HOME EQUITY - Can You Use Home Equity to Qualify for a Mortgage?
Posted by Sean Stewart
on 17 May 2021
 "HOME EQUITY - Can You Use Home Equity to Qualify for a Mortgage?")
Do you have a lot of equity built up in your property and are wondering how to leverage this equity to qualify for a mortgage? There are a couple of equity mortgage products on the market that we can use.
If your income does not qualify you for the mortgage you need but the mortgage amount is small compared to the property value then we can use one of two products:
1. 65% Equity Product The mortgage amount is 65%, or less, of the property value. Meaning that you will have at least 35% equity remaining in the property. This product allows the borrower to use a higher total debt servicing ratio which allows you to qualify for more of a mortgage amount using the same income.
2. 50% Equity Product The mortgage amount is 50%, or less, of the property value. Meaning that you will have at least 50% equity remaining in the property. This product allows the borrower to use an even higher total debt servicing ratio (compared to the 65% Equity Product) which allows you to qualify for even more of a mortgage amount using the same income.
These are great products that qualify you for more of a mortgage given your income because you have good equity remaining in the property. The lender offers good interest rates with no fees attached. The interest rate is a bit higher than standard market rates because you are relying on the home equity to qualify. Alternatively, if you used a standard mortgage product you would qualify for less of a mortgage amount but at better interest rates.
Property equity cannot be used for a total net worth program. Meaning the equity is not considered to be a liquid asset. Total net worth programs rely on liquid, or near liquid, assets in order to qualify.
If your income does not qualify you for the mortgage you need but the mortgage amount is small compared to the property value then we can use one of two products:
1. 65% Equity Product The mortgage amount is 65%, or less, of the property value. Meaning that you will have at least 35% equity remaining in the property. This product allows the borrower to use a higher total debt servicing ratio which allows you to qualify for more of a mortgage amount using the same income.
2. 50% Equity Product The mortgage amount is 50%, or less, of the property value. Meaning that you will have at least 50% equity remaining in the property. This product allows the borrower to use an even higher total debt servicing ratio (compared to the 65% Equity Product) which allows you to qualify for even more of a mortgage amount using the same income.
These are great products that qualify you for more of a mortgage given your income because you have good equity remaining in the property. The lender offers good interest rates with no fees attached. The interest rate is a bit higher than standard market rates because you are relying on the home equity to qualify. Alternatively, if you used a standard mortgage product you would qualify for less of a mortgage amount but at better interest rates.
Property equity cannot be used for a total net worth program. Meaning the equity is not considered to be a liquid asset. Total net worth programs rely on liquid, or near liquid, assets in order to qualify.
Contact Us
For more information on using home equity to qualify, contact your local Ajax Mortgage Broker, Sean Stewart at 905-427-9596 or sean@seanastewart.comAuthor:Sean Stewart
About: Mortgage Broker
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