4 Things to Consider When Applying for 2nd Mortgages in Oshawa

If you are looking for an immediate source of cash for a major expense, such as a home-renovation project or post-secondary tuition fees, 2nd mortgages for Oshawa homeowners are a tempting option. A second mortgage is essentially a secured loan financed by your home’s accumulated equity. It is a viable option for those looking for a large sum of money that is not available from other means such as credit cards or unsecured loans.
While it is tempting to acquire a second mortgage, there a few things to consider before taking the leap of fate.

Consider Refinancing First Before Taking Out a Second Mortgage

If you find your cash flow is low due to your original mortgage’s high interest rates or payments, consider speaking with your original bank or lender to see if you can refinance the first mortgage. Refinancing allows you to retain your original equity, while potentially unlocking better interest rates, lowering payments, or adjusting the length of your loan.

Interest Rates

If you are satisfied with your current mortgage’s terms and conditions, a second mortgage is a good way to tap into your home’s equity without disrupting your original mortgage. However, since a second mortgage is secondary to your first mortgage, secondary mortgage is considered riskier to lenders. The interest rates for second mortgages are likely going to be higher than your first. However, it can still be significantly less than traditional credit cards, which can be as high as 20%–25%. If you are considering second mortgages as an Oshawa homeowner to consolidate your debt, shop around for the best interest rate available to you. While you may save money in the monthly payments by consolidating your debt into your home, it is the interest where you will save money in the long run.

Budget for Closing Costs

Unlike traditional loans, second mortgages require quite a bit of paperwork and fees to submit your application. Closing costs can include mortgage application costs, appraisal, and legal fees that will add up. It is important to take into consideration these expenditures when budgeting your repayment plan. Even if you are able to make the monthly payments, you should look into whether the amount you need and the length of the loan is worth all the upfront expenses.

How Is the Market?

Whenever you are dealing with real estate, your decisions are often affected by the conditions of the housing market. Are homes in your neighbourhood selling quickly or sitting on the listings for months on end? Do you have a long way to go on repaying your original mortgage or only a few more years? Questions like this will allow you to gauge the market’s conditions and the amount of potential equity you have available. In addition, you will want to take a look into current interest rates. Do they look favourable compared to previous years? If the housing market is hot and interest rates are low, it is an advantageous time to consider taking out 2nd mortgages for Oshawa homeowners.
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