Your personal finances play a pivotal role in shaping the borrowing options available to you. Whether you’re looking to secure a loan for a major purchase or navigate through unexpected expenses, understanding the factors that impact your borrowing options is essential. In this blog post, we’ll explore six key aspects of your personal finances that can significantly influence the loans and credit opportunities at your disposal.
Maximize your borrowing with Cannect. The 6 Key Factors That Influence Your Borrowing Option from credit scores to income Strategize your financial success. Understanding the six aspects of your finances that influence your borrowing possibilities is the first step in making the best borrowing decision for you. Let us now look at those.
1. Your time horizon
If you intend to keep borrowed funds for an extended period of time, the importance of accessing this money through a first mortgage grows. This isn’t always the case, but it’s crucial to note that taking out a short-term home equity loan leads in higher interest rates. Higher interest rates might have an impact on your cash flow and equity position. If your credit and income make it impossible for you to obtain a new first mortgage today, it’s better to avoid taking out a higher-interest-rate first mortgage from an equity lender. Finding a bridge to the first mortgage is the best option.
2. Your income
The mortgage stress test, implemented by the Government of Canada in 2018, makes it extremely difficult for Canadians to qualify for mortgages, even on their own property. It’s especially distressing if your house’s value has improved, your borrowing power has increased, and yet you still can’t access low-cost equity in your home, as was possible two years ago, according to your bank. Working with Cannect can help you obtain the capital you require to modify how Tier 1 lenders assess your mortgage application, allowing you to borrow the funds you require at the rates you deserve.
3. Your credit
Credit standards at large banks and Tier 1 mortgage lenders have tightened. Even when their salary qualifies them for larger loans, Canadians find it more difficult to access the equity in their homes. It is in the banks’ best interests to provide Canadians unsecured debt because this solution only harms the borrower. Going this way lowers a borrower’s credit score and makes it more difficult to obtain a mortgage in the future. Cannect assists Canadians in rebuilding their credit and resuming borrowing at the market’s lowest rates.
4. Your equity
Any financing decision must take into account the amount of equity you have in your property. Simply put, the more of your home you own, the less expensive the borrowed money gets. The worth of your home less any mortgages filed against it is described as equity. If you own a $100,000 home with a $40,000 mortgage, you have $60,000 in equity. Cannect will work with you to guarantee that your equity position is maximized. We accomplish this by matching you with appraisers that evaluate your house fairly and accurately, work for you throughout the process, and have your goals in mind rather than the banks’.
5. Your possible penalties and mortgage maturity
Mortgage penalties have a significant impact on borrowers’ decisions to take out short-term home equity loans. Depending on the amount of the penalty your bank would impose to break your mortgage, it may be advisable to wait out the duration of your current mortgage and refinance on your renewal date. Cannect may assist you in making these selections, securing the funds you require right away at a competitive rate, and ensuring that you can accomplish your current financial objectives – all while avoiding expensive penalties. Banks in Canada charge
6. What is your current type of mortgage
Mortgages come in a variety of shapes and sizes. Aside from the durations, which can range from one to 10 years, and the rates, which can be fixed or variable, mortgages differ in how they are secured. Canadian banks have been pushing collateralized mortgages for the past eight years.
A collateralized mortgage is filed against your home for a sum greater than the amount borrowed, and often greater than the value of your home! This gives the bank long-term control over your borrowings. It forbids you from borrowing against your home equity from anyone other than your current bank. You would lose the opportunity to use any equity that existed before to your mortgage, any equity that resulted from paying down principal, and any equity that resulted from property value rises. In these scenarios, Canadians are frequently caught in higher-interest debt.
Consider yourself fortunate if you were informed about a collateralized mortgage and chose not to pursue it. Many Canadians were unaware that they had collateralized mortgages recorded against their homes. Although collateral mortgages make lending more difficult, Cannect can assist you in exiting a collateral mortgage and gaining access to your equity. In many circumstances, we can do it for you rather than your bank.
Cannect employs a comprehensive strategy that takes these six factors into account—and how they affect all of the borrowing options accessible to you—to ensure that you always obtain the optimal borrowing solution for your specific financial circumstances.
