Key Considerations for Buying Rental Investment Property
The dream of owning a rental investment property in BC, with monthly cashflow and potential increases in value year after year, is the desire for everyone I know. The idea of sitting back and enjoying the benefits of an investment in real estate may certainly offer peace of mind to you and your loved ones. However, the realities of property ownership in BC can also have enormous challenges that one should be aware of. There are many costs and expenses associated with owning a rental property which may deter investors from engaging. With the numerous expenses one may anticipate, the profit to the investor may quickly be diminished, making the entire investment not worthwhile. Furthermore, there are various types of rental properties to consider investing in, which will also determine the benefits or challenges. The list goes on and on.
Whether you live in the Greater Vancouver area or Lower Mainland, Vancouver Island or up in the Interior of BC, it is important to be aware of the costs to consider when purchasing a rental property in British Columbia. Here is a comprehensive list of the costs and expenses to consider for an investment rental property in BC, along with some potential challenges:
12 Costs to Consider When Purchasing a Rental Investment Property
An investor must set aside a sizeable down-payment in today’s market to qualify for & justify the purchase of an investment rental property in BC. With property values in the province being so high, it will require a large down-payment to bring the operating costs down to a manageable level to be debt serviceable. The potential investor also wants to ensure there is enough revenue each month to cover costs and avoid having to put their own money out of pocket to help with expenses.
Mortgage Payment & Interest Cost:
Any loan or mortgage you must carry on the property will have a monthly payment that you will have to account for. This mortgage payment usually makes up the single largest monthly expense for the investor. Interest rates change and so will the allocation of principal and interest with each monthly mortgage payment. It is important to structure a cost-effective mortgage with the investment property. Ideally, the investor would desire to minimize the interest expense and rapidly pay down the mortgage.
Property taxes are a fixed expense due each year. The amount can vary based on the ever-changing municipality and market conditions in British Columbia.
Strata Maintenance Fees:
Another fixed monthly expense for strata property owners. Used to assist with general maintenance upkeep, strata services, contingency reserves - this is a monthly expense that one can never anticipate being reduced. Strata fees only seem to increase after time and never decease. Furthermore, with a strata property comes the potential for future special assessments. Should there be major issues with the strata development such as water damage (ie. “Leaky Condo”), the out of pocket expenses can be crippling.
You must have insurance to cover the property from perils and liabilities. Having to maintain insurance is another fixed expense and extremely important to have when purchasing a rental property in BC. The investor needs to ensure that the property investment is fully protected from the unexpected.
Realtor & Leasing Agent Fees and Commissions:
Should you seek the services of an agent to help with marketing and managing your investment rental property in BC, there will be a cost for these services. The agent will use their skills and tools to find a suitable renter for your property. The agent will assist you in qualifying the potential applicant to ensure you have a great candidate to rent your property. The agent may also offer to collect the monthly rent and handle general inquiries to satisfy any renter demands on your behalf. The property investor would be insulated from having to deal with any renter issues. All of these agent services, plus many others, come with a fee. The basic average property manager fee may range from 7-10% of the gross monthly rent/lease.
Maintenance & Repairs:
These expenses are not fixed but can arise at any time, unexpectedly. When this happens, immediate action must be taken, and the expenses are incurred on the spot. Typically, the property owner must address plumbing or electrical issue, appliances that need replacing, a new roof or fence, etc. The property undergoes wear and tear so there will be ongoing maintenance required. There may also be the issue of an unruly tenant - one who intentionally damages and vandalizes the property. The repair work in cases such as this may be significant.
Unless the rental agreement states otherwise, the property investor must account for the costs of heat, water, electricity, hydro, cable/internet.
If the property owner opts to waive the services of a rental agent, then the costs of finding a suitable renter falls on the investor. The actual monetary cost of running ads and the time spent on interviewing potential renters can be immense. This is true especially for the new and inexperienced property investor.
Accounting Fees & Costs:
Strict accounting records must be kept and maintained for the investment property. This to highlight the revenues, but also the various costs and expenses to minimize the tax liability to the property investor. As a result, in most cases the property investor must employ the services of a capable financial service provider to help with tax return preparation.
Legal Fees & Costs:
These costs would be incurred for such items as preparing rental contract/leases, dealing with overdue rental collections or any other legal issues. Legal fees are also incurred when an investor purchases or sells a property in BC.
The cost of keeping the yard and gardens maintained and manicured are another expense for the property investor to consider. This may only be a seasonal expense, but regardless, it can be expensive and time consuming to manage.
The information provided above is meant to offer an overall snapshot of the types of expenses a real estate investor may anticipate when pursuing a rental property in British Columbia. The rental investment property market in BC is vast and so are the numerous options and challenges that come with it. It is strongly recommended that prior to engaging and snapping up that investment property, that you seek the services and advice of a real estate expert. A real estate professional will guide and offer you the tools and important information to help you make the right wise decision.
If you are a current homeowner in Vancouver, Surrey, Burnaby, Abbotsford, or elsewhere in the Lower Mainland and are looking to pursue an investment rental property, speak with us today should you have any questions. Similarly, we are also serving clients in Kelowna and the Okanagan Valley who pursue investment rental properties in the Interior of BC. For more information about how you can leverage your existing home equity to pursue an investment rental property, get in touch with us today by clicking here or giving us a call at 604.620.2697.
If you are thinking about purchasing raw land in British Columbia, Canada for the purpose of building a house, recreational property or for investment, there are many factors and costs to consider. The cost of servicing the land for construction and to build out may be quite significant. Furthermore, if you are holding the land as investment, one should be aware that this is a risky and speculative type of business venture. Those who do purchase raw land and make money from it tend to be sophisticated real estate experts, who understand the mechanics and potential industry circumstances. The purchaser must have a clear and objective focus in terms of goals and the inherent risk. As a result of numerous risks surrounding raw land, the potential rate of return on your investment may be extraordinary.
Let’s go over some of the pros and cons of purchasing raw land and how a private mortgage loan in BC can help you achieve your investment goals.
Advantages of Purchasing Raw Land in British Columbia:
Disadvantages of Purchasing Raw Land:
Private Mortgage Loans for Raw Land Purchase in British Columbia
If you are a current homeowner in BC and are considering making a purchase of raw land, it’s important to understand the advantages and disadvantages of this type of investment. If you have any questions or concerns regarding the purchase or financing aspects of raw land, please contact a mortgage specialist to better understand your options. Whether you live in Surrey, Langley, Abbotsford, Kelowna, or elsewhere in British Colubmia – get in touch with us today to learn more about how Silver Hill can help you achieve your goals with a private mortgage loan.
Defaulting on your mortgage may have serious consequences. If the borrower breaches any terms of the mortgage or misses regular payments, the lender has many firm remedies they may exercise to protect their investment. Making your regular payments on time and keeping within the terms of the loan will spare you potential foreclosure and plenty of grief.
What are mortgage arrears?
As in any contract, your mortgage agreement will outline all the terms and conditions related to your loan, specific to you. You fall into mortgage arrears when you start falling behind on your payments – for example, missing a mortgage payment. Missing mortgage payments go against the terms agreed upon when you initial took out the loan, and is to be avoided as much as possible. Any breach of the terms and conditions by the borrower may trigger the lender to take corrective action.
Why do people fall into mortgage arrears?
Some of the most common reasons for default would be for:
Given the above reasons, one may find themselves in a difficult situation. However, there are also many options for the borrower to consider if they are in default of the mortgage contract.
How do I get out of mortgage arrears?
Some of solutions for those currently behind in mortgage payments include:
Due to the fact that mortgage finance makes up the bulk of real estate transactions, there is a greater likelihood of challenges and problems. Borrowers are faced with high unemployment, failing businesses, times of recession and so many unexpected things in life, which may result in financial turmoil. There are several solutions for the borrower if behind on their mortgage.
Private Mortgage Lenders for Bad Credit
It would be wise to speak with a mortgage broker to get your options laid out for you if you are faced with mortgage arrears and imminent foreclosure. If you have bad credit and are looking for private mortgage lenders, and live in Surrey, Vancouver, Abbotsford, or elsewhere in the Lower Mainland, give us a call today at 604.620.2697. You don’t have to do this alone – let’s discuss your options.
If you are considering purchasing an investment property in Kelowna, Vernon, Kamloops, or elsewhere in the Okanagan Valley or Lower Mainland, with the intention to renovate, there are key items to seriously consider. Others may consider to invest in properties in the Metro Vancouver area, spanning Vancouver, Burnaby, Langley, Surrey, or the tri-cities – but the planning remains fairly the same when looking into renovating. As you know, real estate investing in Kelowna, Vancouver, or elsewhere in BC is not cheap by any means and requires some considerable planning. The process and plan should consist of selecting the ideal property, renovating, and preparing it for rental or to sell for a profit.
Top Things to Consider When Purchasing an Investment Property for Renovation
When you are in the process of selecting a real estate investment property for renovation in BC, here are 6 main factors to focus on:
The location and neighbourhood should be pleasant and attractive. The neighbourhood should be safe, crime free and preferably family oriented. Whether you are looking for a real estate investment property in West Kelowna, or a townhouse in Surrey, the location within those cities definitely matter.
Renovation Permits & Requirements
The property should be easy to renovate, meaning that there is no need for many permits and applications required from the city authority. Depending on if you are buying a rental or investment property for renovation in Kelowna, Kamloops, Vancouver, Victoria, or Langley – be sure to understand the different requirements from the city authority to renovate as smoothly as possible. The least amount of resistance from any third party and streamlining the process is best. Find a house which has as little major renovation obstacles to overcome as possible. Try and avoid situations involving faulty issues with foundation and building structure.
Access to Amenities & Walking Score
Ensure that the property has access to as many amenities as possible. These amenities would include shopping, transit, schools, and even health centres and hospitals. It is a benefit having many of these amenities as close to the residence as possible, whether you are looking to rent the space out or sell it for a profit.
Avoid properties which are very isolated. Perhaps the price point may be far less for properties further out of major towns and cities, but they are not always as desirable. This is for the obvious reason, that location is what sells and makes the property extremely desirable. The best location typically gets the best results, which should be a factor to consider when investing in property in BC.
Incorporate good quality and noticeable craftsmanship in the renovation work to be done. A visible appreciation and acknowledgement of the work completed should be achieved. Take pride in the renovation and ensure you have the work done right by a professional. Avoid cutting corners and try not to cheap out on certain aspects if you can avoid it.
Seek out a location which has plenty of new construction and renovations on going. The construction activity and atmosphere will complement the property you are renovating. It will resonate an appealing image that you are beautifying the property to come.
Renovating a property in BC is an exciting experience for many, but you want to make sure that you are familiar with the process. If you lack the experience but have the desire, you should educate yourself and seek out expert advice. You may consider connecting with several contractors and have them assist with the planning and give you independent quotes for the work to be done.
If you are looking to get started with renovating your property but are having challenges with the financing, and are located in Kelowna, Vancouver, Surrey, Langley, Victoria, or elsewhere in BC - get in touch with us today and we can walk you through the process of leveraging your home equity to finance your home renovation.
If you are looking to pursue an investment property for renovation to later rent out or sell for a profit, we may also have a private mortgage solution for you. Leave a comment below or get in touch with us today at 604.620.2697 to discuss your options.
Appraising a property has so many benefits, since no two pieces of real estate are identical. If you intend to buy or invest in real estate in Vancouver, Surrey, Kelowna, Victoria, or elsewhere in BC, finding the right appraiser to support in the process is important to keep in mind. Professional appraisal companies prepare the reports and offer an opinion of the estimated value based on several market and subject property details. An appraisal report is highly dependent on the expertise and objectivity of the property appraiser, and the assumptions they make.
Benefits of a Home Appraisal
There are numerous benefits of having a professional appraisal prepared. Reasons for having an appraisal report prepared would be:
- to determine property value for a potential property purchaser as he contemplates an offer to purchase
- to determine property value for the mortgage financing requirements by a mortgage lender
- to determine property value for house / building & property insurance
- to determine property value as you try and figure out an asking price for your property
- to determine property value if you appeal your property tax assessment with the municipality
- to determine property value as you deal with family estate matters such as death or divorce
- to determine property value for potential property expropriation purposes
- to determine property value for any court litigation purposes
- to determine property value for capital gains taxation
If you seek to get an appraisal completed in BC, ensure you search out appraisal companies who have their professional designations and are regulated by their associations.
Two appraiser designations to be on the lookout for when looking for a property appraiser are:
It is extremely important to find the right appraiser especially if you intend to invest in real estate. Need more info on property appraisals or pursuing a home equity loan? Get in touch with Jim today for a friendly chat at 604.620.2697.
Are you looking to purchase a home? Exploring your real estate options in Vancouver, Surrey, Kelowna, or elsewhere in BC? Whether you are looking into buying a summer home in the Okanagan, or purchasing an investment property in the Lower Mainland, it’s best to do your research and understanding the 5 main areas that affect real estate prices. Let’s take a look!
Location, location, location. This is one of the most significant factors which influence the price of real estate in BC. You could be looking at purchasing a property in a certain neighbourhood of Vancouver or Surrey, or perhaps a summer property in Kelowna or Vernon, but essentially – the more desirable the location, the greater the value and pricing. As you assess the location of real estate, it is important to factor in amenities, appearance, centrality, along with potentials for development and expansion. It is often said that value-wise you are likely better off having and average house in a great location, than having the best house in a poor location. Further, location is one of the most determining factors in resale value and ability. Property location creates desirability, and this desirably creates an unwavering demand for such real estate.
Supply & Demand:
The amount of supply vs the demand for housing will certainly affect the price of real estate in BC. As previously stated, location creates desirability, desirability creates demand, and this demand raises property prices. The lack of the availability of desirable property will also affect prices in the area. The fewer the number of desirable properties, the more expensive and valuable they become. The opposite is also true. If there are too many properties available to purchase in one particular location, the prices will tend to weaken.
A strong economy is extremely important in stimulating the real estate market. If the economy is strong and the overall feeling is positive, the market activity will be positive, and this should push prices upward. On the flipside, if there are negative or doubtful feelings of the economy, this will seemingly lower the price of real estate.
This segment would include many of the property taxes buyers or investors may be challenged with. High property taxes, property purchase tax, capital gains tax, speculation tax… all may be compounded and affect property values negatively. These taxes will not only affect prices, but the overall market activity in certain areas. Generally, taxes play a large deterrent for many real estate buyers and investors, as they can become quite expensive.
Shift in Population/Demographics:
If a certain location has plenty to offer, such as amenities, industry, infrastructure, natural beauty and opportunities, there will be a desire for residents to settle and remain. This attraction of residents will certainly fuel demand and the upward push of property values. Conversely, if there are economic woes and industries move or close down forcing folks to leave, this will affect property values negatively.
There are other factors which may affect the price of real estate in BC and these would include: borrowing interest rates, rent controls, vacancy levels, seasonal factors, public perception, and the type of government party currently in charge. If you are a current homeowner looking to purchase a property or are looking for a private mortgage loan and are located in Vancouver, Surrey, Kelowna, Langley, Victoria, or elsewhere in BC, apply now for a free quote or call us today at 604.620.2697. We’d be happy to help you understand your options.
Buying an investment property, whether you're in Kelowna, Surrey, Victoria, Vernon, or elsewhere in B.C., definitely has its allure. For one, Kelowna and the Okanagan are one of the top emerging real estate markets in Canada. On another note, some may opt to invest in real estate further outside of Vancouver such as in cities like Surrey, Burnaby, Richmond, Coquitlam, given the increasing trend of working from home, the perk of more space, and potential for growth as these areas continue to expand.
Regardless of city, many have made a fortune in real estate and are financially independent as a result. The real estate market in Canada over the past 25+ years, has created an amazing number of millionaires. Many were created as their primary residence has inflated exponentially in value over the years. Most of these millionaires were created in certain regions within the country, where real estate values have gone up substantially. If you live in the Metro Vancouver or GTA area, you may know that the two primary regions where this has occurred is the Greater Toronto Area and Metro Vancouver. Many of these folks have benefited from tremendous equity build up. As a result, they can leverage themselves and explore many other investment opportunities and use this equity to build their wealth even further. Many use their available equity and leverage themselves further into the real estate market. Ownership of an investment or rental property is extremely attractive to many, and their pursuit relentless in some cases. There are many advantages to starting up your real estate investment portfolio, as well as some disadvantages. All of this is dependent on type of market, geographic location, and many other factors.
Is Real Estate a Good Investment?
Real estate investing in some cases, perhaps in most, is far more attractive than most other types of investments. If you’re looking to invest in real estate in Vancouver, Surrey, Victoria, Kelowna, or elsewhere in the Lower Mainland, consider the many advantages to doing so in building your wealth. This is due to the main advantages associated with it, which include:
Lower Risk Level
Real estate has always remained a solid and secure investment. Of course, the risk level is dependent on the geographical area, market conditions, and other factors. However, traditionally it tends to increase in value over time even as the market may go through cycles.
It is far easier to borrow against real estate than other types of liquid assets. Lenders are more inclined to lend on real estate since it is a desirable investment. The market lenders offer many options to the real estate owner should they ever want to borrow against their property. There are lenders for all property types and just about any situations you can imagine.
You are the Boss
Owning a home puts you right in control of your investment. You call the shots and there is not much experience required. The process itself of owning a home is easy and quite seamless. Most homeowners learn and acquire their real estate skills as they continue to own the property. Homeowners usually only answer to themselves since they are ultimately in charge.
In most cases, home ownership is a part-time job. Not only is little experience required, but also part-time involvement from the owner. There is no requirement to be involved in a time-consuming process. Home ownership is low activity and usually a turnkey operation requiring very little effort to manage.
As previously mentioned, real estate tends to increase in value over time. As a result, the owner will build up equity in the property. This increase in value may be leveraged and used for other investments. It provides the property owner with options and recourse to pursue and engage in other investment activities.
Income Tax Benefits
Unlike other investments, there are far more potential tax benefits available to the property owner. Investments such as stocks, GICs, RRSPs, etc. are all subject to income or investment income tax. There is no opportunity for the investor to try and minimize the income tax paid on these types of investments when realized. Real estate on the other hand, does offer certain tax benefits. For example, the equity appreciation on your primary residence is tax free. Any increase in value in your home is tax exempt. This is a tremendous tax advantage for a homeowner. A property owner may also use expenses incurred on an investment property as a taxable write-off or benefit. This is an example of offsetting and equity appreciation, by the costs associated in maintenance of the asset. There are potentially many other taxable benefits to the property owner.
On the flip side, there are a few other sides of the coin to consider as well:
Initial Capital Investment
To become a property owner, you must have funds available to apply as a down payment for the purchase. This is a struggle for many, because depending on the market, one may need a substantial amount of funds in securing a property. As you know, it takes time to save money and it is not an easy task. Be prepared to invest a large sum up front to realize your property investment. If you currently own a home in Vancouver, Surrey, Kelowna, or elsewhere in BC, and want to explore your options in pursuing a second or investment property, get in touch with us today.
Liquidity is tied up
Once you own a property, your resources are then tied up into the property. These resources are committed to the property and cannot be accessed so readily. So be prepared to part with and have your funds sitting invested into your property. This may limit your ability to diversify and pursue other investment opportunities. To create some sort of liquidity, you would have to borrow against the property or sell it. Please keep in mind that a real estate investment can really pin you down financially.
Length of Ownership
Purchasing a property usually involves a commitment from the owner for an extended period. Having taken on one of the largest financial obligations with property ownership, most are in it for the long haul. As you know, it can take a long while for real estate to appreciate. On the other hand, real estate values can also retreat and slip away with varying market conditions. If values decline, then there is ground to be made up and one might be forced to hang on for far longer than anticipated.
Government rules and regulations may also influence the real estate market. Government ultimately calls the shots and can have an extreme impact on real estate values. Realistically, the government owns all the real estate as we know it. Property owners may hold a deed for the land, but the government is the trustee. The government has the power to expropriate, rezone, re-develop, license…. most real estate as they choose. All of these variables may affect the property value.
All of the factors mentioned as being an advantage or disadvantage will certainly impact the value of your property. As a result, it is highly recommended that you do thorough research and get expert advice prior to engaging in the purchase of property. Interested in learning more about investing in real estate in Surrey, Vancouver, Kelowna, Victoria, or elsewhere in BC? Get in touch with us today to explore your options.
Are you looking for a private mortgage lender to help you get started with investing in real estate? Click here or give us a call today at 604-620-2697 and we’ll get back to you within 24 hours.
As the weather gets colder as we move into the winter season, home buying and open houses tend to slow down a bit as families opt to stay indoors. Although some turn to waiting until warm weather comes around to buy a home, others may choose to continue their efforts and buy in the winter due to take advantage of less competition, lower prices, and quicker closing times. Whether you are looking to buy your first or second property in Vancouver or elsewhere in British Columbia, let’s take a look at some positives of buying property in the winter.
Less Competition, Lower Prices
With more rain and colder weather moving into the holiday season, one positive of buying a property in the winter is less competition. With less buyers all around this time of year, families can take advantage of less competition and may have greater likelihood to have their offer accepted. In addition to less competition for homebuyers, another thing to keep in mind is lower prices. While this typically depends on various factors, potential homeowners may have more flexibility in this regard as there generally aren’t as many buyers during the winter, giving more opportunities for negotiation with the seller.
Faster Closing Times
Sellers that put their houses on the market in the winter usually are keen to sell as soon as possible. With this in mind - sellers may be motivated to accept an offer and close a deal with as little friction in the process. For buyers, this may mean potential savings if you are willing to negotiate and agree on either a lower price, or a closing date in alignment with both parties’ needs.
Moving Companies May Be Cheaper
Everyone knows how busy moving companies can get in the last weekend of the month, going into the 1st, with countless people relying on rental trucks and staff to assist in the moving process. Sometimes, these need to be booked several days or weeks in advanced. While booking a moving truck in the winter may be quite easy, it may also prove cheaper as well depending on the company and their rates.
What about mortgages? What if my credit isn’t the best?
For current homeowners looking to buy another property this winter, sometimes individuals may face issues with getting approved for a mortgage by the bank. Whether you live in Vancouver, Victoria, Surrey, Abbotsford, Coquitlam, or even up in Kelowna, we’ve got you covered for home equity loan solutions. If you have bad credit and are looking for a mortgage in BC, you may be eligible to access up to 75% of your home’s value in the form of a second mortgage. At Silver Hill Mortgage, we work with private mortgage lenders in BC that focus on your available home equity – not your income or credit. To learn more about your options and see how we can help you access your home equity, get in touch today by clicking here. Looking to get approved sooner? Give Jim a call at: 604.620.2697.
If you are currently looking for mortgage financing and live in Vancouver or elsewhere in British Columbia, you will learn very quickly that are so many lenders and sources of mortgage funds out there. There are numerous mortgage options for any and all types of mortgage requests, whether you live in the Metro Vancouver area, on Vancouver Island, or in the Okanagan. Funds for mortgages are available from the major banks to individual private lenders. The competition for mortgage business is great, especially in today’s market, allowing customers to benefit from the many options and competition for their valued business. Because of this, a borrower should do their research before deciding on a mortgage lender to move forward with. Another option would be to take on the services of a mortgage broker, who will effectively maneuver you through the mortgage market maze. A mortgage broker will save you a lot of time and explain in detail the various mortgage products and options available depending on your situation. Brokers can “cut to the chase”, as they specialize in mortgages. After an initial consultation, they are able to pinpoint and narrow down the best finance options quickly and effectively for customers.
Here is a list of the various sources of mortgages available for residential or Commercial purposes that one may wish to consider:
1) Commercial Banks:
The primary commercial banks in Canada are:
Commercial Banks typically offer the lowest interest rates, along with special mortgage products and benefits to customers. Commercial banks are usually on top of the list when it comes to the best interest rate discounts and specials. However, their lending standards are strict and the turnaround for getting a loan is far longer than most lenders.
2) Trust Companies:
Trust companies are generally the next step down from commercial banks. They are an alternative lender, whose mortgage rates are marginally higher than banks, and their loan guidelines are more flexible. Further, they may charge a small fee for arranging the loan called a lender fee. This lender fee is usually .50 – 1% of the gross loan. This fee is charged in addition to interest rate.
3) Credit Unions:
Another option to getting cost effective mortgage financing is through a credit union. Credit unions offer a full range of bank services. They cover off everything from loans of all descriptions to various types of accounts such as saving, checking, etc. Their interest rates compare with bank rates in most cases. Credit unions are non-profit, so they often have lower fees than traditional banks. Credit unions are community oriented, offering fast and personalized services to their customers.
4) Mortgage Investment Companies:
Mortgage investment companies are non-bank lenders who provide creative financing solutions. They mainly cater to customers who have poor or damaged credit, and little or no income to show. They take on riskier loans and are primarily an equity lender. They put a bulk of the weight for approval on the type of real estate and the amount of equity available to lend on. Their rates are much higher that banks, credit unions & trust companies. They are a flexible lender with far fewer lending guidelines, but all at a higher cost than most market lenders. They also charge a lender fee for their services. Lender fees can start as low as .50% of the gross loan and go up from there.
5) Private Lenders:
Private mortgage lenders are individual people who lend their own funds for mortgage financing. Private lenders are private individuals who could be a friend, family member, acquaintance, etc. Private mortgage lenders are usually very flexible and determine their own lending guidelines. They are great to work with one on one, as they call their own shots, since it is their money. Their interest rates are higher than most lenders, and they may charge a fee for the loan in addition to. Turnaround for approval and funding with a private lender can be quick. This is because they have far fewer guidelines, and the buck stops with them.
6) Vendor Take-Back mortgage (VTB):
A vendor loan is when the seller of a property extends a loan to buyer to help secure the sale of the property. This happens when the buyer does not have enough resources to close on the sale of a property. If down payment & the approved 1st mortgage of the buyer is not enough to cover the price of a piece of property, there will be a shortfall. The seller may carry back a loan in the amount of the shortfall, so the buyer can close on the sale. This will ensure that there are enough funds to complete on the sale. The vendor loan in this case would be a 2nd mortgage secured against the property, right behind the 1st mortgage. The vendor loan would be registered in favour of the seller, yielding interest to the lenders benefit. The details of the vendor loan are usually negotiated directly between the seller and purchaser.
7) Assuming an existing mortgage:
Another option to getting a mortgage when purchasing a property, is to assume the existing mortgage on that property. You may legally take over a mortgage by assuming the original loan. In order to do this, you must meet the lenders requirements. That is that you would have to fully qualify under the lender’s guidelines. Further, you would have to carry on with the existing rate and loan provisions if you assume the loan. If this is an option you might be considering, you must ensure the loan is assumable, and get proper legal advice as to your legal obligations under the original loan.
8) Reverse Mortgage:
A reverse mortgage may be an ideal loan option for seniors who have plenty of equity in their home. The equity in the home may be used to get a loan called a “reverse mortgage”. Unlike regular mortgages, there is no repayment required from the borrower until they pass away, or the home is sold. This allows the borrower access to funds without having regular monthly mortgage payments. The borrower can decide if they want the loan in one lump sum, or disbursed in set up intervals. It allows folks to hold on to the ownership of their home and have funds available for their day to day. The costs associated with reverse mortgages is often higher than most other alternatives, but it offers definite advantages to the elderly, who would not typically qualify for a bank loan.
As you can see, there are many options to pursue for mortgage financing. It would be strongly advised that one should seek out the services of a mortgage broker to better understand the options best suited for a borrower. If you’re a current homeowner looking to explore your mortgage options, get in touch with us for a free quote today: 604.620.2697.
Struggling to keep up with bills and financing your lifestyle? Then you’ll want to know more about second mortgages. A good place to start is to learn about the myths about getting a second mortgage. Like most financial options, there are some myths surrounding second mortgages that often arise when homeowners explore this option. We have debunked those myths for your convenience - let’s take a look!
1. Second Mortgages Are Only For People That Are Out of Options
The first myth to debunk is the notion that second mortgages are only for people that are out of options. This is a pure myth because, in order to qualify for a second mortgage, you have to own a home that has enough equity available to borrow against.
Most people that are running out of financial options don’t own a home. You should be proud of the fact that you own a home and have enough equity to borrow against. Even if you're not in a tricky situation, and looking to simply tap into your home equity to finance a new home renovation, or to help with the purchase of a new home, a second mortgage can help with just that!
2. Second Mortgages Are Complicated
One of the most common myths about second mortgages is the claim that they are extremely complicated. This is not true. In concept, a second mortgage is extremely simple.
If you own a home and you have a substantial amount of equity available, you can convert that equity into cash. You can choose to receive the money from your second mortgage in a lump sum or in monthly payments, depending on your lender.
In any case, trusted professionals like the team at Silver Hill Mortgage can walk you through the process and answer any questions that you might have. Not sure how much equity you have? Take a look at our Home Equity Loan Calculator to get an estimate!
3. You Can Only Use the Money From a Second Mortgage for Certain Things
Perhaps one of the most misleading myths about second mortgages of all is when folks claim that you can only use the money from a second mortgage for certain things.
You should know that there are no restrictions whatsoever as to how you can spend the money that you receive from a second mortgage. It’s your home equity - which means you can use the money for anything you wish, whether it be for debt consolidation, new home renovations, business capital, or even medical emergencies. If you are purchasing or refinancing, a second mortgage can help with providing the funding you need for that as well.
Get Your Second Mortgage From Silver Hill Mortgage, No Tricks, No Myths, Just a Great Deal!
Now that you know more about the myths about second mortgages, you’re ready to take advantage of this unique financial option. Silver Hill Mortgage specializes in helping families across Vancouver, Kelowna, Victoria, and the Lower Mainland take advantage of second mortgages and tap into their home equity.
Want to turn your equity into cash? Then give Silver Hill Mortgage a call, we’re ready to help! Talk to Jim today at 604.620.2697.
Silver Hill Blog
Jim Horvath is the principal broker and director of Silver Hill Mortgage Corp., arranging private mortgage loans in British Columbia for over 25 years.