Put your home equity to work on your next property, investment or business.
Many owners use the equity in one property to buy another, fund a business, or invest. Used carefully it can accelerate your plans. Here is how it works and what to weigh.
You've started an application.
Saves as you go · No credit check · A licensed mortgage professional follows up
How lenders look at investment & business financing borrowers
1Common uses are the down payment on a rental property, working capital or equipment for a business, or buying into an investment.
2You access the equity through a HELOC, a refinance or a second mortgage, then use the cash where you need it.
3Rental income can help you qualify, and in some cases the interest on money borrowed to earn income may be tax deductible. Confirm with your accountant.
4Borrowing to invest is leverage: gains and losses are both bigger, and the loan has to be repaid either way.
Get ready
What lenders will ask you for
Proof of income: T4s and pay stubs, or 2 years of Notices of Assessment
Mortgage statement, property tax bill and home insurance
For a business: financial statements, business plan or bank statements
For a rental: the offer, lease or rent estimate
Photo ID
Your options
Which kind of lender fits you
Option 1
HELOC
Flexible access to funds for a down payment or for working capital. Rate is normally variable.
Option 2
Refinance with cash out
One new mortgage and one payment. Check the penalty on the old mortgage.
Option 3
Second mortgage
Keeps your first mortgage as it is. Higher rate and fees, often a short term.
Option 4
Business-for-self or private lender
When income is hard to document or timing is short, a bridge can be arranged with a plan to move to a regular lender.
Avoid these
Common mistakes
!Borrowing against your home for a speculative investment you cannot afford to lose.
!Underestimating carrying costs: mortgage, property tax, insurance, vacancy and repairs.
!Mixing personal and business accounts, which makes your income hard to prove.
!Skipping tax advice on interest deductibility.
Take action
Your first steps
1Write down the opportunity, the amount and your repayment plan.
2Estimate your home value and mortgage balance.
3Gather your income and, for a business, financial statements.
4Speak with your accountant about tax treatment.
5Start the intake so a broker can compare the routes and timing.
The intake
What your application will ask
Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.
For investment & business financing borrowers
What do you plan to invest in or fund, and how much do you need?
What is your estimated home value and current mortgage balance?
How is your income earned: salary, self-employed, rental or other?
Do you already own other rental or investment properties?
What is your timeline for needing the money?
What monthly debt payments do you have today?
How do you plan to repay the borrowed money?
Plus the basics everyone answers 13
Your full name, email, mobile number and the best time to call.
The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
Are you applying alone or with someone else? If with someone, their name and how you are related.
Your goal: buy, refinance, renew, take out equity, or consolidate debt?
The property type (house, condo, multi-unit) and the city it is in.
Will you live in it, rent it out, or both?
The purchase price or estimated value, and your target closing or renewal date.
Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
Your approximate yearly household income before tax.
Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers
Questions people ask
Can I use home equity as a down payment on a rental property?
Yes. Many investors use a HELOC or refinance for the down payment. Lenders will look at your income and the new property.
Is interest on money borrowed to invest tax deductible?
It may be when the money is used to earn income, but the rules are specific. Speak with your accountant before you borrow.
Can I fund my business with home equity?
Yes, through a HELOC, refinance or second mortgage, though it puts your home on the line. Many owners compare this with a business loan first.
Will rental income help me qualify?
Often yes. Lenders usually count a percentage of expected rent. The percentage varies by lender.
What if I am self-employed?
Lenders can use your Notices of Assessment or a business-for-self program. A broker can match your documents to the right lender.
Does starting the intake affect my credit?
No. The intake is just questions. A credit check is only done later, with your separate permission.
General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.