In the simplest terms an equity mortgage, also known as an equity loan, is a mortgage that is lent to you on the amount of equity that is in your home. Based on standard qualifying, you can often mortgage up to 80% of your property value. For example, if you have a home worth $700 000 and a mortgage on that home for $350 000 you would then have $350,000 in equity. Of that $350,000 you could be eligible to mortgage up to an additional $210,000.
What is an Equity Lender?
There are two types of Equity Lenders:
1. Private and Alternative Lenders 2. Conventional Lenders These would be considered as Big Banks, Credit Unions, and Monoline Lenders. Due to Government regulations, many conventional lenders are unable to provide a loan simply based on equity. They will factor in things such as income and credit. If you have great credit, and fully provable income, we can discuss your options for a mortgage at best discounted rates!
Why would I need a Private Equity Mortgage?
Unfortunately we never know what the future will hold for us and sometimes we have a big unexpected event take place. This could be divorce, illness for yourself or a family member, job loss, or a loss of a family member. This unexpected event may lead to reduced income or a hit on your credit. When this happens, you may no longer be eligible to obtain a loan from a conventional lender. This is where Private and Alternative Lenders can help if you have equity in your home.
If you still have good credit and income, you may still find it beneficial to be with a Private or Alternative Lender. These reasons can be:
- Renovations - Schooling - Investment Opportunities - Construction or Property Development
In most cases, private mortgages are short term, usually 1-3 years. This tends to be enough time for the borrower to get a better grasp on their financial and credit situation.
How do I get a Private Equity Mortgage?
If you are questioning if this would be the best option for you, contact me and we can go through your options.