If you’re self-employed, you may find it harder to get a home equity loan than if you were employed by someone else. The reason for this is that when you’re self-employed, the only income that lenders can use to assess your ability to repay the loan is your personal income. As someone self- employed, this can make it more difficult to prove that you can afford the loan repayments; especially if your income fluctuates from month to month. One proven way out of this is using a home equity loan.
What is a home equity loan? If you don’t know what home equity loans are, then we need to address that for better context and understanding. A home equity loan is a type of secured loan, which means that the loan is backed by collateral. In this case, the collateral is the borrower’s home equity, that is, your home equity. Home equity loans are frequently used to fund large expenses like home repairs, medical bills, or college education. Because home equity loans are secured by your home equity, they typically have lower interest rates than unsecured loans. Additionally, home equity loans may offer tax advantages depending on your financial situation. And, if you’re wondering how to get a home equity loan despite being self-employed, here are a few tips that may help you qualify and improve your chances:
Show evidence of income. When you’re self-employed, lenders will want to see evidence of your income. This could include tax returns, bank statements, and financial statements from your business.
Have a good credit score. A strong credit score will give lenders confidence that you’re capable of repaying a loan. If your credit score is not as strong as you’d like it to be, there are steps you can take to improve it before applying for a loan.
Keep your debt-to-income ratio low. Your debt-to-income ratio is the amount of debt you have compared to your income. Lenders prefer to see a lower debt-to-income ratio because it means you have more disposable income each month to put towards repayment of the loan.
Have a large down payment saved up. A larger down payment will decrease the size of the loan you need to take out, which in turn makes it easier to repay. It also shows lenders that you’re serious about buying a home and have the ability to save up money for a down payment.
Try to find a lender who is willing to consider alternative forms of income, such as assets or investments.
Shop around and compare offers from different lenders before deciding on a loan. Be sure to read the fine print and understand all of the terms and conditions before signing anything.
Bottom line Now that we have established that as a self-employed Canadian, you can get home equity loans, it is also important to research how to get the lowest rates on home equity loans in Brampton. While this can help you bring down the amount to pay back, it will also prevent you from getting further into debt.
Lendmax Inc. is a licensed mortgage administrator for LMC MIC. FSRA 13002
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Chief Executive Officer
Sammy is the CEO of Lendmax Mortgage Capital, with a strong vision to build a better product for clients, he set out in the banking industry to make a difference and got sucked into the mortgage market where he spent a decade in origination, underwriting, exit planning, client management, investor relations and identifying opportunities to help families make more money as an investor.
Sami’s ability to work with clients and uncover their potential has been as asset for the banks he worked for. Sami soon realized he could do more by being independent, learning and working in the private mortgage space helped him achieve success in the business and grow into a leadership role which focuses on guiding the investor community to a tried and tested process of wealth creation.
Over the last several years Sami’s experience in investment planning with the banks is the basis of his versatile guidance offered to a network of high net worth clients during his tenure in the mortgage financial industry has resulted in a committed following that helped his clients achieve their investment goals. It also helped him create mortgage products that deliver much needed flexible solutions to the Canadian Mortgage Market while working with a concentrated focus on mitigating risk, he created programs that actually help borrowers, used technology to build an infrastructure and is now aiming at establishing a diversified mortgage offering investment corporation, all of this with attention to tax saving opportunities for Lendmax Mortgage Capital Investors.