Choosing Between A Line Of Credit and A Second Mortgage

Choosing between a second mortgage and a line of credit is a big decision more so now that most of an average person’s wealth is tied up to their home in the form of home equity.

There are several reasons for the above, such as people using up all their extra money to pay their mortgage so they can fully own their home sooner. It could also be the sudden boom of real estate in a certain area. Having your wealth tied up to your home as equity can make moving quite difficult. What can you do if your current home is no longer meeting your needs then? Well, you can still try to move (and have a very challenging time bidding on much more expensive homes) or you can renovate.

Making Your Home’s Equity Work for You

The good thing with renovating is that you can use your home equity to work for you. No need to dip into your savings if you can get approved for a home equity loan so you can pay for the construction bills. Sounds great, right? Yes, this could be great; but you have to know the differences between the various  ways of tapping into your home’s equity to ensure that you won’t be biting off more than you can chew.

You see, home equity loans come in two types, the increasingly popular home equity line of credit (HELOC) and the more conventional second mortgage.

Why Get a Second Mortgage

A second mortgage will give you access to a lump sum of cash that you can use according to your needs. You won’t be able to get another loan until your second mortgage has been paid off over a fixed period of time but it gives you immediate freedom when it comes to accessing funds.

A second mortgage is more conservative and predictable than a HELOC. It allows you to plan expenses better as the specific amount you need to pay for a specified amount of time is stipulated. Although the interest rate is higher than that of a HELOC, a second mortgage is the better choice for those who want no surprises when it comes to future payments.

Because of the nature of the second mortgage, it offers less temptations in terms of spending. It is a great option for a single large expense such as buying a second property, setting up a business, or funding an extensive home renovation.

Why Get a Home Equity Loan Line of Credit

A home equity loan line of credit is better if you want more freedom with how much of your equity you can withdraw at a given time. It is more flexible than a second mortgage and allows you to reuse your loan for several projects and/or emergencies.

You have more flexibility in terms of payments for a HELOC as well. You can choose to just pay the interest for whatever amount you borrow at a certain month. The downside is that if you are a poor financial planner, you might end up dipping into your line of credit for expenses you don’t really need. You might end up having trouble paying because the HELOC’s interest rate will change with the market together with whatever amount you’ve used up.

A home equity line of credit is a great option if you have periodic semi-large expenses such as medical bills or tuition fee payments.

Ready to apply for a second mortgage or get a line of credit? Contact us and our mortgage brokers will help you get approval!

Second Mortgage Loans vs. Home Equity Loans

Most people get confused when referring to home equity loans and second mortgages because some websites may use the terms interchangeably, so how are they different?

A second mortgage is actually a type of home equity loan. When mortgage professionals bring up the term home equity loan, they are usually referring to a HELOC or a home equity line of credit. Both loans allow you to use the equity you’ve built up in your home to your advantage but subtle differences may make one better than the other for your needs.

To make it easier for you to pick whether a second mortgage or a home equity loan would be better for you, we’ll have to touch up on their basics so you can have a clearer understanding of each loan type.

A Look into HELOCs

An easy way to describe a HELOC is to compare it to a credit card. Your current equity is a determining factor in setting your credit limit but just like a credit card, you can use a HELOC for both big and small purchases as long as you do not exceed your limit. Interest is charged just like a credit card but only to the amount you’ve taken out of your equity via your HELOC. The limit of your HELOC’s credit is based on your credit worthiness and the equity value you’ve built up.

A Look Into Second Mortgages

A second mortgage allows you to tap into a set amount of money that you will have to pay according to the schedule set out by your mortgage lenders. This is not the same as refinancing because unlike it, a second mortgage does not replace your first mortgage.

A second mortgage usually last for 15 to 30 years and offer you a fixed interest. The interest will be based on your credit history so the cleaner your record is, the lower the interest rate you will have to pay. The price of your home and the current market’s interest rates are also factored in.

Note that although the above means that your second mortgage will have a higher interest than your first one, the fees that you will have to pay are generally lower.

Should You Go for a HELOC or a Second Mortgage?

The main factors that will determine whether a second mortgage or a HELOC is better for you are your financial needs and your financial capabilities. If you need a substantial lump sum of cash, then a second mortgage will be best for you. On the other hand, if you are someone who needs small amounts of money on a recurring basis, then going for a HELOC would be better for you. Beware though that if you’re the type that gets easily tempted with purchases that you do not need, then getting a HELOC may not be the best idea.

To help you decide which loan can answer your needs, it would be in your best interest to talk to professional mortgage brokers who can help you choose your loan and connect you with refutable lenders.

Ready to apply for a loan? Contact us today at Homebase Mortgages!

How a Second Mortgage Can Really Help You

There are so many reasons why people would consider taking a second mortgage. You might be thinking of getting one as of this very moment and is just isn’t sure yet if you should go for it.

The first question you should ask yourself when taking any kind of loan is how beneficial it would be for you. Loans come with interest rates after all, and even if you go for one with a comparatively low interest rate (such as a second mortgage compared to a personal loan at the bank), you have to consider whether the benefits would outweigh the risks.

Benefits of a Second Mortgage

A second mortgage is a substantial amount of cash that you can take as loan using your available home equity. This is not the same as a home equity line of credit or a HELOC wherein you can use your home equity’s value as a sort of credit card and also not the same as refinancing your current mortgage.

Taking a second mortgage can be for various reasons. However, the most common reason why people do take one is to consolidate their debts. For example, if your credit card loans, car loans, and other loans have gotten to the point that paying them off has become a real burden due to the huge interests and the stress of making sure that you pay before each bill’s due date, it would be best to take a second mortgage to pay them off so that you’ll just have one loan (with a lower interest rate) that you have to take care of instead of numerous ones. By doing this, you will have a lower total monthly payment and save a lot of money!

You can also use a second mortgage for anything that would be considered a big expense such as a wedding, buying a new car, or going to your dream vacation. Note that you can also use it to fund a much needed home renovation or upgrade that can add value to your home.

Note that any available cash means flexibility. It allows you to do things that otherwise can’t be done and plan for a better future. This is what a second mortgage affords you.

In summary, a second mortgage can provide you with funds to cover an immediate need for cash and can also be used to fund your long-term projects. If used correctly, not only will a second mortgage give you lots of savings but can also increase your net worth such as when you use it to fund smart home renovation ideas.

How to Best Get A Second Mortgage

Getting a second mortgage can be a bit tricky for the inexperienced or if your credit history isn’t as flawless as you would like. This is where the mortgage broker advantage comes in.  A professional mortgage broker can find you the best mortgage deal to help you out financially. Interested in a service like this? Contact us today!

Going for A Second Mortgage? Ask Yourself These Questions First!

How property values in Canada tripled in just a little over a decade is nothing short of remarkable. A $1M home just 10 years ago is easily worth $2 to $3 now, giving homeowners quite a substantial bit of equity on their homes.

Homeowners may want to tap into that equity by means of a second mortgage and understandably so. Sending a child to college or upgrading a home isn’t cheap, but will tapping into your home’s equity be worth the hassle of getting a second mortgage? Will it be really better than borrowing from banks or relatives?

Second mortgages usually come with a higher interest rate compared to the less risky first mortgage. Interest rates can range from a manageable 6% up to the highest legal limit of a whopping 29.9%, with lower interest rates usually given to those with a good deal of equity in their home accompanied by a good credit score.

There are truly many considerations that you will have to think of before getting a second mortgage, including the broker fees, how much you want to borrow, and whether you can cover the interest rate with no issue. The following are the important questions to ask yourself if you’re still trying to decide whether a second mortgage is something you’d want.

Is a lawyer needed? How much will a typical lawyer’s fee be?

If you want all your bases covered, it would be in your best interest to hire a lawyer to go over your mortgage documents and explain to you the mortgage terms that you’re getting yourself into.

Stay away from a mortgage broker who advises against having a lawyer to save money, as this will often cost you more in the long run. Expect to pay about $2,000 in legal fees and think of it as a safety measure.

What broker fees should you be expecting?

There is no specific figure for broker fees but it would be reasonable to expect that it will at between 5% to 15% of the value of your second mortgage. The typical rule is that the more you borrow, the lower the broker’s fee will be in terms of percentage. Higher broker fees can be expected if there are legal issues such as foreclosure or marriage separation to contend with.

Will you be able to pay off the mortgage without penalties?

Note that most brokers will charge a 3 months’ worth of interest for late or early mortgage repayment. Ask about this before you sign anything, more so that there will usually be specific penalties for certain things such as defaulting on your payment.

Will an appraisal be needed?

Although most lenders will require an appraisal, there will be some who would want to personally inspect your property. A personal inspection will save you some money but if a lender requires you to have a professional appraisal done, you can find a list of Certified Registered Appraisers at www.aicanada.ca.

Do you REALLY want to get a second mortgage?

Note that the total fees for a second mortgage will usually be at a minimum of $4,000 excluding any interest that you’ll have to pay as well. In some cases, such as when you only need a few thousand in cash, a second mortgage may not be the best financial solution for you.

Be sure to talk to the broker and ask questions. Ask about a specific lender’s rules, and any other concern you may have. Think long and hard about being able to pay off the second mortgage before getting one. Better yet, make sure that you get the help of a professional mortgage broker who’s not looking to take advantage of you.

 

The Basics of What You Have to Know About Second Mortgages

A second mortgage is basically what its name says it is. It is a kind of loan that a homeowner can take using the home as the collateral while still having another loan secured by the same house.

In other words, a homeowner will be adding to his or her overall debt burden by taking a second mortgage. An increased debt burden can result to more financial difficulties in case the homeowner will have some issues that will affect his or her ability to repay his or her debts.

Before taking a second mortgage, you have to know that they carry higher interest rates. This means that there will be a higher chance of losing your home in the event that you fail to repay your loan. You’ll have to be absolutely sure that you’re ready to take on that possibility.

Ready to know more about second mortgages? Then continue reading below!

2 Common Types of Second Mortgages

  1. Home Equity Loans

A home equity loan is a second mortgage that will allow you to get a lump sum of money as a loan based on the equity of your home. The catch is that you’ll be required to repay the loan via instalment over a fixed period of time.

  1. Home Equity Line of Credit (HELOCs)

A home equity line of credit is a second mortgage that works like a credit card. It allows you to have a credit limit that you can continue reusing as long as you also continue paying the balance.

Note that the amount that you’ll get for HELOC and Home Equity Loan will greatly depend on your available equity and your lender’s lending standards. There are also ‘open-end’ second mortgages that will allow you to take out cash up to your maximum credit amount and will let you do so again as you pay down the balance. On the other hand, second mortgages that will not allow you to redraw after receiving up to the entire loan amount upfront also exist, and are called ‘close-end’ second mortgages.

Use Your Second Mortgage Wisely

Because paying off a second mortgage isn’t easy, you may want to use a second mortgage in ways that can help you off in the long run. More so, knowing whether you’ll be using your second mortgage to buy a new car, pay for improvements in your home, or paying for tuition, will help you decide which type of second mortgage would be best for you.

What do we mean by this?

Let’s say you want to make one large purchase, then the ideal type of second mortgage for you would be a Home Equity Loan with a fixed amount (and also fixed payment). This way, you can get the money you need and plan for payments later. On the other hand, if you need small amounts every now and then, a HELOC would be ideal for you.

How about using your second mortgage to pay off other loans?

That wouldn’t be a smart idea because you’ll just end up paying for interest in the long run. What you’ll be doing is just getting another loan to try to pay off an existing one. It would be a bad cycle to get yourself into.

Second Mortgage Considerations

Having a second mortgage means another bill that you’ll have to pay-off monthly. You have to be sure that you will be able to handle your monthly expenses before taking on any new payment responsibilities. It would be best to contact a mortgage specialist to help you evaluate whether a second mortgage would be right for you. A mortgage specialist would also be able to advise you on other options such as mortgage refinancing or perhaps going for a private mortgage.

4 Common Second Mortgage Mistakes to Avoid

If you’re a homeowner, the thought of getting a second mortgage may have crossed your mind from time to time; more so that when used wisely, second mortgages can help you buy a new property, consolidate old loans, or even start a new business. There is no doubt that a second mortgage can be great for you, but it should also be noted that any type of mortgage means a new financial obligation.

How do you make sure that what you’ll be doing is a smart move and not a risky move that can hurt you in the long run?

Below are the risky and common mistakes people make when taking a second mortgage. Read up and avoid them as much as possible!

Not Watching Out for Balloon Payments

Using balloon payments is a trick used by some lenders to entice you into taking a second mortgage. The payment terms often start with small payments that increase over time and can put you in trouble later when you may not be able to afford the later stages of your mortgage’s payment. Failing to pay often results in huge penalties that can wreak havoc on your finances. To prevent this from happening, always make sure that you look over all the details of the payment plan before taking on a second mortgage.

Committing to a Mortgage with Huge Default Penalties

Defaulting on payments is always a risk when you take on two mortgages at the same time, so it is essential that you should be ready for consequences in the event that you end up missing out on payment later. If your second mortgage has a huge penalty, a one-time default might be something that you may be unable to recover from. Be sure to avoid this by negotiating a mortgage with little to no default penalty. This way, you’ll be reducing your risks when taking a second mortgage.

Forgetting to Fix Your Credit Score

A bad credit score can mean having to pay higher rates for your second mortgage. You can avoid this by double-checking your credit record for errors that can be corrected to your advantage. In doing this, your loan’s terms would be much more favourable for you.

Not Evaluating Your Need for Mortgage Insurance

Second mortgages typically come in a package along with many types of insurance. It is often the case that you have no need for these insurance add-ons and that having them would just be a waste of money. If a certain type of insurance isn’t important for you or you don’t think it would benefit you, it might be best to negotiate that it be taken out of your package to make the loan easier to pay.

Remember, a second mortgage is a good thing when you use it wisely. The smart use of a second mortgage starts with paying attention to all details right from your second mortgage application to its approval to ensure that your financial circumstances can handle the extra responsibility. If you have further questions about second mortgages, don’t hesitate to contact your Toronto mortgage experts at Homebase Mortgages!

Is a Second Mortgage or a HELOC Right for You?

second mortgagesWhen you’re refinancing your home you’re going to have many things to choose from; for most a second mortgage is the right answer. Here we’re going to go over everything you need to know about a second mortgage, how they’re beneficial and if they’re right for you. Before you make any choice about refinancing your home, talk to one of our talented Toronto mortgage brokers and see what we can do for you. Let’s get started!

What is a HELOC?

A HELOC is a home equity line of credit. Unlike a normal mortgage, this is a revolving line of credit; revolving means you can pay it back, borrow it back, etc. etc. over and over again, just like a credit card. These are great for some situations and disastrous for others. If you’re retired or retiring for example, you can take the equity out of your home and put it towards your daily expenses. One of our Toronto mortgage brokers will be able to help you find a low interest and fair home equity loan for this purpose. You want to be careful about taking money out of a HELOC account on a day to day business, as this can backfire on you rather quickly.

What is a Second Mortgage?

A second mortgage is a bit like a HELOC loan; instead of borrowing the money and paying it back again, you’re going to be able to borrow it one time and then repay it that one time. This is a great option if you’re looking for a large lump sum so you can pay off debts or purchase big ticket items. If you’re going to need a more steady income stream, you may want to think of a HELOC loan instead. Second mortgages are the de facto choice for most people who need a loan against their house. In both cases you’re going to need equity to borrow money.

What is Equity?

Equity is what you actually own in your home. It’s a good bargaining chip for when you need to borrow against your home. You’ll need to figure out your equity before you try and apply for a mortgage. Take the appraised value of your home and subtract any mortgages or debts that you have against the property. If you owe any taxes you should subtract this too, so you can get a realistic view of what’s going on. Now you know how much equity you actually have in your house.

Choosing between a second mortgage and a HELOC can be hard, but you’re going to need to make the right choice. Let one of our Toronto mortgage brokers help you make the right decision for your finances. Without competition, banks have zero incentive to make sure that they’re giving you the right deal. So make sure you’re getting the deal that’s right for you.

To find out how we can help you find a great mortgage, apply online here!

What Makes a Second Mortgage Different From a First Mortgage?

There are many different ways to finance your home, but second mortgages are by far the best for most home buyers. You’ll be able to get a large lump sum to pay off debts, for your children’s University funds or whatever else you need the money for. Since a second mortgage borrows against your interest in your home, you’re going to need to be careful about who you choose as a lender. We can help you; as Toronto mortgage brokers we can work on your behalf to find the right lender for you and your home.

How do Second Mortgages Work?

The first thing you need to know about second mortgages is that they don’t have to be repaid right away; a first mortgage usually enters into repaying right away. You may have to repay it within six months of closing or you may be able to wait decades. Since the risk of default is higher with this kind of loan you may wind up paying extra points of interest in the long term. This is just another reason you’re going to want a mortgage broker to help you find the right second mortgage for you; we’ll work hard to make sure you don’t pay a fraction more in interest than you have to.

What is Equity?

Equity is how much of your home you actually own. You may owe back taxes, you may owe on your first mortgage; whatever you owe on you’re going to have to subtract from the appraised value of the house. After you do that, you’ll have the equity amount that you hold in your home. You can borrow up to 70% of this amount (more or less depending on your case). It’s important to talk to your mortgage broker to make sure you know what a second mortgage would mean for your home equity.

What Are the Benefits of a Second Mortgage?

This will really depend on what you need the second mortgage for:

  • Avoid Foreclosure: It can help you avoid foreclosure of your home, by helping you get the money you need to pay off your first mortgage.
  • Pay Off Your Bills and Repair Your Credit: You can pay off bills and repair your credit; you’ll want to make sure that the interest rates and repayment terms will be better than the debts that you’re paying off or you’re just throwing good money after bad.
  • Get Money You Need Now and Repay it Later: Getting the money you need know and paying it back later can help you in more ways that you think. It could be decades before your second mortgage enters into repayment.

A second mortgage can give you the money you need to handle things now, but you’re going to want to be careful before you do it. Let us help you! With the right Toronto mortgage broker you’ll be paired with the right lender who will give you a fair and equitable lender.

Always Compare Second Mortgage Interest Rates

With so many options to choose from with second mortgages, you’re going to want to think about what kind of interest rate you can get. By working with us you can save time and money on your second mortgage; a mortgage broker doesn’t work for banks and only get paid at closing. This keeps the process honest and helps you get the best loan for you and your situation. Here we’re going to go over how interest rates can affect your mortgage and how you can get the lowest rates possible. Let’s get started!

Why a Second Mortgage?

Second mortgages are there for when you want to take equity out of your house and turn it into cash you need today. You’ll be able to spend that money on bills, sending your children to university or whatever you need; the important thing is that you spend this money wisely! You’ll want to make sure your new interest rate is better than the interest rates you’re paying now or you could end up in a debt trap that’s hard to escape from.

How Does Interest Affect Mortgages?

Interest is the root of all evil… if it’s done wrong. A lender makes no money just by giving you a loan; the profit comes from interest rates. The more interest they can charge you each month, the more money they can make over the life of your loan. Interest is one of the few things about borrowing money that you can control, and this is why it’s important to get the lowest interest rate possible at the beginning of your loan. This is why you will need a Toronto mortgage broker like us to help you get the best terms for your loan.

Is a Low Interest Second Mortgage Hard to Get?

They can be, but that’s where we come in. We’re experienced Toronto mortgage brokers with good relationships with local lenders. We will help you fill out your application to make sure there are no errors. We’ll then discuss issues that you may face, like your credit or employment situation. After all of these issues are resolved, we’ll be able to begin submitting your application to many different lenders. After a period of time we’ll receive offers and help you come to a decision about which one of these are right for you.

Don’t Apply Without a Mortgage Broker

You don’t want to waste time and money applying for mortgages without a mortgage broker. But you don’t want just any mortgage broker, you want a Toronto mortgage broker! One close to home that understands our unique financial climate, how much money you’re going to need to refinance or to buy a home; we’ll help you through every step of the process and make sure that the experience goes as smoothly as possible. No one deserves a high interest second mortgage, so let us help you find the one that’s right for you!

To learn more about our great rates on second mortgages, contact us today!

How do Second Mortgages Work?

2nd MortgagesMany of us are taking out a second mortgage to work on our homes or pay off big ticket items; a second mortgage found through a good Toronto mortgage broker can help you get there. You’re going to first need to make sure that this is the kind of financing you need; they’re virtually the same as a home equity loans, and you’ll want to use it to make your life better. There’s no need to get money at 20% interest to pay off a 10% interest credit card bill, so make sure that this is the right choice for you before you proceed.

How do Second Mortgages Work?

Second mortgages work off the equity in your home. Equity is what you really own in your house, as opposed to what the home is valued at. If you have a house that is worth $250,000 but you still owe $100,000 in mortgages, you’ll only have $150,000 in equity stored up. This is what your Toronto mortgage broker will tell you that you can borrow against, but you can only borrow 70% to 80% of this amount. You’ll still hold a portion of your home equity and you won’t have to worry nearly as much about losing your house as you would otherwise.

Who Gives Second Mortgages?

Second mortgages are given by just about any lender, and your best chance is to work with a Toronto mortgage broker to see if you can find someone who will give you the best rate. Don’t just go back to your original lender to see if they’ll give you a fair deal when you can make many different lenders compete and give you the best rate on your next mortgage.

Banks are conventional mortgage lenders, while private mortgage lenders like lending companies offer private mortgages. They both will lend to anyone who has equity in your home, but they can both be geared towards people in different ways. Private lenders will be friendlier with people who have bad credit, while conventional mortgage lenders will be geared more towards people who have better credit. It will really just depend on who you’re working with and what kind of credit you have.

What Makes a Second Mortgage a Good Mortgage?

Finding the right second mortgage means knowing what you need out of one. You’ll want to speak with a Toronto mortgage broker and see what’s out there for you. You’ll want to first know what you want to spend your home equity loan on. Should you pay off your debts, should you pay for your children’s education funds? What are you going to do with the money, and how much do you need? You don’t want to borrow extra just because it’s available, but you don’t want to pass up what you need because you’re not sure what you need. Speak with a Toronto mortgage broker to make sure that you’re getting what you need and what’s right for you, not what’s right for the lender.

To learn more about our great rates on second mrotgages, click here: http://www.homebasemortgages.ca/second-mortgage/