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.