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Reasons to Obtain 2nd Mortgages for Ottawa Homeowners

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Applying for a 2nd mortgage in Ottawa can be confusing and overwhelming due to the regulations that exist with credit lending in Ontario. A second mortgage is essentially a loan obtained by using your home’s equity. Your home’s equity is calculated by taking your home’s value minus the amount you currently own from your original mortgage. If you have a large sum of cash locked in your home already, along with a good credit score and steady income, your chances of qualifying for a second mortgage are considerably greater. So, when would it be appropriate to consider applying for one? Here are three instances when it might be a good idea to look into this option:
 

Home Improvement and Renovation Projects

 
Adding new features or upgrading your home’s fixtures can be costly. Many home buyers seek a remodelled kitchen or renovated bathroom when shopping for their dream home. Homeowners in retrospect consider investing money into their home’s upkeep and improvements an investment to its future value. However, with monthly bills, mortgage payments, and other routine expenses, there is little disposable income left for major renovation projects. Financing these costly upgrades through credit cards is risky business for those who are unable to make the minimum payments, getting dinged with nasty interest penalties. A second mortgage can be a viable solution to this low liquid asset situation. By taking out a loan on your home’s existing equity, you can free up a large sum of cash to spend on improving and investing in your home. Features such as granite countertops, new windows, and energy-efficient appliances will increase your home’s value for years to come.
 

Post-Secondary Education

 
With tuition costs on the rise, it is becoming an increasingly daunting challenge for parents to help support their children’s future education. While there are long-term saving options such as RESP, not all families are fortunate to have the stable income necessary to invest ahead of time. Student loans are an accessible option, but sometimes the interest with these loans can be higher than a second mortgage. If the cost of your child’s tuition is within the amount available through your home’s equity, this is an option to take into consideration.
 

Debt Consolidation

 
A typical homeowner not only has to pay for their mortgage, but also a number of other bills for investments, such as their education or car. It can be overwhelming and difficult to manage various bills and debts with differing interest rates. Consolidating your debt into a second mortgage may allow you to cut down on your payments, while increasing your disposable income for other needs. In addition, it can decrease your interest rates and allow you to focus on paying off your debt, not your interest.
 
Remember, if you do take on a second mortgage, you will be making two separate monthly payments. It is crucial you gauge your financial situation and ensure you will be able to make these payments on time. The risk you take with 2nd mortgages in Ottawa is that you are putting your most valuable asset (i.e., your home) up as collateral. However, it can be a fantastic option depending on your situation and investment.

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