The Basics of a Second Mortgage – Lenders and How to Qualify

Getting a second mortgage can be either challenging or easy depending on how informed you are. By definition, an additional loan that you take on a property that is already mortgaged is a second mortgage. This makes a second mortgage riskier for lenders as compared to a first mortgage. In the event of a default, the second mortgage lender knows that they are only second in position on who gets paid first. The lender also risks not getting fully paid or paid at all. For this reason, it is understandable that the interest rates for second mortgages will always come out higher than that of primary mortgages.

Types of Second Mortgages, What is Best for You?

Depending on your ability to pay, existing loans, income, and other factors, one form of second mortgage may fit you more than another. For instance, if you have more than 20% equity in your home and happens to have good credit, a HELOC or a home equity line of credit may make the most sense for you. If you’re someone with little equity on your property, then it might make more sense to try to get a second mortgage from a private lender because they are usually more lenient in their requirements as compared to say, banks. If you’re not sure which type of second mortgage to apply for, then call us so we can guide you on which one might work for you.

Uses for a Second Mortgage

The uses for a second mortgage are endless. The most common uses include debt consolidation, paying for home renovation or home improvement, and using the money for investments such as higher education or another property. Some people may think that using a second mortgage for these may not be a smart decision because of interest rates. However, note that interest for second mortgages are still significantly lower than credit cards and other types of loans more so if you have a good credit score.

What You Need to Qualify for a Second Mortgage

Lenders typically look into 4 main qualifiers to approve someone’s application for a second mortgage.

  • The first factor is how much equity the homeowner has. The larger it is, the easier it is to get approved. Regular and up to date payments to utilities is under this qualifier as well.
  • The second factor is income. Verifiable income is always good to have because this serves as a guarantee that you have the ability to pay.
  • The third factor is credit score. Higher credit score means easier approval as well as lower interest rates because it generally means that you’re good at paying debt.
  • The fourth factor is the property itself. A lender views any granted loan as an investment. A run-down property may mean money lost in the future so a well-maintained property in a good location will have better chances of approval when getting a second mortgage.

Overall, applying for and qualifying for a second mortgage is a straightforward process. If you’re interested to apply for a second mortgage, contact us as soon as possible so we can help you out.

Important Things You Need to Know About HELOCs and Second Mortgages

Home equity loans and home equity lines of credit are hot mortgage news topics recently because of changes with mortgage rules and interest rates. There is also quite a lot of misunderstanding from readers thinking that HELOCs and home equity loans are one and the same. In this write-up, we’ll be delving more into HELOCs and differentiate them from second mortgages.

A HELOC or A Second Mortgage is a Line of Credit That is Secured by the Value of Your Home Equity

Second mortgages and HELOCs are both loans that use the equity of your home as collateral; however, while a second mortgage is dispensed as a lump sum, a HELOC is given as a loan limit from which the borrower can use as little or as much of for a predetermined period of time. Because of this, the required monthly payment for HELOCs may differ from month to month unlike with second mortgage with which the required payments are oftentimes fixed rate.

You Can Lose Your Property if You Miss Payments

Because second mortgages and HELOCs are home equity loans, inability to pay your debt can mean losing your home according to the terms you agreed with. A lot of people can forget this crucial detail so be sure that you fully understand the loan terms you’ll sign for. Remember that a secured loan means that if you leave it unpaid, the lender can take the security.

Second Mortgages and HELOCs Are Not Without Pitfalls

Home prices are rising up and this equated with a lot of people becoming rich on paper because their home equity has gone up faster than anticipated. However, just because you can tap into your home equity does not mean that you should max it out. It is still best to borrow an amount that you’re sure you can pay to avoid repayment issues later. Note that the bigger the debt, the bigger the interest rate is as well.

Home Renovations Remain a Favorite

Do you know that HELOCs were originally meant to help homeowners finance home renovations that can, in turn, increase the value of their property? Though an increasing number of borrowers use HELOCs for something else, a lot still consider getting a HELOC to fund home renovations. The same goes for second mortgages, more so if the planed home renovation is meant to be an extensive one.

Second Mortgages and HELOCs Also Require Financial Planning

Even though you are doing okay now in terms of cash flow, things can change drastically in a matter of months. With this said, it is important to know possible changes in the interest and payments that the lender may initiate before you even sign for your home equity loan. Understand that although second mortgages and HELOCs are easier to apply for, especially if borrowing from private lenders, they are still loans and have to be paid on time according to the terms you agreed with.

Are you worried that you may not be able to handle getting a second mortgage or getting a HELOC? Contact us today and we’ll discuss with you what home equity loan option may be best for your unique circumstances.

 

 

Do Not Get A Second Mortgage Without Reading This

Just thinking about getting a second mortgage can be very intimidating. Maybe you’re unsure about whether getting a second mortgage can really help you. Understanding what it is and what it can do for you should allay your worries and make for a smoother application process. That’s why we wrote this article!

Second Mortgage Definition

A second mortgage is defined as a type of loan that is secured against the value of your home, just like your primary mortgage. However, it is called a second mortgage because it only gets second priority with your initial mortgage getting top priority. Homeowners can borrow as much as 90% of their home equity with a second mortgage.

Why Get a Second Mortgage?

If you’re contemplating applying for a second mortgage, the most likely reasons are to finance education or spend for a home renovation. If not these, perhaps you are in the middle of your mortgage term and want to avoid fees related to refinancing or breaking your current mortgage. Or, you’re thinking of using your home equity for debt consolidation.

Given the above common reasons on why people apply for a second mortgage, it is easy to see why getting a second mortgage is gaining popularity.

Risks of a Second Mortgage

Second mortgages carry risks just like any other type of home loan. Lenders also view second mortgages as a riskier type of loan for them because money is lent to a borrower who already has an existing home loan. This is why more and more people are getting their second mortgage from private mortgage lenders because banks tend to be very strict to mitigate possible risks.

Interest rates are higher for second mortgages because lenders need to cover their own risks as well as insurance for lending to borrowers who have a higher risk of defaulting. The same goes for fees and penalties which is why reading the fine print and making sure that you understand all the terms is of utmost importance before signing a second mortgage.

Is It Worth it to Get a Second Mortgage?

Second mortgages spell convenience although some may view them as a bit expensive. Homeowners who have a lot of home equity can usually negotiate for better terms. If the funds are used in a smart way, such as for debt consolidation, you can save a lot of money after all the fees are considered.

The people who benefit the most from getting a second mortgage are those with a plan to pay it off as soon as possible and only using it for temporary financial relief. Note that the benefits you can gain from applying for a second mortgage are dependent on the terms that you can get, especially with the help of mortgage professionals.

Are you looking for insightful information on getting a second mortgage and understanding what it can do for you? Contact us and we’ll be happy to talk! Our team of mortgage professionals will discuss with you what you need to know to ensure that you’re getting the best mortgage help possible.

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7 Things You Need to Know to Get a Second Mortgage in 2019

Getting a second mortgage remains as one of the best financial solutions for homeowners who are at a financial bind and need funds. Not everyone has a stash of savings in their bank and when a huge expense comes by, it is comforting to know that you can use your home equity to gain access to some money.

What is a Second Mortgage?

A second mortgage is an additional loan that you take on your house when you still have a primary mortgage to take care of. It is taken with another mortgage lender and is paid separately from the primary mortgage. Know that a second mortgage does not erase or cancel out a primary mortgage; rather, it is a separate loan.

How Does It Work?

A second mortgage allows you access to funds from your home equity. This is because this type of mortgage loan uses your home equity as collateral. This type of mortgage loan is riskier for the lender and can be risky for the borrower too if the borrower fails to pay.

How Does One Qualify for a Second Mortgage?

Lenders for second mortgages tend to look more at a person’s home equity value than that person’s credit score or income. It is important to know what percentage or value you have in your home equity before applying for this type of mortgage loan.

How to Pay for a Second Mortgage?

Most lenders have terms that last a year or two wherein they only require the borrower to meet the interest-only payment. After this period, the borrower is required to pay the full amount. If the borrower cannot do so, there is an option to get a new second mortgage or extend the loan for another term.

Is it Possible to Get a Second Mortgage Even with Bad Credit?

The short answer is yes. Many lenders will have no issues with providing second mortgages to people with bad credit including those who got turned down elsewhere or who have filed for bankruptcy. The tricky part is finding these understanding private lenders and connecting with them so that you can apply for a second mortgage.

Why Are Second Mortgage Interest Rates Higher Than Primary Mortgages?

The primary reason for this is because this type of mortgage loan carries more risks for the lenders. They risk losing their money if the borrower is unable to pay because the first priority for payment goes to the primary mortgage lender.

Is it Easy to Apply for a Second Mortgage in 2019?

Applying for this type of mortgage loan follows a set procedure wherever you may be in Canada. There are no shortcuts. You need to provide the required information and show that you have enough home equity to qualify. Aside from this, you need to find the right lender that will be understanding of your situation.

Do you have bad credit and need a second mortgage or were your second mortgage application turned down by banks? Contact us at Homebase Mortgages and we’ll help you get approved as well as inform you about the various ways to use home equity to borrow money!

 

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Got a HELOC? You Might Have Trouble Getting a Second Mortgage

A new rule change may make it a lot tougher for those who have a HELOC in Canada to get a second mortgage. Just recently, Toronto-Dominion Bank, the leading HELOC provider in Canada, just changed their policy and are now requiring those who have applications for other financing methods to prove that they are capable of paying their HELOC based on reaching the theoretical monthly limit and not on how much the actual balance is. This new policy is currently being implemented by some lenders, including the Royal Bank of Canada.

Small Change, Big Changes

As of present time, OSFI, or the Office of the Superintendent of Financial Institutions has not yet directly claimed responsibility for the recent changes although they are Canada’s banking regulator. Industry experts are saying that this change will have a significant impact on the second home and rental markets, not causing a crash of the market but will surely add extra weight on home prices.

What This Means

If you’re thinking of getting a HELOC or new loan in the future, you should be ready for the banks subjecting you on a stress test, testing you on a HELOC credit limit that you can afford. They’ll add an assumed payment to your mortgage application which will be based on the government’s benchmark

If you are getting a new HELOC, all the banks will “stress test” you on the HELOC credit limit. In other words, they’ll add an assumed payment to your mortgage application, based on the greater of the lender’s contract rate or the government’s benchmark posted rate. No impact will be felt if you’re merely renewing mortgage as well. Only those who have an existing HELOC and getting an additional mortgage will feel the hit.

Huge Impact?

With the new policy, a borrower who has a HELOC of $200,000 will have to prove that he or she can pay a monthly HELOC payment of $1,202 based on current rates. This can cause individual debt ratio to skyrocket beyond lenders’ maximum limits.

The good news today is only a few lenders have applied the policy so far although some more major banks will surely implement the change come 2019.

Bank Hypocrisy?

The banking industry makes a lot of money from HELOCs. It is said that borrowers do not apply for a HELOC, they are typically sold a HELOC if they are deemed credit-worthy. HELOCs undoubtedly increase bank profits and banks often build fences around borrowers when it is time for renewal, making borrowers pay more if they want to switch lenders. Banks also try to approve those with a HELOC application for the maximum amount, because the more borrowers use, the more interest they can charge. Some industry insiders now deem the actions quite shady since the usual marketing spiel is that HELOCs don’t have a huge impact on borrowers and now the borrowers are kind of trapped because of new developments.

If you want to retain your HELOC and qualify for a second mortgage to buy another property or to finance a home renovation, know that the recent changes may have an effect on you but some lenders may be easier to talk to than banks. Contact us and we’ll help you get a second mortgage.

Your Must-Know Checklist About Second Mortgages

If you’re undecided yet whether you should get a second mortgage or not, now is one of the best times to get a second mortgage in Canada. You just have to be sure that you fully understand what it means to get a second mortgage and what options will be best for you. More about second mortgages in Canada below!

Getting a Second Mortgage

Unlike your first mortgage, a second mortgage is a loan that is secured by the equity of your home. It is named ‘second mortgage’ because it comes as a second priority to your primary mortgage. People get a second mortgage to access as much as 80-90% of their home equity depending on the type of second mortgage they apply for. People usually opt for a second mortgage when they are still paying their primary mortgage and don’t want to refinance their mortgage due to expensive fees associated with breaking a current mortgage.

Purposes for a Second Mortgage

There are many uses for a second mortgage. The most common reasons are paying for education, consolidating debt, or funding a home renovation project. The main reason for using a second mortgage is to take advantage of the specific benefits that each type of second mortgage has, to help someone better manage his or her financial needs.

Types of Second Mortgages

Far from being a choice for desperate people, applying for a second mortgage is a smart decision if you know how to make a mortgage work for your advantage.

You may choose to get a HELOC or a home equity line of credit if you know that you’ll have several recurrent big expenses coming up because a HELOC will allow you to borrow for as many times as you want or need as long as it doesn’t exceed set limits. It works as a revolving credit so you can pay what you can afford in between each time you borrow, making a HELOC a bit like a credit card but your credit limit is the ceiling assigned to your home equity loan.

You may choose to get a second mortgage or a home equity loan to have access to a lump sum if you need a big amount of cash in one go, such as when you need money for funding a home renovation or when you need funds for a huge investment or debt consolidation.

Risks of Second Mortgages

Lenders typically view that a second mortgage carries more risks for them so it is understandable that lenders impose a higher interest rate for a second mortgage or have strict requirements regarding who to lend money to. This is why big financial institutions prefer other types of loans and why it is easier to get a second mortgage from a small lender. Second mortgages have a higher risk of not getting paid because the primary mortgage is the priority.

Should You Get a Second Mortgage?

The first step that you should take is to fully assess your financial situation to determine if you can qualify for a second mortgage. Note that different lenders may have different requirements so asking for help from mortgage professionals won’t hurt. Understand that a second mortgage goes on top of your first mortgage and failing to pay may have severe consequences. Talk to us at Homebase Mortgages if you have some questions or want to get a second mortgage in Canada.

Get a Second Mortgage When You Have Bad Credit

Do you know that you can significantly improve your credit score by getting a second mortgage when you have bad credit? If used correctly, a second mortgage can be used to repair bad credit although the challenge lies in qualifying for one when your credit score is bad. If your application is strong enough and you’re able to get a good interest rate, then you’ll definitely be able to repair your credit score.

Effects of Bad Credit

Using a second mortgage to fix a bad credit come with a lot of possible pitfalls. You have to note that a second mortgage is still a loan and that it comes with a higher interest rate than your primary mortgage because a second mortgage carries a higher risk for the lender. This means that the lender for the second mortgage will only get paid after the lender of the primary mortgage in case you default on your payments; and hence, second mortgage lenders charge higher interest rates especially for people with bad credit. Bad credit may also mean that stricter terms will be drafted for your second mortgage.

The First Step to Repair Bad Credit

Before you can use a second mortgage to repair your bad credit, you have to qualify for a second mortgage first by improving your credit score even by just a little. You can achieve this by getting a copy of your credit report and looking for mistakes that can be reported to quickly improve your credit score.

Pay Some of Your Debts

Paying off some of your small debts or working to get some of your credit card debts below 30% of your credit card limit can drastically improve your credit score and help you get approval for a second mortgage. Do not be tempted to move your debt to a lower interest card because that is only a band-aid solution that can hinder your possibility to get approval for a second mortgage. Remember that multiple rejected applications can also damage your credit score.

Get a Second Mortgage to Fix Bad Credit

After you’ve done the above, it is still possible to have some trouble getting approved for a second mortgage if you have bad credit. One way to get approval is to have someone as co-signer, perhaps a family member who has a good credit score. It will also help to seek the assistance of professional mortgage brokers who can connect you with lenders who may be more understanding of your situation. A good mortgage professional will not only help you shop for a lender but will also make sure to protect your interests so that you’ll be in a better financial position while paying your second mortgage and even more so after. By paying off a second mortgage, you can fully fix your bad credit. The trick lies in borrowing only what you can afford with the help of trusted mortgage professionals and staying on top of your payments.

Need to assistance connecting to lenders who will lend you a second mortgage despite of your bad credit? Contact us today and we’ll talk about further details with you!

What Canadians Should Know About Second Mortgages

Second mortgages are becoming increasingly popular, but do you know why so? What makes second mortgages attractive for many Canadians and why it is worth a consideration for you? Find out about these and more below!

Second Mortgages are Usually Used for Debt Consolidation and Home Renovation

Most people who get a second mortgage do so because they want to pay off a high-interest debt or because they need funds to finance a home renovation project. Both of these are smart uses for a second mortgage because debt consolidation saves you money on interest and home improvement projects usually increase the value of your home, thereby also increasing your equity.

Your Second Mortgage Can Help With Your Bad Credit

Consolidating your debt with a second mortgage can reverse your bad credit and repair it back to its former spotless glory. It may be a bit challenging to do this by borrowing from a bank so you better try alternative lenders such as private lenders that will have friendlier requirements.

There are Several Types of Second Mortgages

Second mortgages are loan products that come after a primary mortgage. As such, they come in various forms to cater to different people’s needs. For example, HELOCs are typically best for people who need a small amount of cash on a regular basis and happen to have a strong credit profile. Home equity loans, on the other hand, are given as a lump sum.

Second Mortgages are High-Risk Loans for the Unaware

Second mortgages use your home as a collateral so failing to pay based on the terms may result in you losing your home to foreclosure.

You Can Borrow as Little as You Need or as High as Your Equity Will Allow

Because the amount you can borrow on a second mortgage is usually dependent on the home equity you have, the amount you can access can be as much as a few hundreds of thousands of dollars. If you need a small amount fairly often, you can get a HELOC because that type of second mortgage works as a revolving credit with no minimum requirement for the money you borrow each time.

Interest Rates Vary Widely

Because different types of second mortgages have different terms and requirements, their interest rates also vary widely. This means that you have to consider this before getting a second mortgage to ensure that you choose the type that best fits your financial needs and means.

Second Mortgages Have Fees

Just like the interest rates for second mortgages, the fees vary as well depending on the lender, your location, and the specific type of second mortgage you apply for. This is where it gets tricky because you want to make sure that the savings you’ll get will exceed the fees you’ll have to pay. A mortgage professional can help you with this by advising you on what type of second mortgage may be best for you.

Second Mortgages Have Flexible Payment Terms

Some types of second mortgages only require you to pay interest on a set schedule, resulting in lower monthly payments that are easier to manage. This is great for those who want to use a second mortgage for home renovations before selling a home because they can use the second mortgage to increase the home’s selling value and then use the sales profit to repay the second mortgage.

Do you have questions about getting a second mortgage? We’d be glad to talk to you about them! Contact us at Homebase Mortgages so we can discuss with you the different types of second mortgages and help you determine which might be best for you.

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Convert Your Mortgage Into Assets

Most people think of their mortgage as just another bill to pay, not really seeing it as an investment. This mindset has got to change because far from a money pit, a properly handled mortgage is like building up a savings fund for a rainy day.

A mortgage is an investment because the more you pay towards your mortgage, the more home equity you’ll have. Home equity can be tapped and turned into cash via a second mortgage or a home equity line of credit – giving you a way to use the equity you’ve built up in your home without resorting to selling your home. Below are the ways on how you can convert your mortgage and your home equity into usable cash.

Apply for a Second Mortgage

Applying for a second mortgage will allow you to access as much as 80% of your home equity. This is released as a lump sum that you can use to pay for huge one-off expenses such as for debt consolidation and paying for renovation, both smart uses for your home equity as both can improve your finances by a large margin if done right.

Applying for a home equity loan or a second mortgage may or may not be an issue for you depending on your credit score and existing equity. Most banks decline people with no stable source of income or those whose credit score don’t meet up to bank standards. Private mortgage lenders are generally more lenient and can draw up more manageable terms especially with the help of private mortgage brokers.

Remember that a second mortgage means another loan that will have to be paid on top of the primary mortgage. It is best to have professional help regarding the terms to make sure that you won’t have issues paying off 2 mortgages at the same time.

Get a HELOC or a Home Equity Line of Credit

A HELOC allows you to access your home equity in the form of a revolving credit. This means that there will be a predetermined ceiling amount from which you can borrow and re-borrow up to a certain time frame.

A HELOC can help you tap up to 65% of your home equity and is a great financial solution for large recurring expenses such as financing university tuition or medical treatments.

Refinance Your Mortgage

A mortgage refinance is a means to give your current mortgage contract an overhaul to make it more manageable for you and possibly get some savings in the process. Just like the 2 ways to convert your mortgage into assets that were mentioned above, a mortgage refinance doesn’t come free. There are fees involved which you have to consider to determine if paying for the fees will still give you a substantial enough savings to justify going through the process.

If you’re not sure which amongst a mortgage refinance, a HELOC, or a second mortgage is the right way for you to convert your mortgage into an asset, a consult with mortgage professionals will be the next best step. Contact us today so we can help you get answers!

 

 

Your Guide To Getting A Second Mortgage By Building Home Equity

One of the fastest and most doable ways to build wealth is to build home equity. The value that you build in your home is one of your biggest assets that you can tap in times of need or when you need funding for a large project such as a home renovation.

Building home equity is literally as easy as paying your mortgage. Over time, the money that you pay towards your home grows as part of your home equity, which is defined as the value that you own when you take your home’s market value minus the amount that you still owe. The bigger your home equity, the easier it will be to tap later on when needed. This is one of the biggest tricks in making sure that you get a second mortgage should you need it. You can build your home equity by using the tips below:

Pay A Sizable Downpayment

Paying the largest downpayment that you can afford means starting off your home ownership by owning a large portion of your home from the start. This also means that the sooner you can apply for a second mortgage should the need arise.

Pay As Much As You Can Every Month

Your mortgage is paid monthly with a set amount; however, there is no stipulation against paying more than the minimum required per month so paying a bit extra here and there will not help you fully own your home faster, it can improve your financial profile making other loans possible in the future.

Pick A Shorter Mortgage Term

Not many are aware of this but choosing a 15-year-plan over a 30-year-plan often means paying as little as a few hundred dollars more per month and saving hundreds of thousands of dollars down the road. Always ask to see various term computations so you can determine which one you can afford best.

Be Smart When Choosing Home Improvement Projects

Some home improvement projects boost the equity of your home better, thereby effectively increasing your home equity faster. For example, landscaping your lawn may cost the same as a kitchen floor makeover, but the kitchen floor makeover can bring up the value of your home as well as make it more attractive for buyers. It is all about choosing the wiser investment and going for the one with the bigger returns more so if your funds are limited.

Get a Second Mortgage Fast

Once you’ve been building your home equity for a while, you may choose to tap it by applying for  a second mortgage. A second mortgage can be used to help consolidate your credit card and personal loans so that they can be made easier to pay off and with a lower interest rate. If you’re not after a lump sum loan, you may try for a HELOC to tap your home equity. We’d be happy to explain to you which second mortgage is best for you. Contact us today!