Many people have questions regarding second mortgages that can be addressed in general, however, its always best to discuss your personal situation with a licensed mortgage agent.
The interest rate on a second mortgage in Toronto can vary and generally can start at prime + where a heloc (home equity line of credit) is concerned. Most of the big 6 banks offer the heloc product, however, not everyone will qualify for this product. Private second mortgages are growing in popularity and vary in range of interest, depending on the loan-to value, the applicant’s credit rating and income profile. I have seen rates from 5.99% + in cases where there was no income and an equity lender had to used to acquire funding. Toronto mortgage brokers can find funding for your second mortgage up to 85% of the appraised value of your home with fees that are fair for your transaction.
A 2nd mortgage charge on your property, is a second loan on title that falls behind your first mortgage. In many cases, we can assist you in acquiring fund that is up to 90% of the appraised value of the home in most urban markets. The second collateral mortgage then becomes an obligation that needs to be paid in addition to your first mortgage obligations. In some instances, we can also have the mortgage pre-paid, which will allow for you to have no 2nd mortgage payments for the term of the loan. Please contact us to discuss this strategy in further detail.
This is an interesting question in the context of what we mean by a second charge mortgage. There is no deposit payable out of pocket per se, however, we may refer to the amount of equity available in the property at the time of underwriting the file for a second loan. In many instances, if you have available equity in the property of 15- 20%, many lenders will be willing to negotiate a loan arrangement upon review of your overall file.
This is perhaps the wording that most people are accustomed to when looking at options related to a 2nd position mortgage. Again, if you have available equity in the property of 15-20%, this would be a good start to commence negotiations with a lender through a mortgage broker of your choice.
Whenever I consult with clients regarding secondary financing, I always try to look to the future outcome a year later after the mortgage has been approved and funded. In my opinion, the best strategy is to use a second mortgage loan to payoff high interest debt or for emergency funding purposes with a plan to payoff the loan after the year by merging the 2nd loan with the first mortgage for one payment at a lower rate. Other instances that make sense for leveraging a second charge on the property would where you need bridge financing for renovations with the intention to sell your home shortly thereafter.
If you are able to consolidate your high interest debt into one payment with a lower interest rate using a second mortgage, this might work in your favor. Allowing you to pay off the balances on your credit cards and unsecured lines of credit, will ultimately reduce your credit utilization, which may reflect well on your credit report, as long as you stick to a plan and not overuse your credit facilities going forward.
If you can refinance your mortgage without an exorbitant pre-payment penalty and consolidate all of your debts into one lower monthly payment, this may be the option of choice. A 2nd collateral mortgage will usually be at higher interest rate than a first mortgage, given, its subordinate position and the inherent risk associated with this loan in the event of mortgage default.
I have seen some lenders use a blanket mortgage strategy, where they will put a lien on your primary residence and the second home, for their security and subsequent lending purposes. This can be a complex matter that requires the expertise of a mortgage agent, and it is suggested that you consult with a professional to ensure it makes sense in your particular circumstance.
This would have to be assessed on a case- by- case basis. In general, as long as you have about 20% equity in your property, most lenders are willing to lend, based on the appraised value of the home. Even with poor credit and no income, we have no problem securing second charge mortgages for our clients. Now with remote signing services, its easier to get approved for a loan that makes sense in your circumstance. Rest assured, if there is a way to have your mortgage refinanced, we will find a way to assist you.
In general, many folks equate a home equity loan in Toronto, with a home equity line of credit, also known as a heloc, as offered by many banks in Canada. Usually the heloc rate was prime, given, it was secured by your principal residence, however, many financial institutions are charging prime ++. If one qualifies for a heloc, it may be advantageous in the sense that it allows for you to draw down on a revolving credit product and make minimum payments that will assist in managing your monthly cash flow. A 2nd mtg on the other hand requires fixed monthly payments (unless you have arranged to have it pre-paid) and has a higher interest rate without the revolving credit features associated with a heloc. Always consult with a qualified mortgage agent or broker in determining your overall qualifications for approval.
Yes, a home equity loan can be a in the form of a second mortgage and allows for you to draw down on the equity in your home for your borrowing purposes. There are many institutional banks, credit unions and mortgage investment corporations that offer these loans with varying 2nd mortgage interest rates.
If you are going to use the 2nd loan to payoff high interest debt at a lower rate and have a subsequent plan of repayment of this mortgage loan in the future, this could prove to be beneficial based on the advice and plan of action as discussed with your mortgage broker.
Generally, you want to have equity in the property for a bank or lending institution to qualify you for this sort of loan. Most mortgage agents and brokers have access to lenders that will lend up-to 85% of the appraisal value of the home in question. The condition of the home/property does play a part, as I have seen many lenders walk away from funding a second mortgage due to the home being unkept.
Most second position mortgages are for a one year term of interest only payments. There are exceptions where the term can be negotiated for a longer duration based on the lender’s approval criteria.
Essentially, a heloc can be considered as secondary mortgage in most instances, however, not everyone qualifies under the strict lend criteria rules that the six banks have in place in Canada. There are numerous credit unions and financial institutions that are NOT governed by the “Banking Act” and have different rules that allow for quick approvals for many home owners in the GTA. Speak to our Expert Agent to assist you in finding the best 2nd interest rates and terms on your mortgage in the market.