Save on Your Second Mortgage Rates by Shopping for the Right Lender the Smart Way!

Though getting a second mortgage is quite popular these days, rates can still vary by a lot depending on several factors including the lender you choose to transact with. Choosing the right lender is a big factor in managing how much you’ll end up paying for the interest of your second mortgage.

Why Mortgage Interests Differ

Mortgage interest rates are mostly dictated by individual lenders, but their decisions are still products of existing technology, motivation to be the market leader in their region, operating costs, and risks associated with each loan.

Some lenders take a more transparent approach and give you a ballpark of fees and interest as soon as you contact them. Some may not disclose these details until after a lot of communication has transpired. To make sure that you’re getting good rates, it won’t hurt to gather at least 3 quotes. Better if you have a mortgage broker who can get this data for you to maximize your savings. Just comparing 2 quotes can save you thousands in final fees and interest to be paid.

The key is to not just ask for the interest rate but also ask for the total that includes fees after all has been said and done. A 0.2% difference in interest can translate to thousands if applied for the same time period. Additionally, a higher interest rate applied for a shorter span of time can still result in savings for you. This is why it is important to compare data and think of long-term impact on your finances.

Is Getting A Second Mortgage A Smart Option?

A second mortgage is not the only way to tap your home equity although it certainly is one of the most popular for many reasons. For one, a second mortgage will give you access to a huge amount of cash all at once, making it the perfect option if you have a big-time expense that you can’t simply save for (like a home overhaul). A second mortgage is also easier to manage for some because the payments and interest are set per month, so the homeowner is aware of how much to pay and until when. This is different for a HELOC which has a variable interest.

Shop for the Right Lender

Ultimately, what will decide whether a second mortgage is the right financial solution for you are your current needs, your ability to pay, and whether you qualify or not. After this, the next step is to find the right lender by using the information we shared at the earlier part of this write-up.

Remember, getting a quote or several quotes from at least 2 lenders can save you thousands! More if you get the help of mortgage professionals who can save you both time and money. After all, they know which lenders would have the best possibility of having terms that would be the right fit for your needs.

Need help with anything concerning mortgages in Canada? We got the answers to your most frequently asked questions regarding mortgages and more. Contact us today to avail of our mortgage-related services.

Answers to Your Frequently Asked Questions on Second Mortgages

Getting a second mortgage is not something that you can simply do on a whim. You have to be sure that you understand what you are getting into and that you’ve at least read about the advantages and disadvantages of second mortgages before plunging in. Asking questions is only wise, after all! Below are the answers to the most frequently asked questions people have on second mortgages.

What is a Second Mortgage?

A second mortgage commonly goes by the term ‘home equity loan’. Essentially, it is another loan that you take on top of a property with an existing mortgage. A second mortgage loan is secured against the property it is associated with.

Is a Second Mortgage the Same as a HELOC?

A home equity line of credit is not the same as a second mortgage. The easiest way to explain their difference is that a second mortgage is given as a lump sum and is paid just like a typical mortgage. On the other hand, a HELOC operates more like a credit card because it is a revolving line of credit that can be used and reused until the set time and value limit is reached. Paying a HELOC is usually interest-only for predetermined time.

What is the Typical Interest Rate for a Second Mortgage?

Second mortgage interest can either be fixed or variable. What doesn’t change is the fact that interest for a second mortgage will always be higher than that of the primary mortgage because it carries more risks for the lender. The good thing is that compared to unsecured loans such as a car lease payment or a credit card, a second mortgage has a relatively low interest rate.

What is the Maximum Second Mortgage Credit Limit?

First off, there is a required amount of equity that you need to have before you can get a second mortgage (and this will vary depending on the terms of each lender). Banks usually require a minimum of 25% equity while trust companies may lend you money on just 10-15% home equity. The money that you can borrow can then be up to 80% of the appraised value of your home after the balance of your first mortgage was subtracted from it.

Is It Possible to Apply for A Second Mortgage if I Have Bad Credit?

While it is possible to obtain a second mortgage even if you have bad credit, the truth is that it will be a very long and probably unfruitful process if you approach the wrong lenders. This is because lenders can be very strict about approving second mortgages as they carry more risks for the lender.

For What Can A Second Mortgage Be Used For?

You can use the funds from a second mortgage to pay for any huge expense that you cannot simply save for given your financial situation. You can use it to pay for a home renovation to add value back to your home too.

What Risks Should I Be Aware of Before Getting A Second Mortgage?

Because a second mortgage is a secured loan against your home, you will risk losing your home if you fail to make payments or if you signed one with unreasonable terms. You have to be sure that you can afford the payments and that you fully understand the payment terms.

So, when is it wise to get a second mortgage? The answer is when you’re ready and fully understand the accompanying responsibilities as well as benefits to your finances. You may contact us if you have more questions on second mortgages not answered here. We’d be happy to talk with you at Homebase Mortgages!

When Is It Wise to Get a Second Mortgage?

Getting a second mortgage isn’t as simple as marching to a bank and telling lenders that you want to take a loan against your home equity. Although a second mortgage is just defined as a loan against the equity you’ve built up for your home, getting one is a complicated process that can result to you losing your home if you’re not careful. You should only take a second mortgage if you’re sure that you can handle the terms and that the risks will be worth it for you.

Why Get A Second Mortgage

Most people apply for a second mortgage to finance projects that they don’t have the cash for, such as an expensive home improvement project or extensive home repairs. Some do so to fund big expenses such as a dream wedding or vacation. There are also people who take a second mortgage to save money in the long run, such as when the money is used to consolidate loans with a high interest rate – effectively converting them to a low-interest single loan that is easier to handle.

How a Second Mortgage Can Help You

Whatever your reason is for trying to get a second mortgage, you need to understand how a second mortgage works to ensure that you end up helping yourself by getting it.

Know that a second mortgage gives you a one-time set amount that you have to pay on top of your first mortgage. The payments are a fixed amount monthly and is set until you’ve fully paid off your loan. The downside is that failure to make payments as agreed can lead to your losing your home to foreclosure.

How to Apply for a Second Mortgage

Getting a second mortgage follows a process that is similar to getting a first mortgage. There will likely be an appraisal as part of determining your home equity and then you connect with a lender or a bank to begin the paperwork.

Banks generally take a long time to evaluate your details to determine how much they can lend you. A private mortgage lender might be a better option if you’re not traditionally employed or if your credit score isn’t as good as banks requires it to be.

Is it Wise to Get A Second Mortgage?

Getting a second mortgage shouldn’t be your first financial option when you need cash. Ask yourself if it is possible to simply save up for the huge expense you have to fund. Try to see if your loans can be consolidated some other way. Try to see where you’ll be financially in the future to determine if you’ll be able to pay or whether you’ll be risking going homeless.

Weigh all the pros and cons before making up your mind to apply for a second mortgage. Try to find if there are any other ways to finance your needs. Once you’re sure you want to get one, don’t hesitate to ask for professional help to get the best terms possible. You need to make sure that getting a second mortgage will have a lot of benefits for your situation for it to be a truly wise  decision.

If you feel that you should consult with mortgage experts before you get a second mortgage, do it! Contact us and we’ll be happy to discuss your concerns with you.

Disadvantages and Advantages of Second Mortgages

Applying for a second mortgage is no light decision because it is a loan that can take your home away from you if not paid back according to the terms you’ve agreed to. On the other hand, it allows you to access your equity without having to sell your home. With this in mind, it follows that a careful evaluation of the disadvantages and advantages of second mortgages can help you gauge whether a second mortgage is for you or not.

Types of Second Mortgages

Second mortgages come in a lump sum and a line of credit form. A standard second mortgage gives you your loan in a lump sum that you’ll have to gradually pay over time with fixed monthly payments. A line of credit or a HELOC (home equity line of credit), gives you a pool of money from which you can withdraw from as needed and repay and reborrow from over and over.

Understanding the types of second mortgages will give you more flexibility about deciding which type of home loan will be better suited for your needs. Know that interest rate will usually differ – with a line of creed usually being subject to variable interest rate and a standard second mortgage having a fixed interest rate that helps you plan your payments ahead.

Advantages of Second Mortgages

One of the key advantages of second mortgages is that they allow you to have access to large amounts of cash given that the loan is secured by your home. Other benefits include:

  • Enjoy lower interest rate as compared to other types of loans because second mortgages are a type of secured loan.
  • Tax deduction for interest paid (more so for pre-2018) if you qualify barring technicalities. This is still available this year but only applies to money spent on getting substantial improvements on your home.

Disadvantages of Second Mortgages

The risk of foreclosure is the biggest in the list of disadvantages of second mortgages but this generally only applies if you fail to continue making payments. Other disadvantages of second mortgages include:

  • Second mortgages are not cheap. There are closing fees involved as well as you having to pay for appraisal, origination fees, and more.
  • Interest cost can add up. Although a second mortgage’s interest is a lot less compared to credit card loans and the like, it is still a bit higher than your primary mortgage’s interest.

Best Uses of Second Mortgages

There are many uses of second mortgages but the best and wisest one is perhaps reinvesting the money back in the home by means of needed home improvement projects and upgrades. Debt consolidation is another smart use for a second mortgage because of the money saved in the long run. Funding education is another good use for the funds from a second mortgage as further education can drastically improve your earning potential.

Now that you know how a second mortgage can help you, have you made up your mind to get a second mortgage? If so, feel free to contact us today!

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When You Should Consider Getting a Second Mortgage

Getting a second mortgage isn’t as simple as marching to a bank and telling lenders that you want to take a loan against your home equity. Although a second mortgage is just defined as a loan against the equity you’ve built up for your home, getting one is a complicated process that can result to you losing your home if you’re not careful. You should only take a second mortgage if you’re sure that you can handle the terms and that the risks will be worth it for you.

Why Get A Second Mortgage

Most people apply for a second mortgage to finance projects that they don’t have the cash for, such as an expensive home improvement project or extensive home repairs. Some do so to fund big expenses such as a dream wedding or vacation. There are also people who take a second mortgage to save money in the long run, such as when the money is used to consolidate loans with a high interest rate – effectively converting them to a low-interest single loan that is easier to handle.

How a Second Mortgage Can Help You

Whatever your reason is for trying to get a second mortgage, you need to understand how a second mortgage works to ensure that you end up helping yourself by getting it.

Know that a second mortgage gives you a one-time set amount that you have to pay on top of your first mortgage. The payments are a fixed amount monthly and is set until you’ve fully paid off your loan. The downside is that failure to make payments as agreed can lead to your losing your home to foreclosure.

How to Apply for a Second Mortgage

Getting a second mortgage follows a process that is similar to getting a first mortgage. There will likely be an appraisal as part of determining your home equity and then you connect with a lender or a bank to begin the paperwork.

Banks generally take a long time to evaluate your details to determine how much they can lend you. A private mortgage lender might be a better option if you’re not traditionally employed or if your credit score isn’t as good as banks requires it to be.

Is it Wise to Get A Second Mortgage?

Getting a second mortgage shouldn’t be your first financial option when you need cash. Ask yourself if it is possible to simply save up for the huge expense you have to fund. Try to see if your loans can be consolidated some other way. Try to see where you’ll be financially in the future to determine if you’ll be able to pay or whether you’ll be risking going homeless.

Weigh all the pros and cons before making up your mind to apply for a second mortgage. Try to find if there are any other ways to finance your needs. Once you’re sure you want to get one, don’t hesitate to ask for professional help to get the best terms possible. You need to make sure that getting a second mortgage will have a lot of benefits for your situation for it to be a truly wise  decision.

If you feel that you should consult with mortgage experts before you get a second mortgage, do it! Contact us and we’ll be happy to discuss your concerns with you.

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.