Lots of people are struggling financially these days as financial relief from government agencies and institutions are running out. The reality is that even if the COVID-19 pandemic comes to a complete halt tomorrow, it will take at least a few months for businesses and the economy to pick up and go back to normal. What, then, can someone do to get through it?
Get a Second Mortgage Now? Is This a Good Idea?
Before the pandemic, people usually get a second mortgage to pay for a down payment, consolidate debt, or pay for home renovation and home improvement projects. This is because a second mortgage is a way to access a large sum of money with relatively lower interest compared to bank loans such as using credit cards, borrowing a personal loan, or getting a business loan. This is possible is because a second mortgage is a loan that is backed by home equity and hence has a lower risk of nonpayment compared to an unsecured loan.
The above is not to say that a second mortgage has no risks and interest fee, it is just that it is easier to manage a second mortgage because of more affordable fees. Note too that although it less risky for a lender, a second mortgage carries a high risk for the borrower, as failing to pay within the terms can result in losing one’s home.
Is it a good idea to get a second mortgage now? The general answer is yes. If you have a stable job or are sure that you can secure a steady source of income soon and need a huge amount of money to tide you over for the next few months, then yes. If you are someone who has no job, no source of income for a few months to years, then the answer is no. Even a mortgage professional needs to know more about your specific circumstances to give a tailored answer to you. A lot of factors need to be considered before getting a second mortgage.
How Does a Second Mortgage Work to Access Money?
If you own a home or has been paying towards your primary mortgage, you have home equity. The more payments you’ve made towards your home, the higher your home equity is. Home equity represents the value of your home that you actually own. You can estimate it by subtracting any remaining debts from your home’s current real estate value. To access that value, you can either sell your home or get loan using your home equity. If you get a home equity loan while still paying your primary mortgage, then it is called a second mortgage because it goes on top of your first mortgage. You can choose to access the money as a lump sum via a home equity loan or get access through a line of credit with a HELOC.
Second Mortgage for Funds Covid-19 Pandemic
Given the above information, we can say that it might help you to access funds via a second mortgage to pull you through these challenging times. Is it the best financial move? Only you can decide that after consulting with us at Mortgage Central Canada. What we can do is to provide you with information for you to make an informed decision that will benefit you in the long run. Talk to us at your earliest convenience. Contact us if you’re serious about getting a second mortgage.