When to Consider a Second Mortgage

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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?

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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!

Getting A Second Mortgage in 2022

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Getting a second mortgage is something that you need to truly think about to decide on properly. After all, it is an additional loan that you’ll have to pay on top of your primary mortgage. Know that delayed payments for a second mortgage can mean losing one’s home plus there are always some additional fees that need to be paid which might mean additional financial strain on your budget.

The past few years brought historically low rates in the mortgage scene in Canada which caused an increase in home-buying activity as well as mortgage refinancing activity. Perhaps this is part of the reason why you are interested in getting a second mortgage now, but just know that there are plenty of things to consider before applying for one. We will talk about these things in this article.

Cost of A Second Mortgage

Applying for a second mortgage has certain fees. There will be costs associated with application fees and some costs which might be added by the lender or the institution from which you are planning to borrow from. There are also appraisal fees, closing costs, recording fees, underwriting fees, and other fees which are specific to your area. Note too that some lenders might charge a second position lien or an insurance fee for the extra risk they will be taking by lending to you.

Uses for A Second Mortgage

You can use the funds for a second mortgage for basically anything that needs a large amount of money. This can be a new business venture, a house renovation that you had been putting off, buying a second property, or pursuing higher education. You might also want to use a second mortgage for debt consolidation as a way to help you save thousands of dollars in interest from high-interest debts.

The key to using a second mortgage is to make sure that the benefits of getting one will outweigh the risks of taking it as a debt. You can consult with mortgage professionals to make sure that getting a second mortgage will be worth your effort, time, and money.

Alternatives for A Second Mortgage

There are other types of home loans that can help you access money from your home equity. A good alternative for a second mortgage is refinancing your home. Refinancing your mortgage will usually give you access to a lower amount of cash than a second mortgage. With this said, this still a better option than getting a personal loan which typically comes with high interest. You can talk with our mortgage professionals at Mortgage Central Canada to find other alternatives for getting a second mortgage.

Important Details to Consider

With everything said above, please take note that a second mortgage is still a type of home debt. It is still an additional financial burden that you need to pay on top of your primary mortgage and getting one can mean taking higher risks of losing your home. Additionally, other loan products such as the other types of second mortgages come with their own set of advantages and disadvantages. You need to assess your financial capability as well as your existing assets and liabilities to pick which loan product would be most beneficial for you.

If you’re thinking of getting a second mortgage in 2022, do not hesitate to contact us at Mortgage Central Canada. We remain open for both in-person and online transactions to meet your needs.

7 Things You Have to Know About Second Mortgage in Canada

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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!

8 Common Questions About A Second Mortgage

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It is nearly impossible to have never heard of a second mortgage these days. Perhaps you’ve heard enough to start wondering why more people are getting a second mortgage or getting curious to know how getting a second mortgage may benefit you. We’ve compiled the answers to the most frequently asked questions regarding second mortgages here.

Are There Types of Second Mortgages?

There are several types. The most common ones are HELOCs and home equity loans. A second mortgage that is given as a lump sum is categorized under general home equity loan while one that is given as a revolving line of credit is called a HELOC.

What Collateral is Used?

The value that you own in your home, or your home equity, is the collateral used in a second mortgage. This means that not paying can result to foreclosure so you better be sure to read the terms before getting one.

What Are the Common Uses for a Second Mortgage?

Debt consolidation of high-interest debts and paying for home renovation are the most common reasons cited by those who apply for a second mortgage.

Are Interest-Only Payments Possible?

Yes, paying for just the interest on a monthly basis is possible for some types of second mortgages. This is a useful feature to look for when you’re planning to pay for the loan after getting an expected huge windfall or after you’ve sold the home.

How Can You Use Funds from a Second Mortgage?

Once approved for a second mortgage, you are free to use the funds however way you want. You can use it to invest in a business, invest on the home by paying for renovations, pay for expensive tuition fee, finance a lavish wedding or grand vacation, consolidate debt, and more.

Is There a Limit to the Amount That Can Be Borrowed?

Generally speaking, you may borrow up to 80% of the value of the home equity that you’ve built up. This means that if you have $100,000 home equity, you can access as much as $80,000 in the form of a second mortgage.

Are There Fees to Pay?

Besides the interest, you’re expected to pay certain fees depending on which of the types of second mortgages you’ve applied for. This is best discussed with a mortgage professional so you can have a better grasp of what fees you can expect and how much.

Are There Differences in Interest Rates?

The different types of second mortgages come with different interest rates. The biggest factor affecting this is the risk that the lender is taking by lending money to you. There are also instances that the same types of second mortgages will have varying interest depending on the terms set by the lender. For this reason, make sure to compare interest rates before finalizing your second mortgage application.

Do you have more questions about getting a second mortgage? Feel free to contact us so that we can address your queries. Our mortgage professionals will be happy to respond to additional questions you may have about applying for a second mortgage.

 

Is It Wise to Get a Second Mortgage?

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Getting a second mortgage isn’t as simple as marching to a bank and telling lenders that you want to take a loan against your home equity. Although a second mortgage is just defined as a loan against the equity you’ve built up for your home, getting one is a complicated process that can result to you losing your home if you’re not careful. You should only take a second mortgage if you’re sure that you can handle the terms and that the risks will be worth it for you.

Why Get A Second Mortgage

Most people apply for a second mortgage to finance projects that they don’t have the cash for, such as an expensive home improvement project or extensive home repairs. Some do so to fund big expenses such as a dream wedding or vacation. There are also people who take a second mortgage to save money in the long run, such as when the money is used to consolidate loans with a high interest rate – effectively converting them to a low-interest single loan that is easier to handle.

How a Second Mortgage Can Help You

Whatever your reason is for trying to get a second mortgage, you need to understand how a second mortgage works to ensure that you end up helping yourself by getting it.

Know that a second mortgage gives you a one-time set amount that you have to pay on top of your first mortgage. The payments are a fixed amount monthly and is set until you’ve fully paid off your loan. The downside is that failure to make payments as agreed can lead to your losing your home to foreclosure.

How to Apply for a Second Mortgage

Getting a second mortgage follows a process that is similar to getting a first mortgage. There will likely be an appraisal as part of determining your home equity and then you connect with a lender or a bank to begin the paperwork.

Banks generally take a long time to evaluate your details to determine how much they can lend you. A private mortgage lender might be a better option if you’re not traditionally employed or if your credit score isn’t as good as banks requires it to be.

Is it Wise to Get A Second Mortgage?

Getting a second mortgage shouldn’t be your first financial option when you need cash. Ask yourself if it is possible to simply save up for the huge expense you have to fund. Try to see if your loans can be consolidated some other way. Try to see where you’ll be financially in the future to determine if you’ll be able to pay or whether you’ll be risking going homeless.

Weigh all the pros and cons before making up your mind to apply for a second mortgage. Try to find if there are any other ways to finance your needs. Once you’re sure you want to get one, don’t hesitate to ask for professional help to get the best terms possible. You need to make sure that getting a second mortgage will have a lot of benefits for your situation for it to be a truly wise  decision.

If you feel that you should consult with mortgage experts before you get a second mortgage, do it! Contact us and we’ll be happy to discuss your concerns with you.

Second Mortgage Loans in Canada

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In Canada, second mortgage loans are an additional loan that a homeowner can take on a property on top of a primary mortgage. Because a second mortgage is an additional loan, the risks for the lender are quite high, prompting them to charge higher interest rates for second mortgages as compared to a primary mortgage to mitigate their possible loses should the homeowner fail to make payments.

Defining a Second Mortgage

Second mortgages technically come in 2 forms, the lump sum home equity loan, and the revolving credit HELOC which stands for a home equity line of credit. These 2 loans sound similar but they are not the same in terms of format, interest rates, and payment terms. Usually, the term ‘second mortgage’ applies to home equity loan to avoid confusion with a HELOC.

A good credit score is most certainly needed when trying to get a second mortgage from a bank or similar huge financial institutions. This is because the risks of nonpayment are higher for second mortgages due to the fact that paying for them is on top of an existing mortgage. For individuals who do not qualify for a second mortgage with banks, going the private lender route with the help of professional mortgage brokers is possible.

Who Needs a Second Mortgage?

People with a lot of credit card debts from various providers are ideal candidates for a second mortgage as the most popular use for it is to consolidate debt. With a second mortgage, you can access a part of your home equity as a lump sum and pay off your high-interest debts so that you end up with just one bill to pay instead of a few. By using a second mortgage to consolidate debt, you’ll save up on interest fees and more of your payment will go towards paying your actual loan than just struggling to cover interest fees. Other people who may need a second mortgage are people who need to fund a huge project (such as a much-needed home renovation). Consolidating debt and financing home improvement are great ways to use a second mortgage to improve your credit score too.

How to Qualify for a Second Mortgage?

Qualifying for a second mortgage means passing the lender’s requirements on 4 key areas, your credit score, your ability to pay, your property location and status, and your existing home equity.

Lenders are looking for people who have a great property with a substantial enough equity and have the means to pay. Credit score is negligible depending on the lender’s specific requirements.

The best way to find lenders with whom you might qualify for is to reach out to a professional mortgage broker. Good mortgage brokers have years of industry experience and have a huge network of lenders that they can match with specific borrowers based on the factors mentioned above. At Mortgage Central, we’d be happy to discuss your options with you as well as help you get approved for a second mortgage. Contact us soon!

 

Get a Second Mortgage with Bad Credit

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Bad credit may get in the way of getting a second mortgage but it is still possible to get approval even with a less-than-desirable credit score. This is definitely worth a consideration because a second mortgage can be used to improve one’s credit score. A strong application is a must and you must shop for the best interest rate to reap the most benefits.

Dealing with Bad Credit

Getting a second mortgage with a bad credit comes with certain disadvantages. First of all, a second mortgage already comes with a higher interest rate than a first mortgage but with a bad credit, the lender will surely ask for a higher interest to cover the risk of lending to you. This is because a second mortgage is subordinate to the first mortgage and the lender for the second mortgage runs a higher risk of not getting paid if financial troubles arise. It is therefore only logical to be given higher interest rates for a second mortgage if you have bad credit but you can still get a good deal by shopping for the right lender.

Apply for a Second Mortgage with Bad Credit

The first step that you must do before applying for a second mortgage if you have bad credit is to find ways to improve your credit score. It is possible that there are some mistakes that can improve your score once corrected. By getting a copy of your credit history and reporting wrong entries, you may be able to get a great boost in your credit score for a relatively short span of time.

The second step that you must take to get a second mortgage despite having bad credit is to actively work towards reducing your debt, particularly the high-interest ones such as credit card debt. If it is possible, pay them off in full or make sure that the balance is below 30% of your credit card limit. Don’t fall for converting your credit card debt into new lower-interest card debts because this won’t help you in getting approval for a second mortgage. It will look like you have multiple credit applications which will make it seem that your finances are in worse shape than it really is.

Find the Best Lenders in Canada

Getting help from a mortgage professional will make your second mortgage application a lot smoother if you have bad credit. Mortgage professionals know which lenders are more lenient and which lenders will give you a better interest rate. Mortgage professionals can also share some tips for faster approval such as having a co-signer with a good credit score.

Getting a second mortgage with terms that you can manage within a short span of time will drastically improve your credit history and open the possibility of qualifying for other loans in the future. Contact us if you have bad credit and need help with applying for a second mortgage in Canada. We’ll be more than happy to discuss possible solutions with you at Mortgage Central Canada!

2019 Guide to a Second Mortgage in Ontario and the GTA

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Spring is here! Like many other individuals, you may be contemplating about getting a second mortgage this year and asking yourself whether it will be worth it as well as what are the things you need to know. Well, you’re in luck today if you’re seeking more information about second mortgages!

Second Mortgage Definition

A second mortgage is a secured loan, with the security being the value of the homeowner’s property. It is not the same as a primary mortgage and is paid separately. A second mortgage is also the term used for any other loan secured by the home’s equity no matter how many similar loans there are.

A second mortgage is considered a mortgage because the term refers to any loan secured by real estate as collateral and need not be used for the purchase of the home itself.

As mentioned earlier, the term second mortgage applies to any home loan taken after the primary mortgage. If a second mortgage is subject to foreclosure, the primary mortgage is paid off in full first and what is left is used to pay the second mortgage.

Second Mortgage Rates

Rates for second mortgages can vary from lender to lender. An upside is that the interest rate is markedly lower than other options for loans such as unsecured personal loans or credit cards. This is because a second mortgage is backed by home equity; hence, there is some security for the lender. In comparison to a primary mortgage, the interest rate for second mortgages is still a bit higher because they carry more risk with everything considered.

Some second mortgages may have a fixed interest rate and some may have a variable rate. Having a variable rate mean that rates are adjusted from lower to higher based on market condition. Having a fixed rate just mean that payments are predictable because the interest rate remains the same throughout the course of the loan.

Types of Second Mortgages

There are 3 main types of second mortgages, home equity loans, piggyback loans, and home equity lines of credit.

  • A piggyback loan is a way to save money by splitting the purchase of the home into 2 different loans.
  • A home equity line of credit is a loan from which you can draw from many times over as you need.
  • A home equity loan is a lump sum loan taken against the value of the house.

Get a Second Mortgage in 2019

Second mortgages under HELOCs and home equity loans require that the homeowner owns a significant value of equity in the property. Some lenders require a specific credit score, income bracket, steady employment, and other data. Some lenders are more lenient and will lend money to someone who may be self-employed or have bad credit. You just have to understand the terms and make sure to read any fine print before getting a second mortgage from a lender.

Are you applying for a second mortgage soon? Contact us and we’ll help you assess whether it is the right type of loan for you! Wherever you may be in Ontario, the GTA, or Canada, our mortgage professionals are within easy reach. Talk to us soon!

Your 2022 Second Mortgage Checklist

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Do you know that now is one of the best times to get a second mortgage in Canada despite concerns over the contrary? The risks are not worth sweating over if you take the time to understand what a second mortgage is and only decide after identifying the best type of second mortgage that may work for you.

Second Mortgage Primer

A home loan that you take which is secured by your home equity is the definition of a second mortgage. It is called as such because unlike the primary mortgage which gets first priority in the event of you defaulting payment, it only comes second.

A second mortgage can allow you to access a maximum of 80% to 90% of your home equity. The maximum limit is determined by the type of loan you’ll apply for as well as how much the lender will approve knowing that most people who get a second mortgage simply want to avoid the fees associated with refinancing and the fees incurred by breaking a current mortgage.

Why Apply for a Second Mortgage?

Most people cite debt consolidation, home renovation, or higher education when asked for a reason why they’re applying for a second mortgage. In a nutshell, a second mortgage gives a homeowner more elbow room to maneuver in when fixing his or her finances in the long run.

Types of Second Mortgages

There used to be a time when second mortgages were perceived as a desperate choice for financially desperate people. Thankfully, that misconception has been cleared up. More people understand now that second mortgages come in various forms that have their own set of advantages and disadvantages.

A HELOC is a great choice for someone who needs recurring access to a significant amount of money because it allows the homeowner to keep accessing the loan as long as parameters are met. As a form of revolving credit, a HELOC is a flexible loan product that gives homeowners the freedom to spend what they need whenever they need within the limits of the loan.

Those who need a lump sum may choose to get a home equity loan. This is especially helpful for those who need money for a huge renovation or debt consolidation.

What Are the Risks of Second Mortgages?

Second mortgages typically come with a higher risk for both lender and borrower as compared to a first mortgage. This is mainly why lenders impose a higher interest rate for a second mortgage as well as have stricter requirements before giving approval. Lenders have to pay higher insurance for a second mortgage to make sure that they are covered in the event of the homeowner going bankrupt. As for the homeowners, a new debt on top of an existing one will always make things riskier.

Is It Time for You to Get a Second Mortgage?

Assess whether you truly need a second mortgage and whether you can qualify for one. Note that requirements vary from one lender to the other. Try to gauge if the risks will be worth it for you. Better yet, contact us at Mortgage Central to talk to our mortgage professionals. We’ll be able to answer your questions to help you make an informed decision.