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Second Mortgages in Mississauga - One Way to Raise Capital

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Second Mortgages or HELOCS – Which is Better?

 
There are brokers who deal with second mortgages and home equity lines of credit in Mississauga. Both are viable ways to raise capital, using the equity you have built up in your home. Both options have advantages and work better in certain situations.
 
A second mortgage is exactly that – another mortgage you place on your home, secured with your home equity. The interest rate on a second mortgage is almost always more than that of your first mortgage, but is also generally less than the rate charged on credit cards or personal loans.
 
Because you are borrowing against the equity in your home, a second mortgage is an ideal way of consolidating personal debts into a manageable package. It can be used to pay off arrears in taxes or payments on the first mortgage. Second mortgages also give homeowners access to a ready pool of cash that can be applied to large, one-time expenses.
 
The downside of a second is obvious: you are paying off your second mortgage at the same time as you are paying your first. It is an added, ongoing expense that must be carefully calibrated with your family budget.
 

Home Equity Lines of Credit (HELOC)

 
A home equity line of credit is more like a line of credit. You can borrow money whenever you want, up to a certain credit limit. You can pay off the HELOC and borrow again. As with a second mortgage, you are borrowing against the equity you have built up in your home.
 
The upper amount you can borrow with a HELOC is limited to 80% of your home’s appraised value which, when combined with an existing mortgage, can be 80% of your home’s appraised value. But the regular mortgage has to be factored in first. Let’s say your home is worth $400,000, then your potential maximum for a HELOC is $320,000. However, to calculate the actual amount eligible for a HELOC, you first have to subtract the outstanding mortgage. In this case, if your outstanding mortgage is $200,000, that is deducted first, leaving a HELOC maximum of $120,000.
 
HELOCS are popular because of their flexibility. For example, if you are engaged in an ongoing process of home renovations, you can borrow amounts one after another. College tuition is another case where the HELOC’s flexibility and ability to be revisited works well. As with second mortgages, the interest rates on a HELOC are almost always lower than that of a credit card or consumer loan.
 

Choosing the Right Financing

 
Choosing the right kind of financing for your personal situation may seem confusing at the outset, but there are a number of resources to assist you. The first is a comprehensive government website – Financial Consumer Agency of Canada. FCAC has all sorts of advice on mortgages and HELOCs and lays out your options clearly.
 
The second move you should make is engage a reputable broker to guide you through your mortgage needs. Look for an Ontario-based company that provides a full range of mortgage and refinancing service. A good broker dealing with second mortgages in Mississauga can help you unlock the equity that you have built in your home.

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