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2nd Mortgages in the GTA – 3 Types of Lenders to Consider

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Second Mortgages in the GTA – Three Types of Lenders to Consider

 
Obtaining and applying for 2nd Mortgages in the GTA can be an intimidating task given all the different types of lenders and options available for homeowners. With each one saying they offer the best rates or the most sound terms and conditions, homeowners need to come prepared with well-researched questions to determine which lender best suits their needs and understands their concerns.
 
But first, what is a second mortgage? A second mortgage is exactly as it sounds, a mortgage second-in-line to your first or primary mortgage. It is a loan that is against your home’s equity (i.e. your home’s value minus the amount you currently owe). Since your home is often your biggest investment, a second mortgage is a good option for those looking to access large sums of cash, whether for debt consolidation or a home renovation project.
 
There are three major types of second mortgage lenders: traditional banks, credit unions and private lenders.
 

Traditional Banks

 
Many homeowners in the GTA may have their first mortgage through their primary bank since they offer the reassurance of having been a trusted advisor for homeowners throughout their life. Traditional banks (e.g. TD Canada Trust, RBC, CIBC) will likely offer you a home equity line of credit, which is similar to a credit card where you have a monthly limit and can access as much or as little as you need. However, major banks require larger amounts of equity (often 20% or above) to be built up in your home and a strong credit score (above 650) in order to qualify for their mortgage-based products.
 

Credit Unions

 
Credit unions are similar to traditional banks except they are cooperatives that promote competitive rates for their members. They have a "for the people, by the people” perspective and offer their members many of the services a traditional bank would. Credit unions may be less stringent on equity and credit scores. However, it can still be difficult for homeowners (particularly new ones) to qualify for a second mortgage. Trust companies are another type of alternative lender, appealing to borrowers such as new immigrants with very little credit history or small business owners lacking proof of stable income.
 

Private Lenders

 
Private lenders are a great option for those who have a less favourable credit score and/or have not built up the minimum equity levels that traditional banks and credit unions require. A second mortgage can be used to consolidate debt, finance a major project/investment or pay for unexpected expenses. Consider booking a meeting with your current mortgage broker to see what interest rates and terms they are willing to offer you, then use those numbers as a benchmark for comparing and negotiating with prospective lenders.
 
If you are considering second mortgages in the GTA as a viable option for debt consolidation, acquiring capital for investments such as home renovations or a child’s tuition, take the time to book consultations with at least 3-4 lenders to ensure you are getting the best offer for your long-term interests. Regardless of your situation, it is important to be upfront and clear about your financial situation. A trusted financial advisor will listen to your needs and ensure that you are aware of all the possible options before making any major commitments. 

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