronto home equity line of credit will also tend to come with a variable interest rate which may provide a significant saving in interest costs over time.
The approach you take to securing a Toronto home equity mortgage should be based on the greatest value and least cost to you.
In order to determine which option is the best fit overall for your home and financial requirements, we invite you to give us a call to set up a time with a member of our team so we can go through all the different scenarios with you.