For some people, the idea of a “mortgage” can be overwhelming and a little scary. If you are anything like I was in my twenties, my initial reaction to any talk of mortgages was simply “I don’t get it and I will always be a renter in Toronto”.
I never thought I would own property in Toronto.
Since it didn’t concern me, I didn’t bother to learn it. Even when my own mom was a Mortgage Agent for years. That is, until I met my partner Stan and learned that his main business was real estate investing, and mortgages were often a main topic around the dinner table.
If we were going to build a life together and I wanted to be a contributing part of the business, I knew I had to step out of my comfort zone and learn something new.
CAREER CHANGE AFTER 30
After working in the travel & tourism industry for 10+ years, I became a licensed Mortgage Agent in the summer of 2016, right before I turned 33.
I thoroughly enjoyed the course. I had been out of school for almost 10 years, so it was exciting and challenging to learn something new. It also felt absolutely wonderful to be able to fully understand a topic that I once knew nothing about.
The best part is, I’m still learning something new each day. So let’s take some time to talk mortgages – and we will keep it simple.
A MORTGAGE AS BUSINESS LOAN
A mortgage is simply a loan, secured against your home (an asset). For most individuals it is the largest loan you will take on. Purchasing a home/investment property is a HUGE transaction, which is why it can often feel like such a major undertaking. Don’t get me wrong, it is. But don’t let the size and lifetime of the loan deter you.
A mortgage is the largest loan a bank will give, without a business plan!
This is because the bank feels that the asset you are using as collateral is a strong asset of value – they accept it as a guarantee for the loan.
For a business loan most banks need a business plan, possibly some existing sales to show and maybe even a few investors. And this could be for a smaller loan ($50K or less). So how come getting a $500K mortgage doesn’t require a plan?
Well, simply because it is secured against strong assets – a home and the land. The bank feels that the asset you are using as collateral, is going to hold value. If you are approved for your requested mortgage amount it shows that the asset holds strong value and the lender expects that it will increase in value overtime.
Obviously some other factors come into play: income, debt, credit scores, properties owned, businesses etc.
Beauty is, these are all factors in your control.
You can pay off debt, work toward increasing your credit scores and work with a lender who sees value in what you do and the property you are purchasing.
So make a plan, write out your goals and work hard toward creating an opportunity to use real estate as a business, because a mortgage really is the largest loan you will get, with no business plan.