A second mortgage is a loan taken after
the first mortgage that allows homeowners to borrow money from the equity in
their home, without refinancing their current mortgage. There can be various
reasons to take out a second mortgage, such as:
- Consolidating debts;
- Financing home improvements;
- Second property.
The second mortgage, secured with the
same assets as the first, usually carries a higher rate of interest that the
first mortgage. The amount that can be borrowed is based on the equity in the
home, which is the difference between the current value of the home and the
amount that is owed on the mortgage.
One of the most attractive feature of
second mortgages in Burlington is that lenders often will overlook blemished
credit and unique property types, as long as there is sufficient equity in the
property being used as security.
How to Qualify for a Second Mortgage
When you build up equity in your home,
it is one of the most secure financial bases available. Home equity is
independent of your:
- Job security;
- Income qualifications;
- Overall cash flow.
A second mortgage is easier to qualify
for than unsecured loans, and because it is based on home equity, the interest
rates available will be much lower than unsecured debt.
To qualify for a second mortgage you
must have more than 15 per cent in your home and must be able to pay for the
mortgage without exceeding your total debt service ratio. The Canadian
Association of Accredited Mortgage Professionals offers mortgage calculators here to get a
sense of the cost of payments.
A Safer Option
Rather than re-mortgaging your
home or taking out a home equity line of credit, a second mortgage is much
safer. With lower rates than unsecured lines of credit, repayment is faster,
which enables better management of high interest debts. Interest
rates involved in second mortgages can still be much lower than those offered
by other financial products, such as credit cards. This is why it can be
possible to refinance your existing credit card debt by paying it off using a
It makes more sense to use a
second mortgage over an unsecured line of credit. A second mortgage is
easier to pay off, since it will have a lower interest rate than an unsecured
line of credit, and if you use the money to consolidate your debt, or invest in
home renovations that will increase the value of your property, it will help
you find cash when you need it.
Second Mortgage Solutions
Many homeowners have
discovered the benefits of second mortgage solutions in Burlington. Second
mortgages can require less documentation and paperwork than other loan types.
This makes it possible to get your hands on the loan proceeds quickly. This is
important when time is of the essence. For example, you may need access to
funds right away because a great investment opportunity has become available
which won’t be around for long.
Second mortgages provide
homeowners with financial solutions that offer great benefits.