Today’s high cost of living has made
climbing out of debt more difficult. One of the main reasons Canadians take out
a second mortgage is to consolidate their debts. A second mortgage is an
additional loan taken out on a property that already has an existing mortgage.
Second mortgages in Barrie allow homeowners to take advantage of the equity
their property has accumulated to access large sums of money that they may not
otherwise qualify for.
But will it help to clear those debts?
For some it will but it may create more problems for others. Before committing
to a second mortgage, consider these factors.
Do you Have Enough Home Equity?
Equity is calculated by taking the total
value of a property minus how much Is still owed on it, not how much has
already been paid towards the mortgage. The amount of available equity can then
be used for paying off creditors, lines of credit or debt consolidation.
When lenders are considering an
application for a second mortgage, they will look for:
equity – what is left over after the first mortgage or other debts secured
against the home;
ratio – the ability to repay the mortgage
score – influences what amount you will be approved for and what the rate
Are the Payments Affordable?
You will need to decide if taking out a
second mortgage will solve your cash flow problems. The second mortgage will
subordinate to another loan against the same property, and in the event of a
forced sale, the first mortgage will be paid off before the second.
Since second mortgages are secured by
your property, if you stop making payments, your home is at risk of
Work with a Private Mortgage Lender in
Many Canadians might think of private lenders as a last-resort
option if they can’t secure financing anywhere else. However, private funds are
gaining traction as a financing option due to the new mortgage rules set by the
federal government and the continued post-financial crisis caution being
exercised by institutional lenders. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), many
Canadians view mortgage professionals, such as private mortgage lenders, as
valuable consultants that can help them understand their options.
A lender in Barrie is particularly
valuable to second mortgage seekers whose financial circumstances are not as
straightforward as traditional lenders like banks may prefer. A private
mortgage lender will:
- Present the most competitive rates;
- Provide flexibility in financing choices;
- Often look past credit score and debt ratios;
- Have shorter terms;
- Offer fast closings.
Second mortgages in Barrie have very manageable
interest rates and are one of the best ways to borrow against available equity
for homeowners to get a handle on debts.