5 Steps You Should Take Before Seeking a Mortgage Loan in Ontario

Potential borrowers often sabotage their own efforts obtaining a mortgage loan. It is important to remember that each lending institution has particular rules and guidelines to qualify for a mortgage loan. Preparation and homework can help you speed the process and save you money.

Here are 5 steps you can take to make sure you are ready to apply for a mortgage:

Start early.

Many borrowers procrastinate in applying for a mortgage for many reasons such as: fear of being denied, shopping for the perfect deal, not having all their documentation, thinking the process will not take much time. There is nothing more stressful than having a closing date looming with no loan commitment in sight. Starting early does not cost you more and may ultimately save you money.

Get your documentation in order.
Lenders are going to require documentation on income, assets, and other personal information. Be prepared to provide it in a timely fashion. You will be in a stronger position to get the loan you want by being prepared.

Get a copy of your credit report before you apply, particularly if you have any doubt in your mind about how your creditors have viewed the way in which you have managed your financial affairs.

In some instances, borrower's credit reports may contain erroneous information. While credit reports can be corrected, the process takes time. Knowing exactly what your credit report says may provide an advantage.

Complete the loan application thoroughly.
By giving complete and accurate information early in the process, you will help speed up the process.

Don't try to change the system.
Work with a mortgage professional that you are comfortable with and can address your needs, concerns, answer your questions and instil confidence. In some instances, the bank or mortgage company, you or the consultant, you are working with simply may not offer a program that can suit your requirement. In other cases, the type of financing being sought is simply not available. Being an informed borrower and working with an experienced mortgage broker or mortgage agent can often be the difference between success and failure.

For more information visit www.firstequity.ca.

Construction Loans and Home Improvement Financing

For many individuals, adding a pool, an addition to the home or making repairs, requires the use of a mortgage. There are many ways that you can use your home to finance construction projects and home renovations. Obtaining a mortgage loan to finance your construction project or home renovation is often the most affordable route offering the most flexible financing options.

If you are thinking about seeking a construction loan, home renovation loan or mortgage, here are variables that you should consider:

1.       Depending on the required loan amount, a home-equity line of credit (HELOC) may be the most cost-effective option. Home equity lines of credit; typically carry lower interest rates when the loan is less than 75% of the home value. A fixed rate loan program is available at higher interest rates and is available to 90% of the home’s value. For this reason, home equity lines of credit and some fixed rate second mortgage financing work best for smaller loan amounts that will be paid off in a reasonably short period of time.

2.       Borrowers who need larger loan amounts and who intend to keep the outstanding balance for a longer period of time may want to consider refinancing their first mortgage, paying off the existing balance and increasing the loan in an amount sufficient to pay for the improvements. While this option will most likely require the borrower to pay closing costs, the benefit of this option is usually a lower interest rate over an extended period of time than is typically offered by other Home Improvement loans.

3.       Construction or Construction/Permanent loans are best suited for extensive renovations requiring multiple draws to contractors or labourers. Draws are usually set up monthly and are subject to at least a 10% holdback of funds in accordance with “construction liens” laws. In addition, many lenders prefer to fund these draws on a cost-to-complete formula where the funding program insures that there is always enough money remaining after each draw to complete the project in the event of a problem or default. Each time the contractor requires a draw an architect, engineer or appraiser is called in to determine the value of the work in place and the remaining work to be completed. The lender will use this information to determine the amount of the draw that will be advanced. These loans are usually set at a float rate of 1 to 3 above bank prime for non-private funding and may contain a permanent (take-out) mortgage which comes into effect once the construction is complete and beyond the 45 day construction liens period.

In many instances, the lender will require plans and specification for improvements. Lenders will also require an appraisal of the subject property reflecting the value of the improvements in the new valuation.

There are so many lenders out there that include banks, finance companies, mortgage investment corporations and private lenders. Depending on your credit standing and the equity in your property, if you are planning a construction project or a home renovation, you likely have many financing options. For more information visit http://www.firstequity.ca or call (888) 455-5774

First Equity Financial Video - Tired of juggling your bills?

First Equity Financial Video - Financial Quiz