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Second Mortgage for your Vaughan Home

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As one of the largest and fastest growing cities in Canada, Vaughan has seen a boom in real estate values in the past few years. Many homeowners in Vaughan are taking advantage of this increase in real estate value by taking out second mortgages.
 

What Is a Second Mortgage and How Does It Benefit the Homeowner?

 
A second mortgage is a second secured loan taken against the same property as the first loan. The recent increase in Vaughan home values has enabled homeowners to get a second mortgage against the equity in their home. Equity is the current value of the property less any outstanding mortgage balance against the property. The amount available to homeowners in a second mortgage depends on the amount of equity in the home. In some cases, up to 90% Loan-to-value (LTV) can be available. For example, if your home is appraised and valued at $600,000 and you currently carry a first mortgage of $400,000, with a 90% LTV, you can get a second mortgage in the amount of $140,000.
 
Recently, the 2014 annual report released by the Canadian Association of Accredited Mortgage Professionals for mortgages states that across Canada, 11% of homeowners have taken approximately $58,000 equity out of their homes. This equals to approximately $63 billion in the past year!
 
With the help of a second mortgage, homeowners have used this equity for various purposes. Some of these include:
  • Debt consolidation or repayment
  • Home renovation
  • Education
  • Investments
  • To finance a small business
The most frequent use of a second mortgage is for the purpose of high-interest debt or multiple debt consolidation. By using the equity in the home, a homeowner can pay off a high-interest debt, such as a credit card debt, and only have a one low-interest monthly payment. Typically, second mortgage interest rates are much lower than credit card interest rates. This enables you to have a better cash flow and save money.
 
Some of the most common reasons Vaughan homeowners take out a second mortgage are: home repairs and renovations, upgrading the home to make it energy efficient or just to improve the function and look of the home.
 
Other purposes such as education for yourself or a child and financing of a small business can be taken care of by a second mortgage. Since the interest rates of a second mortgage are lower than a credit card, for many homeowners using the equity in their home ensures that they don’t overspend and are able to manage the additional debt with just one monthly payment.
 
A second mortgage on your Vaughan home is an advantageous option if you have a first mortgage that has a low interest rate, a good amount of equity in your home, and can get a high loan-to-value ratio.  This equity obtained through second mortgages can be used for a variety of reasons and by not going with a high-interest loan, it can help you save money in the long run. 

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