A question about real estate and mortgages in Canada
September 6, 2020 5:06 PM Subscribe
Can I re-mortgage my house to buy another house? Details below.
My wife and I want to buy a place in the country, but don't want to sell our house in town just yet. The house we own is completely paid for. I want to borrow less than half its value. We have had an account with BMO for 20+ years, and had our original mortgage for this house with them. The catch is that my wife is now retired and I'm self-employed. Under these circumstances, would BMO be willing to lend me money using my current house as collateral? Like I said I'm self employed and have tax records but my income is not large. I'm sure they wouldn't lend me money based on that. Would they be willing to re-mortgage my current house, knowing the money would be used to buy another house?
My wife and I want to buy a place in the country, but don't want to sell our house in town just yet. The house we own is completely paid for. I want to borrow less than half its value. We have had an account with BMO for 20+ years, and had our original mortgage for this house with them. The catch is that my wife is now retired and I'm self-employed. Under these circumstances, would BMO be willing to lend me money using my current house as collateral? Like I said I'm self employed and have tax records but my income is not large. I'm sure they wouldn't lend me money based on that. Would they be willing to re-mortgage my current house, knowing the money would be used to buy another house?
If you have collateral and good credit you should have no problem at all, the bank will be very happy to lend you money (and make more money off of you!) You can also look into a reverse mortgage, assuming you are over 55.
posted by Cuke at 5:27 PM on September 6, 2020
posted by Cuke at 5:27 PM on September 6, 2020
You might not have sufficient income for a mortgage, but could swing a HELOC. That's the position I was in recently (also in Canada), and it's worked out well. Good luck!
posted by kate4914 at 6:38 PM on September 6, 2020
posted by kate4914 at 6:38 PM on September 6, 2020
You absolutely want a HELOC (Home Equity Line of Credit), which you can get for (usually) up to 80% of the equity you have in your home. No need to have it with BMO if they won't - you will definitely find a bank that will.
You can then decide if you want a payment plan for a lower interest rate, or, since rates are so low and not (likely) going up anytime soon, you can just pay the interest every month until such time as you do sell the existing home, and pay it off - no penalties.
I did exactly this when I went from a paid off condo to a townhouse.
Also, with a HELOC, you don't have to tell the bank what it is for - they don't care...
posted by birdsquared at 11:28 PM on September 6, 2020
You can then decide if you want a payment plan for a lower interest rate, or, since rates are so low and not (likely) going up anytime soon, you can just pay the interest every month until such time as you do sell the existing home, and pay it off - no penalties.
I did exactly this when I went from a paid off condo to a townhouse.
Also, with a HELOC, you don't have to tell the bank what it is for - they don't care...
posted by birdsquared at 11:28 PM on September 6, 2020
They will assess you using your current income. Pensions, part time income, self employed income can all be used to support the new mortgage or line of credit.
Your existing relationship with a bank has little to no impact on your ability to get approved.
You may want to use a mortgage specialist or broker, who will be the most knowledgeable about the income documentation requirements for your deal, as you will be trying to maximize your verifiable income.
Start collecting your income tax documents, (last 2 years) as well as any other supporting documents for your self employment income, as they will be vital to getting you approved.
posted by thenormshow at 5:00 PM on September 7, 2020
Your existing relationship with a bank has little to no impact on your ability to get approved.
You may want to use a mortgage specialist or broker, who will be the most knowledgeable about the income documentation requirements for your deal, as you will be trying to maximize your verifiable income.
Start collecting your income tax documents, (last 2 years) as well as any other supporting documents for your self employment income, as they will be vital to getting you approved.
posted by thenormshow at 5:00 PM on September 7, 2020
This thread is closed to new comments.
posted by oceanjesse at 5:08 PM on September 6, 2020