Equity in the context of mortgage financing is defined as “the market value of a debtor's property in excess of all debts to which it is liable”.
The more equity you have in your home, the less risk that you represent to a perspective lender. Folks who have bad credit or difficulty proving their income will require a larger down payment to purchase a home or more equity in order to refinance it, then someone who didn’t have these issues.
The reality is that there is such a large percentage of the population who have accumulated an unmanageable amount of debt, have had issues with credit, or are self-employed with difficulty proving their income; that some lenders will offer an “equity mortgage” or “equity only mortgage”.
In these circumstances the lender will base their decision solely on the amount of equity in your home and not look at your income, debt load and credit products. Most lenders will not grant a high risk equity only mortgage that exceeds 80% the value of the home.
Also an equity mortgage will bear a higher interest rate, than prime rate mortgages offered by the bank. Equity mortgages are offered by a number of different types of lenders. These include mortgage investment corporations, trust companies, finance companies and private individuals.
Obtaining a refinance equity mortgage is a fairly simple process and goes as follows:
- Mortgage application is made
- Mortgage application is preliminarily approved
- Appraisal of the property is ordered and mortgage statements
- Applicant signs mortgage documents
- Applicant signs documents with the lawyer
- Funds are dispersed
The entire process takes approximately 2-3 weeks. A relationship with a mortgage broker who also lends their own money is a huge benefit. This eliminates layers of referrers that ultimately results in more fees to you. Ontario Mortgage Brokers like First Equity specialize in subprime equity mortgage financing and also lend money too. For more information visit www.firstequity.ca or call David Mandel at 416-440-1224 ext 22.
