Specialty Mortgages: What Are Your Options In Canada?


Specialty mortgages refer to various types of mortgages that you can take advantage of, depending on your financial situation. The following are some of these special types of mortgage:

No Income Qualifier Mortgage

The no income qualifier mortgage is a type of mortgage designed for self-employed individuals, or those who are not working for any specific company or employer. This type of mortgage allows individuals with little proof of income to qualify for a mortgage application. This mortgage is highly advantageous to individuals who are operating small businesses or working as freelance artists. However, these individuals need to prove that they don’t owe the government any back taxes, in order to qualify for the mortgage. There are specific companies which offer no income qualifier mortgages, and often have specific requirements before prequalification.

Split mortgages

Split mortgages involve splitting your home loan into fixed and variable components. Usually when you get a mortgage loan, you are made to choose between fixed-rate mortgages or adjustable mortgages. However with a split mortgage, a part of your loan is fixed-rate while the other part operates on an adjustable rate. One advantage to this split-type mortgage is that even if variable rates rise, a part of your loan remains fixed, so you are able to cushion a portion of your loan from skyrocketing rates. Homeowners will be better able to budget their finances, and minimize risk by keeping part of the mortgage at a fixed rate.

Equity Take out Mortgage

An equity take out mortgage involves taking money out of the equity of your existing mortgage, so you can use the amount to finance other projects. The advantage in choosing to obtain equity take out mortgage is that you will have access to additional financial resources. You can use the amount to finance investments, purchase another property, invest in a small business, or to cover tuition payments should you decide to return to school. Among the disadvantages to this however, are the huge closing costs involved. When applying for an equity take out mortgage, you need to be prepared to pay for the fees as well as insurance.

Debt Consolidation Mortgage

If you are in deep debt and you want to consolidate all your existing debts into one loan, you can take out a debt consolidation mortgage. This mortgage uses the equity you already have in your home in order to consolidate all your existing loans, from credit card debts to car loans, into one simple, restructured loan. This results in a lowered monthly payment, as opposed to paying all the outstanding debts individually. However, before you can qualify for debt consolidation mortgage, you will need to own a home first and to have some home equity as well. This type of consolidation mortgage can be used to settle student loans, credit cards, car loans, and other debts.

Second Mortgages

A second mortgage is a secure loan taken out against the same property already mortgaged. The loan is normally taken out against the equity you already have in your home. The first mortgage remains the priority however and is normally paid first, prior to channeling any funds to the second mortgage. There are several reasons why you would want to get a second mortgage. You can use the extra cash for home improvements, debt consolidation, and even purchasing additional properties. One disadvantage to this however is that you are risking your home, should you fail to pay the loan back.

Pre-approved Mortgages

Pre-approved mortgages are mortgages that have already been reviewed by mortgage lenders or brokers, taking into account your qualifications such as credit score, income, and other financial information. In these pre-approved mortgages, you are able to find out how much money the lender will be able to approve for you. Before you get pre-approved mortgages however, you will need to start house hunting first and to find a lender willing to give you the financing you need. Some considerations for this mortgage include credit scores, debt to income ratios, as well as the amount of down payment you are able to shell out.

Refinance Mortgages

Refinance mortgages are types of mortgages which set up a new mortgage after the existing or first mortgage has already been settled. People choose to go for refinance mortgages for a number of reasons. Refinancing is actually an excellent option for you if you are able to get a much lowered mortgage rate than your current one. Refinancing is also an excellent means to buy investments or a new investment property. However, there are costs associated with refinancing. Before choosing to refinance your mortgage however, you need to make sure first that you understand the costs and fees involved in the refinancing scheme.

No Down or Zero Down Mortgages

The no down or zero down mortgages are mortgages which do not require any down payment prior to approval. Typically, most mortgages require a down payment as part of the requirement for the pre-approval process. However, the no down type of mortgage processes the loan without requiring any down payment. This type of mortgage is ideal for people who don’t want to cash out when applying for a mortgage loan. Before qualifying for this type of mortgage however, you will need to have good credit, no late payments on any loans, and should have been working for the same company for two years.

Revenue Property Mortgage

A revenue property mortgage is a type of mortgage obtained in order to finance the acquisition of an income-generating property. You can apply for a revenue property mortgage if you are planning to purchase a property for lease. This type of mortgage differs from regular mortgage since it is used to acquire investment properties and not homes. One advantage in choosing this type of mortgage is that you can expect a return on investment in the future. However, you must be prepared to pay for taxes associated with the property once you decide to take out a revenue property mortgage.

Mortgage Line of Credit

A mortgage line of credit refers to a line of credit that allows you to borrow money using the equity you have in your home. One advantage to using your mortgage line of credit rather than going for another loan is being able to borrow up to 80% of the appraised value or purchase price of your property. You can use the available credit to finance a vacation, home renovation, or for investment purposes. However, if you don’t have enough equity in your home, you may not be able to get a loan through your mortgage line of credit. Using the mortgage line of credit rather than getting a second mortgage is also considered to be more flexible.

First Time Home Buyer Mortgage

The first time home buyer mortgage is a mortgage that is designed specifically to cater to the unique needs of individuals who have never owned a home. First time home buyer mortgage advantages include a very low down payment or no down payment at all, subsidization of interest costs, as well as fee restrictions. However, one disadvantage of this type of mortgage is not having access to the best properties available. Also, this loan does not cater to individuals who intend to lease out the home property after getting the mortgage. When taking out this mortgage, you will need to have the home as your actual residence.

New to Canada Immigrant Mortgages

The new to Canada immigrant mortgages are mortgages offered to individuals who have just migrated to Canada or have been residing in Canada for a while and plan on getting their first mortgage. Since a very low down payment is required, or as little as 5 percent of the purchase price, and you don’t need to build credit in Canada in order to qualify for this mortgage, this arrangement has become very attractive for immigrants in Canada. However, you need to be able to establish that you have an excellent credit history in your country of origin, to fulfill one of the crucial requirements of this type of mortgage.

July 20, 2016 |

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