For homeowners who need to borrow a large sum of money while
maintaining a reasonable interest rate, 2nd mortgages for Oakville homeowners
can be a fantastic option. Whether it’s to reinvest in your home through renovations
or to help pay for unexpected emergencies, a second mortgage isn’t as scary as
it may seem.
What is a Second
A second mortgage is a loan against your home’s equity. The amount you
can borrow for a second mortgage depends on the amount of equity your home
currently has. To calculate this, you take the difference of your home’s value
and the amount you currently have remaining on your first mortgage. The lender
can provide as much as 90% of this equity, depending on other factors, such as
the value of your home, credit score, and income.
Advantages of Second Mortgages
1. Large Sum of Cash and
Unlike personal bank loans and credit cards, a second mortgage allows
you to borrow a large sum of cash with the flexibility of where you invest it. Most
borrowers seek out a second mortgage for investing in home renovations, debt
consolidation, paying for university or college tuitions, and other large
expenses that can’t be covered by conventional loans.
2. Lower Rates Compared to
Unsecured Loans and Credit Cards
Since all second mortgages are secured loans, lenders consider them
safer since you provide your home as collateral. These secured loans often have lower interest
with fixed interest rates, so it is good for homeowners who want to control
3. Interest Is Tax Deductible
Unlike the interest you pay on a credit card, interest from a second
mortgage is tax deductible. Take this into consideration when weighing out the
pros and cons.
Disadvantages of Second
1. Risking Your Home for
The obvious but critical risk of a second mortgage is that you are
putting your home up as collateral. If you are unable to pay back your loan,
your lender has the ability to foreclose and seize your home in return.
Remember, you not only have to pay for your original mortgage, but your second
mortgage separately. It is important to make sure your income can cover both
2. Interest Rates Are Higher than
a Standard Mortgage
Since a first mortgage takes precedent to a secondary mortgage, the
latter is considered riskier than the
former. The interest for the second mortgage payments will be higher, but may
still be considerably lower than a standard personal loan or credit card.
3. Application Fees and Closing
you will need to have your home’s value appraised and pay for other closing
costs, there are some expenses that come
with applying for 2nd mortgages in Oakville. Depending on the amount
of the loan and the length of the terms, it may or may not be worth the cost.
Ask your lender and appraisers for detailed quotes, so you can determine whether a second mortgage is the