If you are looking for an immediate source of cash for a major expense,
such as a home-renovation project or post-secondary tuition fees, 2nd
mortgages for Oshawa homeowners are a tempting option. A second mortgage is
essentially a secured loan financed by your home’s accumulated equity. It is a
viable option for those looking for a large sum of money that is not available
from other means such as credit cards or unsecured loans.
While it is tempting to acquire a second mortgage, there a few things
to consider before taking the leap of fate.
Consider Refinancing First
Before Taking Out a Second Mortgage
If you find your cash flow is low due to your original mortgage’s high
interest rates or payments, consider speaking with your original bank or lender
to see if you can refinance the first mortgage. Refinancing allows you to
retain your original equity, while potentially unlocking better interest rates,
lowering payments, or adjusting the length of your loan.
If you are satisfied with your current mortgage’s terms and conditions,
a second mortgage is a good way to tap into your home’s equity without
disrupting your original mortgage. However, since a second mortgage is
secondary to your first mortgage, secondary mortgage is considered riskier to
lenders. The interest rates for second mortgages are likely going to be higher
than your first. However, it can still be significantly less than traditional
credit cards, which can be as high as 20%–25%. If you are considering second
mortgages as an Oshawa homeowner to consolidate your debt, shop around for the
best interest rate available to you. While you may save money in the monthly
payments by consolidating your debt into your home, it is the interest where you
will save money in the long run.
Budget for Closing Costs
Unlike traditional loans, second mortgages require quite a bit of
paperwork and fees to submit your application. Closing costs can include mortgage
application costs, appraisal, and legal fees that will add up. It is important
to take into consideration these expenditures when budgeting your repayment
plan. Even if you are able to make the monthly payments, you should look into
whether the amount you need and the length of the loan is worth all the upfront
How Is the Market?
Whenever you are dealing with real estate, your decisions are often
affected by the conditions of the housing market. Are homes in your
neighbourhood selling quickly or sitting on the listings for months on end? Do
you have a long way to go on repaying your original mortgage or only a few more
years? Questions like this will allow you to gauge the market’s conditions and
the amount of potential equity you have available. In addition, you will want
to take a look into current interest rates. Do they look favourable compared to
previous years? If the housing market is hot and interest rates are low, it is
an advantageous time to consider taking out 2nd mortgages for Oshawa homeowners.