A valuable financial tool for homeowners seeking to leverage their home equity. Whether you’re looking to consolidate debt, fund a major renovation, or invest in a new business, understanding how a second mortgage works can open up many financial opportunities.
Join us as we explore the benefits, potential uses, and key considerations of taking out a second mortgage in Brampton, helping you make informed decisions about your financial future.
What is a second mortgage?
A second mortgage is a loan that is secured by the equity in your home. When you apply for a second mortgage, most lenders will allow you to borrow up to 80% if your home’s equity, which means the amount of cash that you can borrow through a second mortgage is often quite substantial.
Once you have secured the loan, you will have two mortgage payments – one on your original mortgage if you still owe money on it, and one on the second mortgage. Getting a second mortgage does not require you to break your first mortgage nor does it affect your payment terms on the first mortgage.
Why get a second mortgage?
When you need to borrow money, you will have various options of how to do so. This may include credit cards, personal lines of credit, bank loans, etc. A second mortgage is most suitable when you need to borrow a larger sum of money. It is a good option, because it is a secured loan which means your interest rate is going to be lower than it would if you borrowed through an unsecured loan (like a credit card).
There are various reasons why homeowners choose to get a second mortgage, however some of the more common reasons are:
- To consolidate higher interest debt.
- To finance a large expense such as a home renovation.
- To obtain money for a down payment on another property.
What Kind Of Interest Rate Can I Get With A Second Mortgage?
Generally speaking, the interest rates on second mortgages are slightly higher than what you’d be able to get on a first mortgage, but much lower than what you could get with an unsecured loan like a credit card or even a personal line of credit.
The interest rate that you can qualify for will also depend on other factors such as your credit rating and whether you can get approval from an A lender or if you need to work with a private lender.
The 5 reasons that may change your mind about second mortgages
- Low-interest rates: Second mortgage loans generally come with a low-interest rate when compared to other types of unsecured loans. If you unsecured loans against credit cards or from a bank, you may notice that the interest rates are very high. However, this is not the case with second mortgages as the lender would not want to keep them on their books for more than a year or two. They want the mortgage to be paid at some time or refinance the loan the renewal for the first mortgage comes up. Also, since with second mortgages you put your house as collateral the starting interest rates can be as low as 6.99%.
- Pay-off your existing debts: You can wisely use the funds of the second mortgage and pay off your other loans. These could be education loans (which take a tremendous amount of time to pay back), car loans ( if you miss one of the payments, the interest rate, as well as the fees, can shoot up and can negatively impact your credit score). As second mortgage loans come with low-interest rates, you can use the fund to clear off your other dues and then slowly pay off your second mortgage.
- Renovate your property: Renovating your property is another great way to use the funds of your second mortgage. You can change the look of your living room, remodel your kitchen and much more. This will not only improve the visuals of your property but also increase its market value. If you’re planning to sell your home in the future, you can get a good price on it.
- Invest in another business: If you want to make your mark as an entrepreneur and start a new business, the funds from a second mortgage may be the most appropriate means of financing it. You might be thinking of taking up a small business loan, but the interest rates on them are very high. In some cases, you might need to have an already established business to qualify for this type of scheme, especially in a tight lending environment. You can use your home equity to secure a second mortgage as seed money. However, you should see to it that your business is based on a solid foundation and has a market for your products. It’s only a good idea when the potential reward is greater than the risk involved.
- Invest in your child’s future: This is another beneficial usage of the funds of your second mortgage. With tuition costs for higher education on the rise year-after-year. It might be a wise decision to save the funds for your child’s aspirational goals.
Get Second Mortgage Easily with Akal Mortgages
A second mortgage can be a powerful financial tool, offering competitive interest rates and substantial funding secured against your home equity. Whether your goals involve consolidating high-interest debts, enhancing your property value, or investing in future opportunities like a new business or educational endeavors, a second mortgage provides a strategic way to leverage your financial assets.
For tailored advice and expert guidance on how a second mortgage can work for you, consider reaching out to the professionals at Akal Mortgages. Their experienced team can help you navigate your options and implement a plan that aligns with your financial objectives.
Ready to tap into your home’s equity with a second mortgage? Contact Akal Mortgages today to discuss your options with a seasoned advisor and start your journey toward financial empowerment.