When to Consider a Second Mortgage

Applying for a second mortgage can be overwhelming not only because it is a huge decision but also because it can be a daunting task to determine if it is the right financial solution for your current situation or not. The process can be confusing for a lot of people and some may simply have no idea where to start. If you feel that you are not yet confident about applying for a second mortgage, then read on.

Using Your Home Equity as A Second Mortgage

You must know that once you have a significant amount of home equity, it is an asset that can have a huge impact on several aspects of your life. Most homeowners do not realize that owning a home means sitting on a huge amount of money stored in their home equity and that by being able to access this fund, they can have plenty of freedom to do a lot of things that can improve their lives. This is where a second mortgage comes in. A second mortgage is a loan that a homeowner can borrow against the home equity that they have built up in their home. Once you have access to your home equity with a second mortgage, you can use it for debt consolidation so that you can wipe off high-interest debts and be able to slowly free yourself from financial burden. This is just one advantage and there is more.

Is A Second Mortgage for Any Situation?

A second mortgage may not be for any situation, but it can surely help you out in a lot of situations. It can offer you an opportunity to improve many aspects of your life that could benefit from financial help. Situations that would be perfect uses of a second mortgage include the following:

  • Paying for high-interest debt or debt consolidation. A lot of debts such as credit card debt carry huge interest rates. If you use your home equity to pay off these debts, you can save 20-30% in interest rates alone. Another advantage that you get is you will only have to remember one payment thereafter instead of several payments for several debts in a given month.
  • Improve your home as soon as possible. Home repair and home improvement are both expensive. A simple case of burst pipes could lead to moulds and mean that you’ll have to replace a huge chunk of your wall as well as the busted pipes. By having access to your home equity, you can get repairs like this done as soon as possible and avoid further damage to your home. If you opt for upgrades while repairing, you also bring up the value of your home.
  • Invest in education. Better education means better income potential. With a second mortgage, you can go for higher education for a few months to a few years and secure a better future for yourself and your family.
  • Invest in business or other properties. Simply put, you need money to make money. By using your home equity to add capital to a business or invest in another property, you can build better streams of income for yourself as well as acquire more assets.

Considering getting a second mortgage soon? Contact us and we’ll do what we can to make that happen.

 

How do Second Mortgages Work?

If you need money and own a home, you can get a second mortgage! Do you need to remodel your home, have bills that you need to pay or many a big ticket item that you want to buy? If so, a Canadian second mortgage could help you get the money you need today for a better tomorrow. Here we’re going to talk about how these work and why you should work with a Toronto mortgage broker like us to get the best deal. Let’s get started.

What is a Second Mortgage?

A second mortgage is a lot like your first mortgage, but a little different. Depending on how much you’ve paid off from your first mortgage, you may be able to delay payment on your second mortgage for up to 25 years. This is where it pays to understand all of the terms of your mortgage, and why you want to work with a Toronto mortgage broker to make things work out in your favour.

When you apply for a second mortgage, you’ll need to fill out paperwork like you did for your first mortgage; you will need to bring some identification documents with you, but we can help you know which one of these you’ll need. After that, we’ll help you go over your application and figure out what areas need improving and if this is the right time to apply for a mortgage. You may want to work on your credit so you can get the lowest interest rate possible (up to 2.75% in some cases!)

Aren’t Second Mortgages Expensive?

This will really depend on the type of lender you go with and their attitude towards you. If you have poor or bad credit, you may be better off avoiding more traditional lenders. This way you’ll be able to get the financing that you need without any of the hassles of being paired with the wrong lender. If you’re looking for a quick loan that you can pay off in a short term (shorter than many 25 year mortgages go anyway), you may want to choose a conventional lender.

Is a Second Mortgage Right for You?

It’s hard to evaluate your case; everyone is different and has their own unique needs! This is why it’s important to evaluate why you want to take out this loan. Speak with one of our Toronto mortgage brokers to see if this is the right choice for you. Some common uses for second mortgages are:

Home Repairs and Remodels: a home repair and remodel can go a long way towards making sure your home is ready to be sold.

Paying off Debts: From credit card debts to private hospital bills, home equity can help you cover it. If you’re in the process of debt consolidation you may need a lump sum for settling your debt.

Bridge Financing: if you’re in the process of buying a home and selling a previous one, you can get a special kind of second mortgage known as a “bridge mortgage” to help you fill in the financing gaps.

Looking to apply for a second mortgage? Click here!

Use Your Home Equity as Part of Your Retirement Planning

Do you know that a lot of Canadian seniors feel that they cannot rely on just their pension after their retirement? As many as 8 out of 10 surveyed seniors feel that pension plans alone are not enough for them to have a comfortable retirement and are keen to find more ways of making sure that they can have better finances during retirement. A lot of the respondents are homeowners who are open to the idea of using their home equity as part of retirement planning but are not willing to sell their current home to downsize and are not planning to let go of their current home for any reason.

If you are one of the Canadians who are seeking ways to use your home equity as part of your retirement planning, then you are in luck today, as there are several ways for you to achieve that while still keeping your home. If you are not planning to sell, know that your options go beyond just getting a reverse mortgage. Even in retirement, you can take out a HELOC or a second mortgage more so if you are planning to use your home equity to help generate post-retirement income such as in the case of planning to purchase a rental property or choosing to invest in another property.

Selling Is Not Your Only Option

A lot of seniors feel pressured that they are expected to let go of their homes and simply ‘downsize’. Some people may not be willing to do this because they want their family to still have the original home for years to come. Some may want to stay in the same home because they have an emotional attachment to it. No matter what your reasons are for not selling your home to access your home equity, all are valid and there are workarounds for you to enjoy the fruits of your labour whilst keeping your home. Aside from a reverse mortgage, you can opt to get a HELOC or get a second mortgage even after retirement.

The common misconception is that a person needs to be employed to apply for a home equity loan, but the main requirement is to simply have home equity. With this said, if you qualify for a home equity loan or a HELOC after retirement or near retirement, be aware that you still have to pay the loan in the future to avoid losing your home. This can be addressed with smart financial planning and only using the funds from your home equity loan as a supplement or a possible emergency fund – to be used only when necessary or when using it can pay off in the future such as in the case of investing.

Are you near retirement or already in retirement and need assistance with tapping your home equity in 2021? Contact us today and we will be happy to answer your questions regarding this and any other concerns that you may have.