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With all of the options availble in the second mortgage market, most people need an experienced mortgage professional to guide them through the mortgage qualifying process. Our dedicated agent will speak to you in detail to determine what your options are with respect to your unique circumstances along with providing you the best terms and interest rate in the market. We have over 400+ lenders in Ontario, that include Banks, Credit Unions and MICs (Mortgage Investment Corporations) to serve your second mortgage needs. In addition to finding you the lowest rate in writing, we carefully vet each lender to ensure they meet our rigorous standards that put our client’s interests first and foremost in the second mortgage & mortgage refinancing process. A second mortgage loan is in fact riskier than the first mortgage, since lenders in this case are in second position on the title of your property.
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Due to this reason, second mortgages are also often termed as subordinate in nature. To make up for this risky situation, providers of second mortgages usually charge a higher rate than that of a principal mortgage.
Individuals that have an existing mortgage, with good credit and above 20% equity in their homes, can consider a home equity line of credit as the most affordable second mortgage option (although the rate may be higher than a second mortgage). However, in the case of bad credit or little equity in the property, the homeowner would require borrowing money through a private lender or a trusted company. In any event, Expert Mortgage has the experience and network of lenders that may be able to assist you in any such case.
Why opt for a Second Mortgage?
- Debt Consolidation
- Business Investment
- Unexpected Expenditure
- Mortgage Arrears
- Car Purchase
- Education
- Home Renovation
- Consolidating High Interest Debts
- Paying Tax
- Investment in Real Estate
- Bridging Finance
- Medical Expense
Is a Second Mortgage Right for You?
A house is a significant financial investment. It also takes a lot of money to maintain. While taking out a single mortgage can be stressful enough, many homeowners choose to take out a second mortgage later to meet large expenses, such as paying off a high-interest first mortgage.
Taking out a second mortgage, as in taking out a first mortgage, is a decision that should be made after extensive discussion with us at Expert Mortgage. We’ll go over the basics of second mortgages to help you make an informed decision, as well as some of the benefits that may make a second mortgage a good idea for you. In addition to conducting research online, we recommend speaking with a financial expert who can assist you in determining whether alternative financing choices are a better fit for your requirements. Please call us at 1-800-513-6469 to speak in further detail regarding an application
What is the definition of a second mortgage?
A second mortgage is a loan that is secured by your home (or, to put it another way, your home is the collateral on the loan—in other words, if you don’t pay back the loan, you may lose your home). It works in a similar way to a first mortgage, with the main distinction being that it is a second mortgage on your house, rather than the only principal debt on the property.
When you take out a second mortgage, the amount you can borrow is determined by the amount of equity you have in your property as well as its market appraisal value. Remember that equity refers to the amount of your home’s principal that you have available for borrowing purposes. This amount fluctuates depending on how much you pay toward your mortgage each month and whether the home’s value has increased, dropped, or remained constant.
Because a second mortgage is a large lump sum payment, most homeowners use it primarily for substantial expenses. These are just some of them listed below:
- Home improvements that are significant, such as pricey repairs or renovations
- Covering the price of tuition
- Debt consolidation
- Putting additional money into a first mortgage with a high interest rate and/or a first mortgage with PMI (private mortgage insurance)
It’s important to keep in mind that a second mortgage is secondary to a first mortgage. This means that if you default on both debts, the profits from the sale or foreclosure will go to your original mortgage lender first. This makes a second mortgage a riskier proposition for lenders, which explains why you can be charged greater interest rates than you were the first time.
Cash-Out Refinancing vs. Second Mortgage
If this sounds familiar, it’s likely that you’ve heard of other lending choices that use your property as collateral, such as cash out refinancing. While both allow you to borrow money using the equity in your home, the main difference between a second mortgage and a cash out refinance is that a second mortgage creates an additional mortgage that exists alongside your first one, whereas a cash out refinance replaces your first mortgage with a new one.
Why would you want to take out a second mortgage rather than just getting a new one? If interest rates have risen, you’ll be better off taking out a smaller second mortgage to cover only what you need rather than refinancing at a higher rate. Lower closing costs result from taking out less money, which is a solid short-term advantage.
Home equity line of credit vs. second mortgage (HELOC)
A home equity line of credit, or HELOC, is another financing option you’ve probably heard of. A HELOC allows you to borrow money against the equity in your home, with a conventional 10-year draw period during which you can withdraw funds, followed by a 20-year repayment period. This, like a second mortgage, produces a loan that is in addition to your first loan rather than replacing it, as a cash out refinance would.
When it comes to deciding between a second mortgage and a home equity line of credit, it usually boils down to rates—albeit in a different way than refinancing. Second mortgage interest rates are usually fixed, which means that the rate you agree to on the day of closing is the rate you’ll pay for the life of the loan. A variable interest rate on a home equity line of credit, on the other hand, can (and frequently does) change during the length of the loan. If interest rates rise, you may find yourself paying more than you intended.
The Benefits of a Second Mortgage
If you require a large sum of money quickly, a second mortgage is an alternative worth exploring. There are three major benefits to taking this route:
You have a lot of borrowing power. A second mortgage is a fantastic way to get a large sum of money for things like a significant home remodel. Unlike personal loans, which are generally regulated at a set amount, the borrowing limit on a second mortgage is determined by the amount of equity you have in your property. And if you’ve been there for a significant time, you should have amassed quite a significant amount, given trends in Ontario. You can typically borrow up to 85% of the value of your property, albeit the amount owing on your first mortgage is taken into account.
There’s a chance you’ll get some tax breaks. You may be eligible for tax incentives depending on the purpose of your second mortgage—for example, if you utilize the funds to make energy-saving improvements or investment for business purposes. Although tax benefits aren’t guaranteed, its best to speak with a tax professional , to determine if your plans for a second mortgage deserve a tax break or two.
You might be able to acquire a lower interest rate than with other types of financing. A house has a lot of value, thus it’s a good security for a loan. Even while your first lender has full claim to asset revenues in the event of a default, having such solid collateral frequently means you get a cheaper interest rate than you would with non-home-secured financing choices.
In terms of drawbacks, all loans come with some dangers that must be weighed against the benefits. One of the major disadvantages of a second mortgage is that you’ll have to make two mortgage payments each month instead of one, stretching your budget thin. But we can help, and have your mortgage payments pre-paid for the term of the loan, freeing up cash flow. You’ll also have to pay for closing costs, which we will fully disclose to you in writing and ensure to keep within market guidelines.
Working with a skilled mortgage broker, who can look at your circumstances and evaluate it, as well as your numerous financing alternatives, is the best approach to ensure that you make the greatest financial decision for receiving the money you need.
Make sure you shop around for the best terms in addition to conducting your due diligence in terms of government research. While your interest rate is mostly determined by your income and credit history, various terms will likely apply from one lender to the next. Don’t know where to begin? Speak with our mortgage professionals first.
Expert Mortgage extends a helping hand to homeowners who may be seeking a second mortgage to address any of the above concerns and other not so common expenditures. We stand out as one of the very few brokerages that commits to finding you the best rate and terms – and we put it in writing, when no one else will..
To get more details on Second Mortgages please contact:
Victor Kaushal
416-895-6074
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