Taking out a second mortgage means
getting another loan in addition to your original mortgage and using your house
as collateral. Because your home is on the line when taking out second
mortgages in Ajax, it is important to consider the financial implications of
the new loan and to understand exactly what you are getting yourself into.
What is a Second Mortgage?
Second mortgages can be used to fund a
variety of projects and goals for Ajax homeowners. A second mortgage is simply another
mortgage on your home – a loan secured against the property. The term "second”
means that the loan does not have priority on your home in case you default.
Instead, your first mortgage – the loan used to purchase your home, has
priority and that loan would be paid off before any funds go towards the second
Some of the most common reasons Ajax
homeowners take out second mortgages include:
- Home improvements;
- Purchasing additional homes;
- Educational or emergency expenses;
- Creating a home equity line of credit.
- Consolidate debts
A second mortgage is a good way of
financing when the homeowner has available equity in the property.
Advantages and Disadvantages
There are many
benefits in obtaining second mortgages. One of the most popular and
advantageous reasons behind second mortgages is to consolidate debt. If you
find yourself overwhelmed by your credit card debt, car loans or other high
interest debt, you can consolidate these different accounts and pay them off
using the second mortgage loan. In this scenario you would pay off your high
interest loans with your new, larger, low interest second mortgage loan. This
results in lower monthly payments, lower interest rates and will save you a lot
of money in the long-term.
Another great use of a second mortgage
is to renovate or improve your home. In doing so, you can increase the value of
your home and actually gain more equity.
Second mortgages can be useful and are
more attractive than personal loans because of the lower interest rates, although
they do carry some risk. There are a few situations where taking one out might
be a bad idea, one of which is if you are just managing to pay your first
Work with a Mortgage Lender in Ajax
Second mortgage rates
tend to be a little higher than first mortgage rates and it’s a good idea to work
with a mortgage lender who will find you the best possible second mortgage rate
available in the market.
The amount available to homeowners
for second mortgages depends on the equity they have in their house, credit
score and loan-to-value ratio – the percentage of the property that is
mortgaged. Home equity is the value of your home minus all the debts you have
against your home.
Many Ajax homeowners use a second
mortgage to help achieve their financial goals. Explore second mortgages in
Ajax with a reputable lender and start saving now.