At Westoba, we understand that life can change unexpectedly. Sometimes new expenses – from a child’s education to home renovations, debt consolidation or a second property down payment – can throw a wrench in your financial planning.
Much can change over the lifespan of a mortgage, and we firmly believe that your mortgage should work for you, not weigh you down.
It is for this reason that we have created multi-purpose mortgages, giving you the flexibility to borrow funds for virtually any purpose using the built-up equity of your home as the collateral or security for the request.
Whether you are looking at finally adding on that sunroom, taking a much-needed vacation, or needing funds for a side project, a multi-purpose mortgage may be right for you. Interested? Keep reading to find out more and to see if you qualify.
What is a multi-purpose mortgage?
A multi-purpose mortgage is a credit secured by the equity in your home that can be used for a variety of purposes.
As explained on the Government of Canada website, “home equity is the difference between the value of your home and how much you owe on your mortgage.”
This means that if your home is worth $300,000 and you owe $200,000 on your mortgage, the difference (what you have in home equity) is $100,000.
“The multi-purpose mortgage is designed for anyone who has built up equity in their home through their regular mortgage payments, large lump sum payments, or whose home has increased in value due to home improvements or appreciation in value over time,” explains Sarah Ferguson, Westoba’s Manager of Virtual Services.
Once you have established equity within your home due to payments that have reduced the amount owed on your mortgage or an increase in the value of your home, you can utilize that equity as security to get approval for additional funding.
How does it differ from a regular mortgage?
When you first purchase a home, the initial mortgage that is registered on your property is typically used to fund the purchase: The purpose of the advance is to provide you with the funds to buy your home.
While you have some options when it comes to the term, amortization, payments, and general structure of your mortgage, most mortgages are commonly fixed-term over a standard 25-year repayment schedule with strict prepayment limits.
But a multi-purpose mortgage is not directly linked to the purchase of your home. This gives you more flexibility around payments and product types. Westoba offers variable and fixed-rate multi-purpose mortgage options as well as Home Equity Lines of Credit (HELOC) to access the equity of your home.
“Because the purpose isn’t tied to the purchase of a home, you can utilize the funds for almost anything - debt consolidation, home renovations, children’s tuition, down payment towards another property purchase, or even a refinance of your existing mortgage to increase the amount or extend the amortization,” explains Ferguson.
In a nutshell, “regular” or “conventional” mortgages are used to purchase a home, while multi-purpose mortgages and home equity loans are utilized for a purpose other than your home purchase after you have established equity in your home.
How do I qualify for a multi-purpose mortgage?
Qualifying for a multi-purpose mortgage is very similar to applying for any other credit at Westoba. We recommend meeting with a Financial Consultant to answer some questions about your repayment ability based on your credit history, income, net worth, and monthly debt obligations.
Your Financial Consultant will also assess the collateral for the request – in this case, your home. An appraisal may be required to ensure there is enough equity available to secure the request.
“The costs vary based on a number of factors including where your current mortgage is held, how your existing mortgage is structured, registered land titles, and whether you are choosing to refinance your existing mortgage or looking for a new mortgage advance,” explains Ferguson, who suggests having this discussion with your Financial Consultant to best determine which option may be the ideal fit.
If you are unsure which mortgage is right for you, a great first step is taking our online Mortgage Matchmaker Quiz to get you pointed in the right direction. You can also take advantage of our online mortgage calculator tool to get a better idea of what your mortgage payments might be, or take our Financial Fitness Quiz to get a grasp on your current financial status.
What can I do to increase my home’s equity?
There are two ways to increase your home’s equity: By paying down your mortgage or by increasing your home’s value.
There are countless ways to increase your home’s value, from renovations to increasing the square footage of your home, adding energy efficiency, or upgrading appliances. Even small upgrades like a fresh coat of paint or a new flower bed can help boost your home’s value. There are many tools available to determine which renovations or improvements will give you the best return and therefore most significantly increase your home’s value.
Think about calculating the anticipated costs of the improvements over the added value of the work put in to determine if the renovations are worth the expense and time. Get multiple quotes before moving ahead with your renovations and keep your receipts and invoices so that you can easily prove the date, cost and quality of the work you put into your home.
Ultimately, we believe a mortgage is not one size fits all. It is important to evaluate your goals, your budget, your timeline, and your current financial situation before deciding on a mortgage. Our Financial Consultants are here to help you navigate fluctuating mortgage rates and to help you make the right decision for yourself and your family.
Ready to get started? Call 1-877-WESTOBA or click below to make an appointment.