To some, the mortgage industry is a complex mystery. Have you heard or learned all you need to know about getting a second mortgage on your home or business? If not, you will definitely want to read this article thoroughly to ensure you have all the facts in hand before making any swift decisions with your finances.
What is a second mortgage?
For those of you that don’t yet know what a second mortgage is, it can be defined as another mortgage that is secured on your current home or business, which you have previously mortgaged. A second mortgage can also help you to find another source of money easily.
The structure of a second mortgage is identical to your first mortgage. You will have a contract with a term, equity in the home (a small down payment), followed by monthly payments. The only difference between a first and second mortgage is that the second mortgage lender will be assuming responsibility if you default on your second loan. However, even though second mortgages produce more risk interest rates on second mortgages will remain lower that the interest rates offered on most credit cards.
It’s also important to note that there will be limits on your second mortgage too, limited to your home equity. Therefore, you cannot borrow more than what your home is worth, and your lender may only approve you up to maximum of about 80% (in some cases up to 95% - offered by one institutional lender) of your home equity value. On the Brightside for homeowners, since prices for homes in Ontario have risen quite a bit, homeowner home equity has also seen an increase.
How to know if you need a second mortgage?
There are many reasons why you may be considering taking out another mortgage on your home. If you have been heavily thinking about:
- The Mortgage Insurance on your first mortgage
- Debt consolidation
- Creating a line of credit on your home equity
- Repairing or renovating your home
- Refinancing your first mortgage
A second mortgage is just what you need.
What are the advantages of getting a second mortgage?
When you secure a loan against your home, your interest rate would be lower due to the loan being a “Secured” loan. Securing a second mortgage will enable you to pay off your car loan or pay down your current credit card debt. If you are considering using the money you get to pay debts, you should focus on high interest debts. Consolidating your debts would allow you to make one affordable monthly payments and get your debts reduce rather quickly, since interest rates on your debts will also be reduced.
A second mortgage may be the best solution for you if:
- You were already turned down by the bank for a traditional mortgage loan
- You struggle with poor credit
- You have income that cannot be verified
- You do not have time to wait for the approval process of a traditional loan
- You have unconventional mortgage needs (such as for residential or mixed-use properties)
Do you still have some questions about second mortgages? Contact AKAL Mortgages to gain valuable insights or apply online today. If you’re looking for a chance to win some extra money, why not enter our Mortgage Sweepstakes? It’s our way of showing our appreciation and giving back to you.
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