Equity Mortgage Home Equity Loans Are Based on Your Home Equity

Equity mortgage home equity loans are also known as “private mortgages” and “equity only mortgages”.

The most common reasons cited by banks for declining mortgage applicants for financing are past or current problems with credit and difficulty proving income.

There are many people who have difficulty proving income; some examples of these people are part time employees with multiple part time jobs, self-employed individuals, sub-contractors, peace workers and commissioned sales people. Those who are not employed full time with supporting paystubs, T4’s and job letters will have to produce a notice of assessment.

A notice of assessment is a tax form that the CRA sends to tax filers after their return has been processed. Some self-employed individuals may declare a low net income after writing off business expenses and when trying to apply for a mortgage, the bank tells them that they will only consider the income declared on their income tax return.

This is where equity mortgages come in. Equity only mortgages are typically arranged by mortgage brokers and funded by private lenders, mortgage investments firms and/or trust companies. Private mortgages do not put as much weight on your credit history or income type, they rely more on their security – the security being the equity in your home.

The amount of equity you have in your home is directly related to the amount of risk that you represent to potential lenders. Usually equity mortgages are arranged for up to 75% of a homeowner’s property value.

The lender will order an appraisal of the property, which will determine the value of the property. A property appraiser will visit the property and provide the lender with their educated opinion of the properties market value. The amount loaned will be based on a percentage of that amount.

For example if your property was appraised at a value of $300,000, a lender will offer you 75% of the value of your home. If your mortgage is $150,000 then the equity available would be $75,000.

Do your homework and ask lots of questions. Some private mortgages can be very expensive or “interest only”. Interest only mortgages involve setting your minimum monthly payment to match the monthly interest due. In this case no principal will be paid down at the minimum agreed payment therefore good pre-payment privileges are a necessity.

A relationship with a mortgage broker will lead you to being more informed about your options and an important fact to keep in mind is that in the province of Ontario mortgage brokers cannot charge you up-front fees. For more information about Equity Mortgage Home Equity Loans and home equity visit http://www.gtamortgagematters.com/