A Preferred Home Equity Loan Lender.
Home Equity Loans
In Ontario.
Access Your Home Equity, Anytime, anywhere.
From Toronto to Lake Muskoka!
What is a Home Equity Loan?
A home equity loan is a type of borrowing facility available to homeowners using the equity in their home. Homeownersmay qualify for a home equity loan from traditional ‘A’ lenders, alternative ‘B’ lenders, and private lenders on their principal residence, a second home such as a cottage, a summer home, or an investment property. Home equity loans are registered in 1st, 2nd or 3rd position. If the property is free and clear, a home equity loan would be registered in 1st position. If there’s an existing 1st mortgage and it makes financial and practical sense to replace it and rewrite a new 1st mortgage, the new home equity loan would be registered in 1st position and would discharge the existing 1st mortgage. Ifit makes sense to keep your existing 1st mortgage in priority, usually to avoid a costly prepayment penalty and/or if your income and credit profile do not permit a similarly low-rate 1st mortgage interest rate, it might make sense to explore a home equity loan in 2nd position. In rare cases, private lenders might be comfortable providing a home equity loan in 3rd position, typically when the existing 1st and 2nd mortgage or line of credit are held by traditional lenders, such as banks, credit unions or trust companies.
Eligible Property Locations for Home Equity Loans
The location of the real estate is of significant relevance and importance to mortgage lenders; accordingly, most home equity loan lenders prefer lending against real estate located in marketable locations, such as major city centres or suburbs. This isn’t to say that rural real estate owners cannot obtain a home equity loan, the lender pool might be smaller, or, lenders may provide you with a lower loan-to-value if you are lookong to access your home equity, or, if you are looking to purchase, you may be required to provide a larger down payment. In some cases, traditional ‘A’ and alternative ‘B’ lenders may not want to provide mortgage financing depending on the location, rurality or zoning. As a result, a home equity loan with a private lender may be the only potential option. Regardless of being turned down elsewhere by other mortgage brokers or private lenders, you may be eligible for a home equity loan with DV Capital if your property is in a rural or remote location, regardless of the zoning, services to the property (i.e., well and septic), or acreage.
What Is A Loan-to-Value (LTV)?
Loan-to-Value (LTV) is a calculation lenders use to assess risk and abide by underwriting and lending policies. Forexample, if the property is appraised for $1,000,000, and the homeowner is requesting a $700,000 home equity loan, the requested Loan-to-Value (LTV) is 70% ($700K / $1M = 70%). As a rule of thumb, traditional ‘A’, alternative ‘B’ and private mortgage lenders will typically provide home equity loans up to 80% of the appraised property value. Keep in mind that with traditional ‘A’ lenders, you will be required to conform to underwriting guidelines regarding your income, credit and debt service ratios (known as the stress-test). In the event you are unable to qualify with a traditional ‘A’ lender due to imperfect credit or perhaps you are self-employed with inconsistent verifiable income, you may be able to qualify for a home equity loan with an alternative ‘B’ lender. Failing which, a private home equity loan lender, like DV Capital, may be able to assist you regardless of your income or credit profile, or even the degree of rurality, acreage, outbuildings or zoning, which is often a deterrent to qualifuing with traditional ‘A’ or alternative ‘B’ or even many private mortgage lenders who will only lend to urban or suburban real estate. In some cases, mortgage lenders will often reduce their ‘loan to value’ from 80%, to 65%, for example, to reduce their exposure to account for the relatively lower marketability of the real estate asset (in other words, there could be a smaller lender audience to take-out their mortgage, or, a softer buyer market, and so, the time on market may be longer).
How Much Money Can You Borrow for a Home Equity Loan?
The amount of money mortgage lenders provide real estate owners for home equity loans varies due to qualifying requirements and because many home equity loan lenders have minimum and maximum loan amounts. For the most part, home equity loans generally start at $20,000 and can increase up to and above $5,000,000. Note that most mortgage lenders use a sliding-scale policy whereby they will lend up to 80% of a particular property value threshold, for example, $1,000,000, and then provide a reduced loan-to-value, for example, 65%, above $1,000,000. For example, if the property is appraised for $2,000,000, certain mortgage lenders may only provide a home equity loan for $1,450,000, which works out to 72.5% loan-to-value ($1M x 80% + $1M x 65%). In certain cases, if the real estate owner owns and is willing to pledge additional real estate collateral with sufficient equity, mortgage lenders, often only private mortgage lenders, may lend above 80% of the subject’s property value, provided their mortgage is blanketed or cross-collateralized against the additional real estate collateral, thus, reducing the average loan-to-value. Note that this approach isn’t exactly simple, nor do many lenders provide this option. There is also increased risk to both the lender and borrower; though if properly assessed and strategized, risk can be mitigated, and the result may benefit both parties.
How Do I Qualify for a Home Equity Loan?
Similar to qualifying for any mortgage financing product, qualifying for a home equity loan largely depends on your income and credit profile (credit score and history, employment, and income), as well as the property (location, condition, marketability, and equity). For those who cannot qualify for a home equity loan with a traditional ‘A’ or alternative ‘B’ lender, private home equity loan lenders like DV Capital fill the void and can often provide home equity loans, regardless of income and credit, based on sufficient equity. When working with home equity loan experts like DV Capital, the process can be fast and seamless.
Why Homeowners Choose DV Capital?
We have originated, underwritten and funded many millions of dollars of home equity loans over the years. We know how to assess and determine favourable home equity loan arrangements for our clients. We provide fiercely competitive and flexible home equity loan solutions to homeowners of all income and credit profiles, who face different situations, even if they’ve been turned down elsewhere by other mortgage brokers or lenders, including other private lenders.
In Summary
Contact DV Capital for a no-obligation discussion to learn how DV Capital empowers homeowners to make informed borrowing decisions and provides access to home equity loan solutions, helping homeowners access their home equity.
“Experience doesn’t cost, it pays!”