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.