An equity take-out mortgage allows you to access your home equity for a variety of reasons and there are many products and types that can suit your financial needs and goals. Take a minute to review a variety of forms, reasons and uses of a equity take-out mortgage.
Whether it be a new family member on the way, a business investment, home renovation or debt consolidation an equity take-out mortgage can help finance a future goal or get you through a difficult time. As an experienced mortgage brokerage we have helped many Canadians get the right mortgage for their financing needs.
Whether you're buying a new home, an investment property or a vacation getaway, you can borrow your down payment from your available home equity. Depending on how much your new property costs and how much available equity you have with your current home you can potentially borrow a down payment that'll significantly reduce the amount that you'll have to borrow for your mortgage on your second home, rental property or lake-side cottage.
Many Canadians have used the equity in their homes when faced with a large expense that their savings can’t quite cover. You may have to cover your child’s university costs or need the money for a home renovation project.
A HELOC is a form of equity take-out but rather than being a lump sum borrowed by a homeowner, it is a secured line of credit against a portion of the available home equity.
Simply the more home equity that you have in your home the more money that you'll be able to borrow through your equity line of credit. The most essential difference that a home equity line of credit offers in comparision to conventional mortgages is that the line of credit is a secured amount that instead of being borrowed and financed is an available fund of which a borrower can withdraw money from at any time.
No payments are required for a home equity line of credit, but the borrowed amount of equity will accumulate interest. It's also important to note that a HELOC is a demand loan, meaning the lender can demand repayment at any time, but probably won't.
A second mortgage is a common and popular equity take-out mortgage. Depending on how much available home equity you have, the amount you want to borrow through your second mortgage and considering you credit score the rate of your second mortgage will be determined. In any case the rate you qualify for on a second mortgage will carry a higher interest rate than the one you obtained for your first mortgage.
An equity take-out mortgage can be used for home renovations.
A lender will be more than willing to fund your ambition to improve your home. A home is security for your loan and given that you plan to add value to that home is an added security for a loan in the case of default.
Though a lender will not likely fund or approve a renovation that involves extreme changes or additions to a home.
A big project like adding another level to your home is a risky move for a lender, as such a project given unfinished or complications could harm the value of the home that a lender is using as security for your debt.
Having multiple debts can be a burden, an equity take-out mortgage can be a good way to consolidate that debt and simplify your life. Rolling your debts and loans into your mortgage can be financially strategic and beneficial.
Consolidating your debt is simply repaying debts with mortgage proceeds. Consolidation is when a debt is paid by another debt. The advantage to consolidation is that it brings a gross owed amount under one repayment and a single lower interest rate.
An equity take-out simply allows you to strategically target high interest debt with a consolidating payment of the debt and a replacement mortgage that consolidates debts under one repayment and interest rate.
Identification is used to verify your identity. While it’s a measure for preventing fraud, it’s essential for us to properly fill out your mortgage application.
It’s also a requirement so a lender can provide you with funding.
Income verification is required for your application so a lender can verify your ability to manage your mortgage payments.
Also provides essential information for us to assess your situation. Most of all helpful information to determine which mortgage product is appropriate for you.
It’s fraud if you falsify and/or exaggerate your income. Fraud for shelter is the most common form of mortgage fraud in Canada. Therefore we won’t tolerate this irresponsible and harmful behaviour.
It is important to be honest and precise with your income so that you aren’t getting a mortgage you can’t manage to afford.
A mortgage statement is simply a document prepared by your current lender and provided to you upon request. This document will detail your current mortgage.
Your mortgage statement will show:
This document is essential for the lender you apply to. As a document it allows a lender to assess your current mortgage and review your management of that mortgage.
Must show your name, property address, balance or original mortgage amount, and payment
A property appraisal is an estimated value of a home, in this case for one you wish to purchase.
Most noteworthy the appraisal is not a document that you will provide but rather pay for, as a requirement from your lender. Appraisals ordered by a lender are not shared with you as it’s their document.
This document is a cost surrounding your mortgage. While the cost can vary depending upon the location and size of the property.
The cost of an appraisal starts around $350 and can go over $500 (plus tax).
An appraisal is a requirement by a lender so they have a reasonable idea of your home’s current market value.
They use this value to assess the home before they are willing to lend against your home.
A lender will require the most recent property/tax bill statement for the property you are mortgaging.
It’s an essential document that details the property and documented ownership of the property. It also allows a lender to ensure that all taxes are paid up-to-date before financing a mortgage against the property.
A lender will require information on how much you pay for heating a month. Along with this information, if applicable, documentation about any condo fees you pay is also required.
It is required to consider the essential costs surrounding your property, it allows a lender to determine an accurate idea of your finances considering your assets, liabilities, income and property.
A void cheque is simply an unusable cheque that details your transit number and account number. It’s essential for a lender to deposit and withdraw funds from your account.
It’s an essential document that allows a lender to fund your mortgage. Also confirms the funds are in fact deposited to you, the mortgagor.
An equity take-out is not the only way to access your home equity and more mortgage financing. Have you considered a refinance mortgage?
Feel free to send us an email with any questions you may have about the required documents for an equity take-out mortgage.
We'd be happy to help!
We have a variety of useful guides that are essential and helpful for all your mortgage needs and questions. We cover everything from basic mortgage concepts to the functions and components of a mortgage to in-depth mortgage guides and strategies.
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We have a few excellent options to determine what you can afford to borrow. We offer an easy to use Mortgage Qualifier Calculator. Simply input the required information and let our calculator give you an idea of how much you can afford to borrow.
If you want to get the most accurate idea of how much you can afford to borrow, contact us or fill out our online mortgage assessment form.
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What a pleasure it is to do business with Nick. I have used Nick as my mortgage broker several times now and wouldn't think of using anyone else. He is knowledgeable, professional and always timely on any questions or inquires I have. He makes you feel like you are a special customer through the entire process. Nick thanks again for all you expertise and making this a smooth transaction.
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It's always been a pleasure to work with you. Everything was made very easy for us even though you are in a different province. I believe I always got a great rate without me having to negotiate with several different banks. All the work was done for me. Thank you.
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