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:

Are Second Mortgages Hard to Get?

While financing your home you’ll be able to find many different options and here we’re going to talk about second mortgages. You shouldn’t have to take out a home equity loan if you can take out a second mortgage, and just because your credit isn’t the best doesn’t mean you can’t get one. Here we’re going to talk about how difficult it can be to get one, how to use a mortgage broker to get the most out of your terms and what to use it for.

What Affects Your Chances to Get a Second Mortgage?

There are three things that will count against or for you when you’re trying to get a second mortgage:

FICO: Your FICO or credit score is one of the main indicators of what kind of borrower you are. This means that you’re going to need a good credit score to get a second mortgage. If you have anything below 600 you’re going to want to consider credit repair or credit building before you apply. You may be able to get your financing but it could be at terms that just don’t fit with what you need.

Income: Your income is important to making sure that you can repay your loan. If you’re self or seasonally employed you’re going to need a Toronto mortgage broker to help you get the best mortgage possible. We’ll help you get it right the first time!

Borrowing History: If you’ve borrowed against your home before (this is technically your fifth mortgage for example), recently or if you’ve had slow pays and no pays on your record you’ll definitely want to make sure that you get a mortgage broker on your side to get the right terms.

Why Are Mortgages Hard to Get in the First Place?

Mortgages, and most financing for that matter, can be hard to get. Lenders don’t want to take a risk that they won’t be able to stretch out the life of the loan and get a lot of interest back over time. They don’t like lending to people who pay off their debts quickly, and they don’t want to lend to people who pay off their debts so slowly it doesn’t make a dent. Most of us fall more towards one side or the other and it can be hard to get a second mortgage. This is when you need to think about getting to work with one of our Toronto mortgage brokers.

What Does a Mortgage Broker Do?

Mortgage brokers will not only help you get a good second mortgage, but they’ll help you look over everything that you can do to improve your credit and help you know if now is the time to borrow. Everyone has their own unique situation, and we know that there are no “one size fits all” solutions with financing. Why work with one lender when you can work with several different ones that will compete to give you the best deal? 

Let us help you find the right loan, at the right rate and help you save money!

Can You Get Private Second Mortgages?

private mortgage lenderIf you want to be able to get a private mortgage as part of a Canadian home refinance, you can. A private mortgage isn’t limited to buying a home out the gate, but you should talk to one of our Toronto mortgage brokers before you get started. You’re going to need the help to make sure you find a good private lender; there are many lenders that make these kind of loans and sadly a good deal of them are terrible to work with. You’ll also need some equity in your home to take out this kind of loan, so let’s get started.

What is Equity?

Equity is how much you actually own in your home when everything is said and done. So whatever debts you hold subtracted from the appraised value of your home will let you know how much equity you have. Here’s a good example:

The house you own is worth $500,000 (one can dream right?), but you still haven’t paid off your mortgage. You owe $100,000 still on your first mortgage, and that means that you have $400,000 in equity. This is great! Only 20% of your equity is tied up with debt, meaning 80% of your home is straight up cash. You will need to know that you can only borrow 80% of what you own; this means that you’re going to be able to borrow up to about $300,000 out of your whole home.

How do Private Lenders Work?

Private lenders will loan money to virtually anybody, which is awesome! Even if you have abd credit you’re still going to be able to get a second mortgage from them. They work just like any other kind of mortgage lender, but where they get their money is a little different. Banks and private lenders both have investors, but private lenders have individuals backing them. Their lending criteria isn’t as strict but you’ll still have to fill out some forms and pledge some of your equity as collateral.

Isn’t This Just a Home Equity Loan?

One of our Toronto mortgage brokers will be able to better explain all of this to you in person, but basically yes. This is a home equity loan. Second mortgages work off how much equity you have in your home and they’ll help you get all the money you need to get things done. You shouldn’t be trapped in a bad situation just because you may have poor credit or no credit. With the right private mortgage lender you’re going to be able to get the money you need.

Working with a Broker Saves You Money

When you work with one of our Toronto mortgage brokers you’re going to save money. We know where to look to get the best mortgages and we’ll help you save. From getting the lowest interest rates to getting the highest loan to value ratio for your next mortgage, we’ll work hard to help you. Contact us today and see what we can do for you.

Is it Time to Refinance with a Second Mortgage?

2nd mortgageIf you’re thinking about refinancing with a second mortgage, now’s the time to talk to one of our Canada mortgage brokers. Trying to refinance on your own you’re going to come up against different lenders with different things to offer, but we’ll help you find the deal that’s right for you. With interest rates at the lowest they’ve been for almost a hundred years, we’ll help you understand which lender is offering the best deal and to know if now is the right time for you to refinance.

What is Refinancing, Anyway?

Refinancing is where you change the way your loan works or you get a second mortgage on your home to pay off your bills. Some people are able to refinance their first mortgages to a lower rate or with a lower monthly payment – others need to take the equity in their home and exchange it for cash.

If you’re trying to pay off a bulk of credit cards for example, a large lump sum payment for less than you owe might be accepted to clear the debt. You’ll pay 75% of the bills all up front, then all you have to worry about is paying back your mortgage at a 4% interest rate. This can save you big over the long term, but only if you do it right.

Why Are Lower Interest Rates Important?

Every point in interest that you have to pay is another thousand dollars that your lender earns as a profit. There’s nothing wrong with making a little profit off loaning money, but you’re always going to want to make sure that you’re getting the best rate. When you work with one of our Toronto mortgage brokers we’ll help you understand how much you can save with different lenders, we’ll help you understand all of your options.

Can You Afford to Refinance?

You need to have a certain level of equity in your home before you think about getting a second mortgage or a home equity loan. If you don’t know how much equity you hold, call your lender and have a chat. You can also find out by looking at your latest monthly statement. The more equity you have free in your home the better off you’re going to be.

Is it Right for You?

If you’re being swallowed up by your bills and you want a way to get on the road to being debt free, refinancing with a second mortgage could be the right choice for you.

It’s important to note that people who get consumer credit counseling while in the process of refinancing and consolidating their debts are much more successful with the process. If you’re looking for help to get your mortgage under control and move on with your life, give us a call. We’re Toronto mortgage brokers and we understand what you need to do to get the best rate on your next mortgage. Contact us today and see what we can do for you.

How to Save Money On Your Second Mortgage

Saving money on your second mortgage means finding a good Toronto mortgage broker; you’ll need a skilled negotiator on your side to make sure you’re making the most of your second mortgage. If you want to save money, you need to know how mortgages work. Here we’re going to talk about why you need to find a good deal, how to find a good deal and how to make sure that it’s also the right deal. This means understanding how they work and why one is right for you. Let’s get started and peek behind the curtain!

Why are Second Mortgages More Expensive?

Second mortgages on average cost more than a comparable first mortgage. This is because the mortgager, or the lender, is taking a big risk hoping that they will be able to recover the money down the line. You could end up defaulting on your first mortgage and then they may never be able to get their money back. You’ll want to talk to your Toronto mortgage broker before you borrow any money from a lender. They’ll be able to help you figure out if a lender is giving you the best deal or not.

What Can You Use a Second Mortgage For?

Second mortgages can be used for all kinds of things, but you’ll want to make sure that you’re using it for the right reason. Debt consolidation can go a long way towards making sure you can save money over the long run. You’ll want to save as much in interest as you can before you sign on for a loan. You can also put the money towards any credit cards or even your first mortgage if you want to save on interest.

Another common thing people use these for is reinvesting in their home’s equity. You’ll be able to upgrade your home and then get more money out of it when you sell it. You can use it for whatever you like, but make sure it’s a real investment like education or upgrading your home. If you put it towards your debt, make sure that your existing debt’s interest rate is higher than the new one you would take on. There’s no sense in getting a loan at 20% to pay off a 10% debt.

How to Get the Right Second Mortgage

You’ll want to first talk with a Toronto mortgage broker. They’ll be able to help you find the right mortgage for you; from private lenders to conventional ones you’ll need to know which one is the right one for you. They’ll talk to many different lenders on your behalf, finding out which one is the one that will work best with your goals. You’ll have to think about who is going to give you the best interest rate, the best mortgage terms and the best deal overall. Without a Toronto mortgage broker you can have your work cut out for you, so make sure you consult a professional first before you get started! To learn more about our great rates on second mortgages, click here!