Flexible lending solutions for business-for-self individuals
Your home is more than just the place you hang your hat at the end of the day—in many cases, it’s one of your most valuable assets. And yet, when it comes to accessing the equity in your property for projects like home improvements or to finance your personal business ventures, you may find yourself among the many homeowners who are unable to do so because of the rigid lending constraints imposed by traditional financial institutions. This is especially true when it comes to lending for business-for-self individuals and those whose occupations provide a variable income that falls outside of typical payroll arrangements.
But that doesn’t make sense! If a large share of your net worth is tied up in your home, you should be able to unlock that equity to finance your dreams.
Victor’s story: Refinancing for home improvements
Victor (not his real name) is one example of someone with a lot of equity, but not a lot of cash on hand to finance his personal and professional wish list. Victor is the owner of two properties, a part of a thriving dental practice, and he has an excellent credit score. Despite his high income and considerable property and investment holdings, Victor does not fit the profile of a “typical” mortgagee and had difficulty securing added financing for home improvements as a result.
Victor owns two high-end homes in Richmond Hill, Ontario: his principal residence and a newly constructed rental property. He has a large amount of equity in his primary residence, which he has owned for ten years, and he currently has a first mortgage with a major bank that is coming up for maturity.
Victor, a dentist, has been with the same practice for 14 years. Even though his income and asset values are high, the fee-for-service nature of his employment means he does not have traditional income documentation, like biweekly paystubs. With his bank tightening up on lending rules, the non-standard nature of Victor’s income reporting is making it difficult for him to get any more money out of his real estate investments through refinancing.
In addition to the first mortgage on his home, Victor has a construction loan that he took out to build his rental property and second mortgages on both his home and the rental property. He approached his mortgage broker to discuss a new, single loan to pay out the existing construction financing and both second mortgages. Victor also wanted access to the equity in his property in the amount of approximately $350,000 for landscaping and further renovations, and to open up flexible options to invest in his business on an as-needed basis. This added credit extension would bring his Loan-To-Value (LTV) ratio to 80%, an amount not typically available from banks. Victor knew there had to be a way to get more out of his real estate investments, and he was right!
Working with his mortgage broker, Victor was provided with several Home Trust options to suit his personalized needs. The one he selected, on his broker’s advice, was a new first mortgage at 65% LTV and a Home Trust Equityline Visa to take his total borrowing to 80% of the value of his properties.
This solution provided Victor with the flexibility of a line of credit to complete his planned landscaping and home improvements, the ease of using a credit card to make purchases for his home, and a single payment instead of multiple loans to track each month.
Your Story Matters
Usually, when we hear stories of people who are having difficulty accessing more credit, it is because of past troubles with their payment history or a lack of income. It may be hard to believe that a high net worth entrepreneur like Victor would have difficulty obtaining credit, but it’s more common than you think. The black and white nature of traditional lending institutions can mean that even clients with substantial assets and a perfect credit history may have trouble using their own money to reach their goals.
It’s only when a lending institution is empowered to listen to a client’s whole story that solutions like the one developed for Victor can help make financial dreams a reality. That’s important for those who have already had the vision of being in business for themselves and made it happen. Self-employment is a dream shared by many Canadians, and Victor is an example of an entrepreneurial success story. The fact that lending for business-for-self individuals can be so difficult is one of the reasons why Home Trust has made a point of looking beyond the numbers on an application form to consider each client as an individual with a unique story.
Together with a qualified mortgage broker, entrepreneurs can move beyond the traditional lending options to find an out-of-the-box solution to reach their financial goals. Visit our website today to learn more about the Home Trust difference for business-for-self clients.