A home equity loan gives you access to the wealth you have accumulated in your property. This is what you would like to get if you are considering buying a second or third property, or even renovating homes. It is defined as the difference between the value of your home and the amount of your debt.
For example, if you owed $ 100,000 and the value of your home was $ 450,000, the total amount of your property will be $ 350,000. In general, you can access 80% of your own funds. Therefore, you are allowed to apply for a loan with a maximum value of 80% of $ 450,000 ($ 360,000), less the $ 100,000 already due = $ 260,000.
In an interview with Your Investment Property, Royden D'Vaz, National Sales and Marketing Manager at Bluestone, explained the different adjustments that investors must make to be able to use this type of loan.
Your investment property: What are the requirements for applying for a home equity loan?
Vaz's Royden: One of the most important factors in obtaining a net worth loan is to make sure that the borrower has enough of own funds, namely: the value of the property less what it owes to the lender / bank. The borrower can then use this capital as a deposit so that his loans allow him to buy an investment property.
The ability to manage the loan is an important element to achieve the desired result of the purchase of an investment property. Relying solely on the rent earned by tenants will not be enough to get an approved loan. Thus, their normal income as well as 80% of the rental income minus their expenses will have to be an income used for the service of the new loan.
The lender will also need the contract of sale of the proposed investment property before proceeding with the assessment of the loan.
YIP: How can this type of loan be approved faster?
RD: The best thing borrowers can do to get the quickest turnaround is to get ready right off the bat and make sure they have everything they need they need to have their application evaluated, including the documentation that proves the revenues and expenses.
Make sure that all the documents you provide cover relevant date ranges, such as personal bank statements for the most recent three months. If your accounts show unusual activity, be sure to provide a detailed explanation. This could include such things as significant one-time expenses.
Also, make sure that all loan applicants are available to be contacted in order to obtain additional information [are] needed to finalize the settlement when the time comes. We strongly recommend that you do not go overseas until a settlement is in place.
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