Getting a second mortgage is becoming increasingly common in Canada these days; however, not a lot of people know what a second mortgage is and how it can help them manage their finances if used correctly.
A second mortgage is a type of loan that allows homeowners to access their home equity provided that they can meet the terms set by the lender. Because a second mortgage is a loan that uses home equity as collateral, defaulting on it can mean losing one’s home. This is why you must know what you’re getting into if you’re planning to apply for a second mortgage. Before you try to find a lender, below are what you need to know about getting a second mortgage in Canada.
Bad Credit Can Be Fixed With a Second Mortgage
Consolidating multiple high-interest debts can help you pay them off faster and improve your credit score in the process. More so, getting a second mortgage even with bad credit is possible through private lenders.
Second Mortgages Come in Different Forms
There are different types of second mortgages, with a HELOC and a home equity loan being the most common. They come with different terms to meet varying needs and demands. Be sure that you pick the type that is in-line with your financial plans and status.
Interest-Only Payments Are Possible
Some second mortgages allow you to pay only the interest until the time that you decide to sell your home. This means that you can take out a second mortgage to help you finance a home renovation prior to selling so that you can sell your home for a higher value. You can then pay the second mortgage from the proceeds of the sale.
Borrow as Little or As Much as Possible
Second mortgages come with a ceiling amount or a borrowing limit that is usually based on how much equity you’ve got in your home. It is possible to tap as much as 80% of your home equity in a second mortgage with the right lender!
It is Not Free
Second mortgage fees do exist and you’ll have to consider them when weighing whether you should get a second mortgage or not. The good news is that mortgage professionals may be able to connect you with the right lenders so that whatever fees you end up paying will still be outweighed by the benefits you’ll be getting.
Interest Vary Widely
Different lenders use different interest rates depending on the type of second mortgage you’re applying for and other factors. You have to be sure that you compare lenders to get the best mortgage deal.
You Can Use Your Second Mortgage for Anything!
Funds from a second mortgage are usually used for debt consolidation. You can also use it to finance further education, invest in a business, renovate your home, go on your dream vacation, or even pay for huge medical expenses. Ask your mortgage professional for more uses for a second mortgage! Contact us today if you need help getting a second mortgage in Canada!