A Second Mortgage on your Oshawa Home – Some Choices

Use Your Home Equity to Raise Money

Life never fails to throw financial curveballs so you may find yourself looking at second mortgages for your Oshawa home! Using the equity you have built up in your home, a second mortgage can indeed be a useful and safe way to raise a lump sum of money. Before you settle on that solution to your financial situation, there are two other options you may want to consider: refinancing your first mortgage, or a home equity line of credit (HELOC).
Refinancing is often available from mortgage lenders. What this means, that you renegotiate the terms of your existing mortgage. Your aim is to access the equity you have built up in your home in the past by paying down the mortgage and/or the rise in your home’s assessed value. Refinancing that first mortgage means you change the terms of the original agreement. You can consolidate other debts using your home equity, negotiate a longer term period, and convert to a fixed rate mortgage. The big advantage is that you have access to a lump sum of cash.
There are downsides. In addition to possible penalties  for changing your mortgage, you may have to contend with a less favourable interest rate than your mortgage is currently pegged at (though the current market would suggest otherwise). Some other terms may change too including what happens to your assets in the case of a mortgage default.

HELOC – Five Letters That May Change Things

A Home Equity Line of Credit or HELOC is much like a regular line of credit. You can borrow money up to a set point, pay it back, and borrow it again. But, because the HELOC is grounded in the equity you have in your home, the rate of interest on a HELOC is less than that offered by a credit card or personal loan.
The flexibility of a HELOC is well-suited to periodic, large expenses, like school tuition fees or ongoing home renovations. The amount available for a HELOC is calculated at 80% of your home’s appraised value or, when combined with a regular mortgage, to a maximum of 80% of that appraised value.
To calculate, take the appraised value of your home and your maximum HELOC and Mortgage combined can be 80% of that value.
Then, subtract the amount you still owe on your mortgage – and you have the maximum credit limit for your HELOC.

Second Mortgages Offer Lump Sum

The third option is the second mortgage. This is exactly what it suggests – a second loan that you’ve taken out using your home equity as the security. The rate will be higher than your first mortgage, because the lender is second in priority to the holder of the first mortgage. Second mortgages are especially good in situations where you need a lump sum of money at one time or, at the time of purchase, want to reduce the size of a first mortgage in order to avoid mortgage insurance fees.
A qualified mortgage broker can help you learn which of the three lending options is best for you: refinancing, a HELOC or a second mortgage for your Oshawa home.
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