Equity Lending

Generally speaking, equity lending normally shares one or more of the following characteristics:

1. Self-employed individuals.
2. Income which is difficult to prove.
3. Down payments or existing equity (refinance), normally between 20-50%.
4. Credit is satisfactory to excellent.
5. People with former credit difficulties that have since been resolved.  This includes discharged bankrupts without any waiting period.

6. Landed and non-landed immigrants to Canada who do not have a credit history.

Equity lending puts the emphasis on the equity position of the borrower and far less on what his or her income or income to debt ratios are like.  Many terms have been adopted in the industry to describing equity lending.  The vernacular includes terms like:

• Low Doc
• Alt. Doc (ALTernative DOCument Program)
• No Doc
• NIQ (No Income Qualifier)
• Stated Income

For non-conforming mortgage lending (Subprime Mortgages), equity lending means lending money for first and/or second mortgages with little or no proof of income and even less-than-perfect credit.  Both prime and subprime lending institutions offer equity lending.  Depending on the borrower's credit, interest rates can be the best in the market up to bank posted rates.  Applicable lender and broker fees also are dependent on the applicant's credit.

Traditionally, equity lending was restricted to the self-employed with good credit.  Today equity lending is available to the following:

1. Self-employed
2. Commission sales
3. Employees
4. Satisfactory to excellent credit

In the "Prime" mortgage market (excellent credit), equity lending can be used in both purchase and refinance transactions. Purchase money can be arranged up to 95% LTV (Loan-to-Value) for self-employed using stated income. Similarly, refinance money can be arranged for up to 90% LTV for self-employed.  In the "subprime" mortgage market LTV ratios are capped at 90% in today's unstable financial markets.