Category: Private Lender

Unpaid municipal taxes

Unpaid municipal taxes: Their consequences and how to keep your property

Is your municipal tax bill overdue? That’s definitely not an ideal situation, but rest assured that there are solutions available to you.

We all know the old adage, “In this world, nothing is certain except death and taxes.” And for homeowners, that includes the municipal property tax. A missed payment can happen to anyone, especially in these economically turbulent times when inflation squeezes every aspect of our budgets. But while skipping a cellphone payment won’t have too many adverse consequences, paying a municipal tax bill late is a whole other matter.

Fortunately, there are solutions available if you are going through a financially precarious period and facing unexpected events.

Each municipality manages this type of situation differently, but let’s take Montréal as an example and look at the outcomes of failing to pay a municipal tax bill.

Contesting municipal taxes that are too high: Action to consider cautiously

It is possible to request a reduction of your municipal tax payments, however, you should know success isn’t guaranteed. The request must be made during a specific time window and your home must be evaluated by a certified appraiser, which isn’t free. An article in the Journal de Montréal (French only) reports that only about half of such requests are accepted.

Even in successful cases, the reduction obtained may not be substantial enough to meet your needs.

Unpaid municipal taxes: Year 1

No reason to panic. Remember that municipal property tax is the greatest source of revenue for municipalities. So, they have no interest in taking overly drastic legal measures at this stage.

If your tax bill for the current year is in arrears (either partially or in full), you’ll get two account statements, which will naturally include penalties and interest fees.

It’s not the end of the world, but it’s better to act now. If your financial problems are ongoing and you don’t have enough liquid funds to pay the city what you owe, then getting financing is critical so you stop hemorrhaging money.

Getting a loan to pay your municipal tax bill

You can contact your bank or credit union to get a loan, but it might be easier and more advantageous to use a private lender. Private lenders don’t have the same constraints as conventional financial institutions, so they can offer financing with terms that are better suited to your situation.

At Financière Victoria, our personalized service lets you get financing that sees beyond a financially tight period. Here are the main criteria to qualify:

The property is a single-family home, a condo, a commercial or income building, or a lot.
The property is located in a serviced urban area.
The financing amount is 75% or less of the property value.

Unpaid municipal taxes: Year 2

The following March, the city will send a notice advising you of the legal steps it intends to take to claim the amount due. It will also initiate the process to sell your property.

6 months before the sale: A formal notice, titled Tax Sale Notice, is sent by mail and a $45 fee is added to the balance.
3 months before the sale: A final warning is sent by mail before the sale of the property is published.
2 months before the sale: The property is listed for public sale. A notice of sale is registered with the Registre foncier du Québec, and fees totalling 5% of the capital (maximum of $2,000) are applied. The information is also sent to the mortgage creditors.

The private lender: A practical solution to keep your property in the event of unpaid municipal taxes

Let’s be honest, if you have made it to this point, it’s quite likely you have several other accounts that haven’t been paid for months. Under these circumstances, it’s almost impossible to get financing from a conventional lender. Since their lending criteria often rely heavily on your credit rating, having multiple late payments on your file will make banks reluctant to grant you a loan.

A private lender can throw you a lifeline so you can catch your breath financially and gain the time you need to get back on top of things.

If you’re in this situation, don’t delay. Make an appointment with a Financière Victoria advisor now.

Second mortgage: Everything you need to know about this type of loan and how to get one

If you’re a homeowner who needs financing, a second mortgage (or second charge mortgage) from a private lender may be the most optimal solution for you.

This alternative to a home equity line of credit is perfect for all those who need cash urgently—be it for an unforeseen expense, major work, debt consolidation, medical bills or a project start-up.

Second mortgage: What is it and who’s eligible?

As suggested by its name, a second mortgage is additional financing that’s taken out from a second lender and guaranteed by real estate that already has a mortgage on it.

There must be a significant amount of equity accumulated on that property. This net value is the difference between the market value of the building and the lot, and the balance remaining to be paid on the first mortgage. To protect lenders—and buyers too—the combined total balance of the first and second mortgages cannot be more than 75% of the property’s market value.

If your residence is worth $500,000 and the capital to be paid back on the initial financing is $200,000, then you could get a second mortgage for $175,000. You would then have a total amount of financing of $375,000 (75%) and a net value on the property of $125,000 (25%).

Unlike financial institutions, which require a credit investigation and have strict criteria on the borrower’s income, private lenders like Victoria Financial give more importance to the transaction’s intrinsic value. A second mortgage may be highly useful to entrepreneurs, self-employed people or others not entirely meeting the criteria of conventional financial institutions.

Poor credit file: Is it still possible to get a second mortgage?

Yes. It is possible for a borrower whose credit file isn’t spotless to get a second mortgage because a private lender’s primary consideration is the net value of the property. A person with a credit rating under 600 who’s looking for a second mortgage may find it very difficult to have their case heard by the banks, but a private lender may be more welcoming.

Obviously, even if a private lender doesn’t have conditions as stringent as the large banks, they must still make sure the borrower is solvent. The main difference is that the private lender has the capacity and the flexibility to adapt to borrowers with a more atypical profile or facing a situation that doesn’t match the service offering of major financial institutions.

What are the major criteria to take out a second mortgage?

With Victoria Financial, borrowers must meet these three major criteria:

Their property must be a single-family home, a condo or a commercial or income building.
The property must be located in a serviced urban area.
The amount of the current mortgage and the second mortgage together must be equal to or less than 75% of the value of the property.

What are the terms and interest rates of a second mortgage?

By offering easier-to-access, flexible financing, the second mortgage lender takes on more risk. For instance, in the event of a payment default, the lender of the first mortgage will be repaid first when the asset is repossessed. For that reason, the borrower should expect to pay a higher interest rate on this type of financing.

However, the second mortgage only requires payment of the interest during the loan period. It’s only at term (generally 1 to 2 years), that the capital must be reimbursed.

So, this can be a valuable financial tool for those expecting a large sum of money in the medium term but who need liquidity now.

Overview of the advantages of a second mortgage

Gives fast access to significant liquidity
Has less strict eligibility criteria (e.g. allows for a poor credit file)
Determining factor for granting the loan is the property’s net value
Only the interest must be paid until the loan comes to term

Poor credit: How a private mortgage can let you own property

Mortgage for bad credit : Tips to get a private mortgage

A poor credit file shouldn’t necessarily keep you from a life project as important as buying property. No one is immune to difficult financial situations, and anyone who has regained control over their budget should have a second chance to get a mortgage. If conventional financial institutions keep putting up roadblocks, I’ll explain how and why a private mortgage can help you achieve your goal of owning real estate.

You are not defined by your credit file

The credit file compiled by Equifax and TransUnion, with their unclear point systems, is a far-from-perfect tool. It’s obvious to me that it is an outdated, if not archaic, system. Certainly, a credit rating can offer a vague idea of your profile as a consumer and borrower, but it only reveals a small part of your history. Not only do we often find mistakes in the file, but the credit rating is calculated from data that can easily distort reality.

Unfortunately, the banks or Desjardins branch advisors no longer have much freedom to judge your actual capacity to repay a mortgage. Instead, it’s the computer that decides.

After talking to several mortgage brokers, I can confirm that many people have suffered for the small errors of their youth or for simple oversights. Some, investors and self-employed people, who are visibly financially well off, can also have trouble getting a loan.

If you have a credit rating under 600 (out of 900), the banks won’t touch you, even if you’ve resolved the situation, earn a good salary and have the down payment needed. You’re just a number, one of the millions of clients—despite what their ad campaigns want us to believe.

The advantages of private mortgage financing

An analysis rooted in reality

Unlike the mortgage advisors of a bank or credit union, a private lender is able to analyze your request for financing based on your current financial reality. They aren’t forced to base their decision on a flawed credit rating to help you buy a home.

In fact, private mortgages are generally approved on the basis of the desired property’s market value. And, naturally, your income and ability to repay also come into play.

Here, we judge the financial transaction on its own merits. Abstract scores, ratings and debt ratios have no impact. To put it frankly, we don’t care if you took a few months longer to pay off your car loan in 2015. And we won’t penalize you because you’re a savvy investor who uses debt as financial leverage.

A fast, simple approval system

While conventional mortgage lenders love paperwork and endless procedures, private lenders value efficiency.

Just take a few minutes to fill out an Online Financing Application to determine the amount you could get.

A request for financing that doesn’t impact your credit file

Did you know that just submitting a financing request with a bank can affect your rating?

It’s true. If you approach several institutions for a loan, this is considered a worrisome sign by the Equifax and TransUnion credit agencies, who can reduce your credit rating.

But that’s not the case for an alternative financing solution with Victoria Financial, because no credit investigation is required at the time of the request for financing.

Flexible terms, according to your needs

The repayment terms of conventional mortgages can be restrictive. As absurd as this sounds, you may not be able to pay part of the interest in advance to reduce your monthly payments.

Since private lenders are not governed by strict corporate policies, they have the freedom to offer terms that are adapted to your needs, such as reduced monthly payments or the opportunity to pay the interest in advance.

Criteria to get private financing

Eligibility criteria vary from one lender to another. Here are the main criteria at Victoria Financial:

The property must be a single-family home, a condo or a commercial or income building.
The property must be located in a serviced urban area.
The amount of financing must be equal to or less than 75% of the value of the property.

This last criterion of course implies that you have accumulated a comfortable sum to invest in a property. As I mentioned earlier, even if you’ve made a big effort to save and show budgetary discipline, the banks still risk ignoring you for as trifling a reason as an old cellphone bill that wasn’t paid. And if you’ve had the misfortune of going through a difficult period in the last few years that forced you into debt consolidation, consumer proposal or bankruptcy, your odds of getting a mortgage from a conventional bank are practically zero.

Thankfully, the private lender has the vision needed to recognize that you are not defined by your past.

Takeaways

I admit I’ve been a bit harsh with the banks and credit unions. But I think it’s fair enough when we see how they use their virtual monopoly to decide your future. They obviously have a role to play and are a must for those who want to only put down 5% on a property.

But if they keep putting wrenches in the wheels of your life plans, it’s time to consider a private mortgage.

It doesn’t cost anything to explore this solution. And you won’t have to worry about it making a negative impact on your credit file.

Newcomers to Canada: How to get a mortgage and invest in real estate

If you settled in Canada recently and are having difficulty getting financing from large banks, then you might want to look at private lenders for an effective solution.

It’s clear that immigrating is difficult and may require many sacrifices. And it’s frustrating for a newly arrived Canadian who has the financial means to become a property owner or who wants to invest in real estate to have to start back at square one and wait several years before being eligible for financing.

A private mortgage overcomes this obstacle and is simpler, faster and more flexible.

How to get a mortgage without a credit file in Canada

New Canadians who want to own property or launch into real estate investment quickly find out that it may be difficult, or even impossible, to get a mortgage loan from a conventional financial institution. The Canadian credit agencies, Equifax and Trans-Union, which are responsible for collecting credit information, do not consider data from other countries. And since the large banks generally demand a credit file with a history of several years, new Canadians are refused a mortgage, even if they are prepared to make a substantial down payment.

And people coming back to Canada after several years out of the country can also face the same problem.

Thankfully, there is a solution available to people in these situations who want to invest in real estate without having to wait years to rebuild a new credit file here. Since private lenders, like Victoria Financial, are not burdened by the heavy administrative requirements of the large banks, they can work with people who do not entirely meet the typical investor profile.

Private mortgage: A simple, fast and flexible solution for new Canadians

With a private lender, each loan or mortgage is judged on its real value. When you submit a request to a private lender, it’s not a computer that will decide whether to accept it and what the terms will be, as is often the case with the major banks. With a private lender, you deal with a real person.

Since private lenders have more flexible financing policies, they enter into a direct and tangible business relationship with the borrower. This is a big difference from institutional lenders, which require a long credit history as well as an impressive amount of forms, proofs and paperwork.

How do private lenders offer an effective solution to new Canadians and entrepreneurs?

For a new Canadian whose assets are still partly in their country of origin, the big banks’ requirements become a huge puzzle. Even if the person has a down payment of 25%, they must still make sure the amount is in Canada before even beginning the loan request. However, a private lender can adapt to the entrepreneur’s situation. This is where the human side of private banking makes a difference.

The same goes for proof of income. We know that many newly arrived Canadians are entrepreneurs. Unlike salaried employees with stable revenues, these businesspeople have a completely different financial reality. Once again, the private lender can demonstrate good judgement and assess the borrower’s actual solvency, even when a portion of their assets are outside the country.

In short, financial institutions like RBC, NBC, CIBC, BMO and Desjardins, generally seek to serve a typical clientele. These corporations simply don’t have the ability (or the willingness) to adapt to the needs of more niche clients, like new Canadians and entrepreneurs, who want to invest in real estate.

What are the criteria for a new Canadian to qualify for mortgage financing?

To qualify for financing from Victoria Financial, it’s not essential to have a credit file or proof of stable revenue or to fill out tons of paperwork. Naturally, there are some administrative conditions to meet, but here are the three criteria that really matter:

The property is a single-family home, a condo, a commercial or income building, or a lot.

The property is located in a serviced urban area.

You have a down payment of at least 25%. In other words, the private mortgage can cover up to 75% of the property value at the time of purchase.

hypothque pour nouvel arrivant

How to get a mortgage for your commercial building

how-to-get-a-mortgage-for-commercial-building

Key stages of getting a commercial building mortgage

Because it isn’t always straightforward for small businesses to obtain mortgage financing, private lenders offer several solutions that can help finance their purchase of a commercial building.

An SME may prefer to own its work premises to avoid being subject to another owner, burdensome lease conditions or the possibility of the lease not being renewed. Also, by owning its own building, the business will own all the leasehold improvements it invests in. And let’s face it, being a master of your own destiny is one of the main incentives for becoming an entrepreneur! However, unless the SME has access to significant liquidity, an entrepreneur who wants to set up a commercial building will have to obtain mortgage financing.

Commercial mortgage loans differ greatly from those offered to individuals for a residential property. Businesses wanting to own and occupy a building may face several obstacles when applying for a conventional loan from a large bank or credit union.

The disadvantages of getting a commercial mortgage from a conventional bank

Harder to access and less advantageous than a residential mortgage

Quebec’s major banks and Desjardins are large organizations that hold considerable power. In real terms, this means they often set the rules of the game. Companies must therefore expect to pay higher interest rates than residential loans and accept loan terms that are constrictive and sometimes even harmful to their growth. For instance, the renewal of a commercial mortgage loan may be conditional upon the business submitting audited financial statements and obtaining positive financial results.

Financial institutions often turn their backs on whole industries and young SMEs

When large financial institutions decide it’s beneficial to avoid certain industries, there is nothing that forces them to do business with companies from those industries. For that reason, entrepreneurs in some sectors, particularly cannabis cultivation and foodservice, face a lot of refusals from banks when trying to get financing for a building.

Very young SMEs and start-ups also often find that traditional lenders are not interested in them because their revenue history is too recent or because of insufficient profitability.

Banks show little flexibility about businesses’ needs and develop restrictive criteria

Things get even more complicated when, for tax or other purposes, the company’s operational division is separate from the one owning the commercial building (company and main brand on the one hand and a Quebec incorporated company on the other).

In short, major financial institutions have the upper hand, and there isn’t enough competition between them to incite them to create an appropriate offering for all businesses. They are even less motivated to offer services that are adapted to the specifics of each entrepreneurial project and its fiscal structure.

The benefits of commercial mortgage financing from a private lender

Because private mortgage lenders are not burdened by heavy bureaucracy and face greater competition, they are more flexible and more willing to work with the entrepreneurs cast aside by the big banks.

What follows are the main advantages of getting private mortgage financing to buy a commercial property.

Solvency requirements are less strict with a private lender

It can happen that your company is going to get a no on mortgage financing before you even set foot in the banking adviser’s office. And in fact, that advisor often has little control over whether or not your request will be accepted. If, for some reason, your application doesn’t match the financial institution’s computerized analysis grid, the likelihood that an employee at your branch can do anything about it is very slim.

When private lenders receive a request for a loan to purchase a commercial building, they look at the real value of the building that will be mortgaged. Yes, solvency is still a significant criterion, but this type of financing considers a multitude of factors, which are often more relevant and tangible than those of the big banks.

Unlike traditional lenders, a private mortgage lender will take time to carefully and thoughtfully analyze all the risk factors in a project to estimate its real potential for success.

A lender-borrower relationship based on concrete factors

Like you, the private lender is an entrepreneur and an investor. The private lender’s mission is mainly to recognize projects that have potential so they can contribute financially to them.

Like you, the private lender is a risk-taker. They’re not there just to do data entry, fill out forms and demand endless documents. In a way, the relationship between a private lender and a borrower is akin to one of the business partners.

Just like you, the private lender knows time is money. It has nothing to gain in making you wait as the larger banks will often do. The private lender’s analysis is comprehensive, efficient and diligent.

Flexible terms and conditions for a win-win mortgage solution

Let’s face it: the financial statements of a major bank or Desjardins won’t be impacted if your entrepreneurial project fails. But the private lender, on the other hand, only does business with a limited number of borrowers, so it has every interest in your company achieving its goals by purchasing a commercial building.

This is why getting mortgage financing from a private investor can offer terms for the payment of the interest and the repayment of capital that are adapted to your company’s needs and situation.

Takeaways

Despite their many shortcomings, institutional lenders can still meet the needs of some companies. But if your business falls outside the box, or if you’re looking for commercial mortgage financing custom-designed and based on tangible aspects, then a private lender will generally offer more interesting solutions.

commercial mortgage

Private mortgage when buying a house: an option worth considering

Buying a house with a private mortgage: Uncover your options

Buying a house can be a very exciting process. But it can also be a hard goal to reach when you’ve had financial issues and banks have turned you away because of debt.

Fortunately, private lenders offer an alternative source of financing that can be very useful for home buyers.

How do private lenders work?

They’re businesses or individuals that have significant funds available and extensive experience in creating quick, simple and flexible financing solutions.

When , turning to a private lender is a completely viable way of funding projects like buying a house. For their protection, these lenders usually offer first mortgage or second mortgage loans on your existing property.

Banks vs. private lenders

A private mortgage is different from a bank mortgage.

Before lending you money, banks will look at what down payment you can make and examine your debt ratio, assets and liabilities, annual income and credit history.

These requirements often discriminate against people with a less-than-spotless financial record.

Private lenders on the other hand may not even look at these things and will show much more flexibility. For instance, they may calculate the amount of your loan based solely on the purchase price, and they can offer you terms that banks won’t.

How private lenders can help you buy a house

Private lenders start by reviewing your plan. They will invest their money in exchange for interest on the loan, ranging between 12% and 15%, depending on the situation. This interest rate may seem high compared to what banks offer, but private lenders are considered a temporary and transitional option. And the cost is definitely worth it in most cases.

Once you get the go-ahead for your purchasing plan, a notarized contract between you and your private lender will be drawn up. Under normal circumstances, private lenders offer loans for up to 75% of the home or building’s market value, with terms of 3 to 36 months.

As with any loan, it’s critical that you discuss the conditions from the very start: how the interest will be paid back, what the terms are in the event a payment is missed, whether you can repay early, etc.

When to consider private lenders for a home purchase

Private lenders are useful in specific situations like the following:

Your credit rating is bad

Before banks decide whether to lend you money to buy a house, they will analyze your . Private lenders won’t. Instead, they’ll look at the market value of the property you’re mortgaging.

You are considered too high-risk

Banks can refuse to finance the purchase of a home if they feel you pose a high level of risk, if your borrowing capacity is too low or if you don’t have enough cash.

Private lenders can let you move forward with your plan to buy a house even when these aspects of your financial situation are not favourable, because they base their decision in part on the mortgaged property’s market value.

You want to flip a property

Real estate flips are increasingly popular with investors. But banks don’t like them, especially when the person asking for the loan is doing their first flip.

For real estate investors wanting to flip a property, the problem isn’t always their credit history but their maximum borrowing capacity. However, private lenders are open to financing projects that have been refused by banks.

Another thing to consider is that a bank mortgage entails a long, formal process. But getting money from a private lender to buy a property for flipping is quick. That makes it easier for you to jump on an opportunity before it disappears from the market.

Other situations when private lenders offer an advantage

Here are other situations where private lenders may be beneficial in financing the purchase of a house:

You’ve had a bankruptcy
You don’t have enough income but do have a down payment
You are
You want to buy a nonconventional property that banks refused to finance

In all cases, the minimum down payment is 25% of the purchase price.

Private lenders help make house purchases a reality

Private lenders offer flexible loan conditions and rapid financing. If the banks have refused to approve your loan request to buy a house, you may want to consider private lenders—a completely valid alternative solution.

Your private lender will do everything in their power to help you buy your house. Why not contact a private lender now to talk about your plans and get answers to your questions?

You can also fill out our Online Financing Application Form. We’ll let you know within 24 hours whether you meet the conditions to get a mortgage from us.

Why consolidate your debts: the solutions available to you

Why consolidate your debts with a private mortgage lender?

Obtaining financing with a bank or a traditional financial institution can be complex because of the eligibility criteria which are sometimes difficult to meet. Demonstrating a great credit history and providing all the (many) required guarantees is not within everyone’s reach, especially in a situation of over-indebtedness.

Fortunately, there is an easy-to-access solution to consolidating debt. In this article, our team tells you why you should consolidate debt with a private mortgage.

What does it mean to consolidate your debts?

Most of us have debt here and there. One loan here for the purchase of a snowmobile, another for the purchase of a television, and another for last year’s honeymoon.

All of these individual loans have an interest rate, monthly payment, and repayment period that differ depending on the loan attached to it or the lender who granted them. Needless to say, the proliferation of personal loans can easily complicate the financial management of a household.

Then comes debt consolidation. But what exactly is debt consolidation? Simply put, debt consolidation consolidates all of the debt you have – cards and lines of credit, utilities, and other consumer goods loans – into one loan with one payment that you then make to your lender according to the terms set out in the payment agreement.

How can you consolidate your debts and consolidate your loans?

To consolidate your debts, you just need to take out a debt consolidation loan. The debt consolidation loan is available from banks and traditional financial institutions. However, in a situation of over-indebtedness, it can be very difficult, if not impossible, to obtain a loan from them when you demonstrate a precarious financial situation and have several personal loans.

Before granting a debt consolidation loan, banks and traditional institutions will typically require:

a debt ratio below 50%;
an adequate credit history;
stable employment and income for a certain period;
various other guarantees and sometimes an endorser.

How you see it, getting a debt consolidation loan from banks and traditional financial institutions is no easy task.

The most attractive option is probably with the private lender, which also offers the debt consolidation loan. A private lender is generally more flexible and typically offers solutions that traditional banks and financial institutions refuse to offer.

The private lender is also generally less demanding. In doing so, many people wishing to consolidate their debts find it advantageous to opt for the private lender, as the qualification process is quick and easy. Generally, a private lender will only require 3 things before granting you a debt consolidation loan:

whether you have a single-family home, a condominium, a commercial or income property;
that your property is located in an urban area and served;
that the sum of your current mortgage and that of your new loan is less than or equal to 75% of the value of your property.

That’s all. Interesting, isn’t it?

The advantages of consolidating your debts with a private lender

As we have just seen, consolidating debt with a private lender is a less demanding process. Let’s take a look at some of the benefits of applying for a debt consolidation loan from a private lender.

Reduction of the debt ratio

If you are in debt, you may sometimes default on your monthly payments. Failure to pay off a loan or credit card debt on agreed terms can weaken your overall financial picture.

By choosing to use a debt consolidation loan, you pay off your creditors in one payment and lower your credit utilization ratio. In the eyes of credit agencies, you therefore become a good payer. And in turn, this increases your chances of getting bank refinancing down the road.

Compared to a personal bank loan, the debt consolidation loan taken out with a private mortgage lender will not show up with major credit bureaus, like Equifax and TransUnion.

One-off monthly payment

By consolidating your debts with a loan, you will simplify your financial management because you will only have to pay off a single creditor rather than several creditors. With the debt consolidation loan, you will only have to make one monthly payment. Easy as 1-2-3.

Favorable interest rate

Even though the amount you owe the same after taking out a debt consolidation loan, the lower interest rate attached to that loan will potentially save you thousands of dollars in interest charges.

For example, the average interest rate on credit card debt is around 20%. Sometimes it can even be as high as 29.99%. However, the interest rate on a private debt consolidation mortgage is significantly lower.

The debt consolidation loan: to the rescue of your debt

The debt consolidation loan is an easy way to consolidate your personal loans under one single loan. It is also an interesting solution for reducing your debt ratio and benefiting from a lower interest rate, which is much more advantageous.

To ease your financial management and improve your credit rating, we therefore invite you to turn to the debt consolidation loan if you assess that it suits you and that you meet the eligibility criteria which, let’s face it, do not are not demanding.

To learn more about the debt consolidation loan or to verify your eligibility, contact us. Our team will be happy to assist you.

Mortgages: An attractive option for renovation

Is it a good idea to finance renovations to your house using your mortgage?

Quebecers love to renovate. And in an ideal world, we would all have the cash flow we need to make the desired property improvements without having to borrow. However, this is not always the case.

Fortunately, your private mortgage can help you with your home improvement plans. Here’s how.

Mortgage refinancing

When you already own a home, you can use mortgage refinancing to finance your renovations.

This type of loan allows you to obtain additional funds quickly using the equity in your property.

Note that the sum of your current mortgage and the additional amount desired must be less than or equal to 75% of your property’s market value.

Carrying out renovation work through mortgage refinancing is advantageous on two levels. First, the interest rate on the refinance loan is relatively low – significantly lower than that on a credit card, for example.

Second, this refinance loan, which can be either fixed or variable rate, can be repaid over a much longer period than a personal loan.

Financing your renovations at the time of home purchase

If you are about to acquire a new home, you can choose to build the cost of renovations directly into the initial mortgage you apply for.

Using this method, the eligible purchaser can borrow up to 80% of the projected value of the house following the renovations.

This type of financing has many of the same advantages as mortgage refinancing: payments are amortized over several years and the interest rate is also very advantageous.

To obtain this type of loan, you must be able to justify the cost of the anticipated renovations when applying to your financial institution. And once the renovation work is complete, you must notify them of its completion and/or present a post-work inspection report, as well as meet all other prerequisites.

Renovation financing can be accessed even with a down payment as low as 5% of the property’s purchase value.

A second mortgage to finance renovations

If you are a current homeowner and have good equity available on your property, taking out a second mortgage can be a great option for financing your renovations.

This type of financing, if provided by a private lender, does not require a minimum credit score or proof of income. Financing can be granted very quickly – no need to go through the lengthy process of traditional banks.

Note that the sum of the first mortgage loan and the amount required for the renovations must be less than or equal to 75% of the property’s market value.

Other methods for financing renovations

Mortgage refinancing and financing at the time of purchase are not the only options available for financing renovations. Other ways include:

a home equity line of credit
a personal loan
using your credit card

Each of these methods has its own particular advantages and disadvantages. Contact us for more information.

How to assess the relevance of your renovation project

Before embarking on any renovations, it is always prudent to consider the following criteria in order to determine whether the work will bear fruit:

the urgency and importance of the renovations
the cost of the renovations
the added value to the property once the renovations have been carried out
the time investment required by the renovations

Mortgages to the rescue at renovation time

Mortgage refinancing and financing at time of home purchase are great tools for financing renovations to your home. Whether it is for maintenance, repairs or improvements to your home, these two financing options offer advantages that are hard to resist.

We encourage you to discuss your renovation financing needs with your private mortgage lender or financial institution.

Is taking out a second mortgage a good option for me?

Second mortgages are the most popular product at Victoria Financial. The main reason our customers choose this product is simplicity. There is no need to modify the mortgage you currently have with your banking institution. This loan is simply added as a second ranking mortgage on your property. Here are the answers to the most frequently asked questions on this matter.

What documents do I need to provide?

When applying for a second mortgage with a private lender, you will need the following the documents, all of which you probably already have on hand:

2 pieces of identification;
a void cheque for the transfer of funds and monthly payments;
a mortgage statement for your current mortgage;
the certificate of location for your property (if you have it);
a copy of your home insurance.

Does my income or credit score impact my chances of getting a second mortgage?

With Victoria Financial, the decision to grant you a second mortgage is based solely on the equity available in your property. For most Quebec cities, we offer financing for up to 75% of the market value of a property. So, if the balance on your first mortgage plus the amount requested on the second mortgage does not exceed 75% of the value of your property, your chances of being approved are excellent. You can use our mortgage calculator to see the loan amount you could be eligible for.

Why not just take out a personal loan?

If you qualify for a personal loan with an interest rate of under 10% with a traditional banking institution, go for it! That option will definitely be cheaper than a private mortgage loan.

However, if the only option available to you is a personal loan at an interest rate of 19.99% or above, it will definitely be cheaper to go with a second mortgage.

In addition to usually having a lower interest rate than personal loans, a second mortgage with Victoria Financial will not appear on credit reports, so your credit rating will not suffer.

How do I pay off my second mortgage?

La grande majorité de nos

The vast majority of our clients take out a second mortgage in order to consolidate their debts. Once their debts are paid off, they focus on improving their credit so they can qualify for global refinancing with a traditional bank within 12 to 36 months.

Others keep their loan for a longer period, depending on their priorities.

How can I apply for a second mortgage?

Apply online via our website or call our underwriting department at (877) 220-7738, extension 1.

Everything you need to know about the new Canadian mortgage rules introduced in 2020

COVID-19 has exposed the vulnerability of Canadian financial markets. To protect the country’s economy and the housing market amid uncertainty, this year the Canada Mortgage and Housing Corporation (CMHC), the country’s leading mortgage insurance provider, changed its criteria for new applicants seeking insured mortgages.

In this article, we give you an overview of these new mortgage rules.

The new Canadian mortgage rules

As of July 1, 2020, the requirements for obtaining an insured mortgage loan in Canada are no longer the same. These new rules relate specifically to new loan applicants, who must have their mortgage insured by CMHC when their down payment is less than 20% of the total purchase price.

GDS and TDS ratios

The first new mortgage rule concerns the gross debt service (GDS) ratio and the total debt service (TDS) ratio.

The GDS, which is the percentage of the loan applicant’s gross income that goes toward paying the mortgage (principal and interest), property taxes and condominium fees, is now capped at 35%.

The TDS, which combines the GDS and all of the loan applicant’s other unpaid debts, is now capped at 42% of the applicant’s income.

Minimum credit score

The second new mortgage rule concerns the loan applicant’s credit rating: the new rules have raised the minimum credit score to 680.

Non-traditional sources of down payment

The third new mortgage rule concerns non-traditional sources of down payment. As of July 1, 2020, down payments from non-traditional sources like a personal loan, loan granted by a family member, etc. are no longer accepted.

Why were these new mortgage rules introduced?

These new mortgage rules were introduced in anticipation of the possible economic impacts of COVID-19 on the Canadian housing market. These measures are also intended to protect buyers and reduce risks to governments and taxpayers.

The new rules are also intended to promote stability in the housing market, and to reduce excessive demand and the growth in house prices.

In short, the new Canadian mortgage rules aim to reduce the risks for new buyers whose loans must be insured in a difficult economic environment.

What are the options for the new insured mortgage applicant?

So what are the new buyer’s options when they want to get a mortgage in this context? Based on the new Canadian mortgage rules, they could:

come up with a down payment equal to or greater than 20%
improve their total debt amortization ratio
explore other down payment options
improve their credit rating

One of the other two mortgage loan insurance providers in Canada (Genworth and Canada Guaranty) may also be an option if the applicant’s bank or financial institution works with these providers. These companies have different eligibility criteria.

The new Canadian mortgage rules – toward a better future!

Within the next 12 months, CMHC forecasts a 9% to 18% drop in house prices. These new mortgage rules will protect new homebuyers and ensure greater stability in the Canadian housing market.

To learn more about mortgage financing, we invite you to browse the blog section of our website. And if you have any questions or would like to discuss your home buying project with our team, please contact us.