8 Things You Must Know About Second Mortgages in Canada

Second mortgages are nothing new to most Canadian homeowners; however, not everyone has an equal understanding of what a second mortgage really is and how it can benefit them. For starters, a second mortgage is a secured loan with the security being the home equity. It is a type of home loan that allows homeowners to tap into their home equity.

Second Mortgages Come in Different Forms

Do you know that there are different types of second mortgages? As a loan product, a second mortgage can be accessed as a lump sum in the form of a home equity loan, or as a revolving line of credit in the form of a HELOC.

Second Mortgages Common Uses

Most Canadians get a second mortgage to help them consolidate debt. By using a second mortgage to pay off high-interest debts, they save on interest as well as make payments easier to manage for themselves. Another common use for a second mortgage is to finance home upgrades or home renovations. By doing this, a homeowner can significantly increase the value of his or her home and effectively make the debt pay for itself.

Your Home is On the Line if You Apply for a Second Mortgage

Because this type of loan products uses your home equity as collateral to the lender, the lender is entitled to take the collateral in the event that you fail on your obligation to pay. If you are sure that you can pay, though, this loan product offers significantly lower interest than unsecured loans.

There are Flexible Payment Options

Do you know that some types of second mortgages allow you to make interest-only payments? This gives you more room to maneuver with your finances such as when you use the second mortgage to pay for renovations to increase your home’s value, pay only the interest, and pay the loan after you sold your home for a much higher price.

Your Home Equity Can Be Used for Lots of Things!

Need money for an investment opportunity? Use your home equity! Have expensive tuition? Pay that with your home equity! These are just a few of the ways that you can leverage your home equity to make your life easier.

You Can Borrow A Lot or a Little

The amount that you can borrow is based on the equity you have on your home. If you’ve built huge home equity and need a lump sum, then get a home equity loan. If you need recurring smaller amounts for a period of time, then a HELOC is for you. These loans allow you to borrow 60-85% of your home equity depending on other factors.

Borrowing Isn’t Free

Because borrowing from your home equity requires paperwork and other processes, there are fees that you have to pay. The fees can vary from lender to lender so it is best to ask around before you make a decision. Don’t forget to ask about early payment fees as well.

Interest Rates Vary Too

Depending on the type of second mortgage you go for, the interest payments can vary by as much as thousands of dollars because of the difference in interest rates. If you can talk to a mortgage broker who is connected with a lot of lenders, you stand a better chance of getting the best interest rate.

Are you interested to apply for a second mortgage? Make sure that you understand what second mortgages are and how they can help you! Contact us to discuss your options for tapping your home equity!

What is The Best Way to Consolidate Debt for 2021?

Debt is one of the most challenging things to manage for a lot of people, more so during the pandemic. It is not just because it can be easy to have too many debts such as mortgages, loans, and credit cards, but a lot of people have seen their incomes dwindle if not totally evaporate this time. If you are one of the many who is struggling with paying bills these days, you might be wondering about the best way to consolidate debt for 2021. Find out below!

How to Consolidate Debt?

There are many ways to consolidate debt but the best choice depends on the existing cumulative debt balance as well as the type of debts that you have. The most common type of debt that Canadians struggle with is credit card debt. Because credit card debt has a high interest, it follows that the smart way to consolidate them is to seek a lower-interest option that can save you thousands of dollars in interest fees in the long run.

Why Consolidate Debt?

The number one reason for wanting to consolidate debt is to be debt-free. It helps you manage your finances and not forget to pay because instead of multiple bills, debt consolidation will transform them into one bill. With a lower interest rate, you will end up paying more towards the amount you truly owe versus paying for just the interest. With a single bill, you will also be likely able to pay on time and avoid late fees. It is all about saving money while repaying debt.

What You Need to Know About Consolidating Debt

Most people think that debt consolidation is simply taking all other existing debts and putting them in one loan. It is not as simple as that because most loans are difficult to qualify for and have high interests as well. To successfully consolidate debt, you need to make it benefit you in the long term. One way of doing that if you own your home is to get a home equity loan. A home equity loan has a pocket-friendly interest because the loan is guaranteed by the equity you have in your home, making it less risky for the lenders. If a loan has less risk for lenders, it follows that they charge lower interest.

Why Get A Home Equity Loan?

With a home equity loan, you will be able to access the value that you built up in your home without having to sell your property. It is one way of making your money work for you and making your life easier. Since it has a lower interest than other loan types, you will be able to pay off sooner and be debt-free faster.

A home equity loan can be used for other purposes aside from consolidating debt. Any extra from a home equity loan can be used for investment, paying for tuition, getting a home renovation, or funding home repairs. If you use a home equity loan wisely, it can give you a lot of elbow room to fix your finances. Contact us if you want to apply for a home equity loan to consolidate debt.