Is Now the Right Time for You to Get a Second Mortgage?

Getting a second mortgage is not a decision to trifle with. After all, you need to use your home equity as collateral for you to get approved for a second mortgage. With this in mind, how do you know when it is time for you to get a second mortgage? What are sound reasons to apply for one and how to gauge if you will truly benefit from it versus if its something that is just nice to have?

So, What is a Second Mortgage?

A second mortgage is a type of mortgage that you can apply for once you already have a primary mortgage. It is backed by the value you’ve built in your property – which is why a second mortgage usually allows you to tap to up to 85% of your home equity.

We’ve compiled several reasons why getting a second mortgage may be beneficial for you right now. Use the following reasons to assess whether it is the right time for you to get a second mortgage or not.

You Want to Buy an Investment Property

It is one thing to simply want to buy houses for the sake of buying houses versus buying one to help make more money for you. If you want to buy an investment property but do not have enough cash to pay for the huge downpayment, getting a second mortgage may be the right decision for you provided that your cash flow can cover the rest.

You Want to Consolidate Debt with Home Equity

Consolidating debt saves a lot of money. When you consolidate debt, you end up with a single lower-interest debt versus having to pay several high-interest debts. Saving money this way can amount to a couple of thousands saved on a monthly basis. If the savings are going to be worth the effort of consolidating debt, then it is certainly justified for you to get a second mortgage.

You Need Funds to Pay for School

Are you planning to go back to school to improve your earning potential or want to fund a loved one’s higher education? Investing in education is one of the best reasons to get a second mortgage because you will surely earn back whatever money you invested in it. It may take a while to start seeing returns but it is worth waiting for if you want a brighter future for you and your family.

You Need Funds to Invest in a Business

You can’t make money without having money. If you want to start a business or expand one, you will certainly need a huge sum to do so. You can use the funds from a second mortgage to beef up your existing business or to start a new venture. This is a huge gamble but if you’re responsible enough to watch where the money goes and determined to get it back, then perhaps it is time for you to get a second mortgage.

You Want to Renovate Your Home

It is quite expensive to renovate a home but then, renovated homes tend to increase their value. You can use a second mortgage to finance a home renovation and then use the increase in home value to pay for the second mortgage at a future date. This is a good move if you’re planning to renovate your home for reselling.

Are you ready to apply for a second mortgage? Use our detailed application form or contact us so we can assist you as soon as possible.

 

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Convert Your Mortgage Into Assets

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

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

Apply for a Second Mortgage

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

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

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

Get a HELOC or a Home Equity Line of Credit

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

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

Refinance Your Mortgage

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

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

 

 

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Key Differences Between A HELOC and A Second Mortgage

Both a second mortgage and a home equity line of credit (HELOC) are additional loans to your home that are taken on top of a primary mortgage. However, some people may be confused about what differentiates them since the term second mortgage is usually used to refer to a home equity loan as well.

The main difference between a second mortgage and a HELOC is how the loan is handled by the lender. A second mortgage distributes funds as a lump sum while a HELOC distributes funds as a revolving line of credit that is not dissimilar to how credit cards work.

How Does a Second Mortgage Function?

A second mortgage is a secured loan that is backed by home equity. It is named a second mortgage because it is a mortgage loan that goes on top of an existing mortgage loan or on top of the primary mortgage. A second mortgage allows you to borrow money from the value that represents what you still owe from your first mortgage subtracted from your home’s market price today.

Funds are released from a second mortgage as a lump sum at the start of the loan. The term of the loan as well as the amount to be paid are fixed amounts determined at the beginning of the second mortgage. Payments are done per month until the loan has been paid for. Once the second mortgage has been paid, you can get another second mortgage.

How Does a HELOC Function?

A HELOC is a revolving line of credit that can be reused as long as there is still some credit left in the credit limit. This loan is backed by home equity and so has a much lower interest rate than a credit card. Payments are only made on the amount borrowed and interest is likewise only charged for the amount used.

A HELOC typically has a 10-year draw period which is the span of time wherein the borrower can use the HELOC, pay, and reuse it again. After the draw period, any amount not paid goes into the repayment period which is usually about 20 years. If you never use your HELOC, you do not have to pay anything for it. If you only use it in the fifth year of your draw period, then you owe nothing for the first 5 years. Note that a lender may choose to freeze a HELOC if property prices start falling.

Is A HELOC or A Second Mortgage Better?

There is no straight answer to this question because what may be better depends largely on your specific circumstances. If you are on the fence about which one you should apply for, you must consider your cash flow, what you are borrowing for, and your other existing debts. We can help you assess which may be the right mortgage loan option for you at Homebase Mortgages. Contact us so we can discuss the pros and cons of a HELOC and a second mortgage as they relate to your needs.

 

Should You Apply for A Second Mortgage During the COVID-19 Pandemic?

Many individuals are experiencing financial difficulties at this time and may be tempted to apply for a second mortgage to meet their financial needs. Some people choose to apply for a second mortgage to consolidate their debts, use as a down payment for another property, to fund a business, or to pay for home improvement. While it is true that you can use a second mortgage for almost anything, including helping you with your cash flow during the COVID-19 pandemic, you should consider the possible impact of every possible scenario that can happen before finalizing your decision.

How Does a Second Mortgage Work?

A second mortgage works by allowing a homeowner access to the property’s home equity. It is easier to qualify for than other loans and comes with a reasonable interest because the loan is secured by the property’s value. The amount that the homeowner can borrow depends on the home equity and can be estimated by getting the difference between the current market price minus existing debts on the property. Once approved, the funds are given according to the terms based on the type of second mortgage. Inability to pay based on the terms may result in losing the property in question.

Common Types of Second Mortgage

The main types of second mortgage are classified according to how the money is made accessible to the borrower. A home equity loan gives the money as a lump sum and is paid with fixed monthly payments. A HELOC is given as a credit line with a drawing period and monthly payments are based on the actual amount used by the borrower.

Is It Smart to Apply for a Second Mortgage Now?

Whether a second mortgage may be beneficial or not for you depends on a variety of factors. Generally speaking, you will not qualify for a mortgage loan if the lender deemed that you will not be able to pay back. If you do qualify for a second mortgage, you generally have a choice between the types of second mortgage to decide which one may be good for you.

The timing for getting a second mortgage varies as well. With how things are now, you have to consider your income for the next months and years to determine which loan option may be the best for you. Objectively speaking, now is a good time to apply for a second mortgage because qualifications are generally still the same compared to prior to the pandemic.

How Fast Is It to Get a Second Mortgage?

The whole process may take as little as days to a few weeks. Because your home’s current market is an important factor in determining your home equity, a professional appraisal is needed along with some documentation regarding your proof of income, credit score, employment information, and other debts for your application to be processed and approved.

Contact us today if you have a lot of questions about getting a second mortgage that is not addressed in our frequently asked questions. We understand that some things may need to be considered based on individual circumstances. Talk to us today!

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How Second Mortgages Work

A second mortgage allows you to borrow against the asset that you have built in your home. If you own a home and have been paying your mortgage, you are building home equity that can be accessed with the help of a second mortgage. This will help you use your asset for your projects without having to sell your home.

What is the Meaning of a Second Mortgage?

With a second mortgage, a homeowner is able to get a home loan using the existing home equity as the collateral. This loan is called a second mortgage because it is a mortgage loan on top of the homeowner’s primary mortgage. As such, a second mortgage also receives secondary priority for repayment if the home goes into foreclosure. The primary mortgage gets first priority. In the event that the homeowner is no longer able to pay debts and the home is sold by the lender, the primary mortgage gets paid first and only the remaining funds go into the payment of the second mortgage. This is the reason why most lenders for second mortgages have strict requirements before a homeowner can qualify to apply for a second mortgage.

How Does a Second Mortgage Work?

Second mortgages tap into the home equity of a property. The higher the home equity, the higher the chances that the homeowner can be approved for a second mortgage because it means that the homeowner has been diligent in paying towards the equity. You can estimate your home equity by subtracting any amount still owed in your primary mortgage from the estimated current market value of your property. As long as you are making payments towards your mortgage, your home equity will increase except in the case of when property values suddenly drop in your area.

After determining if you qualify for a second mortgage, you can submit an application to the lender of your choice with or without the help of a mortgage professional. This is a tricky process that can result in expensive mistakes. It is advisable to consult with mortgage professionals to save time, effort, and money.

There are many different types of second mortgage and they are divided into two forms. You can either access your home equity as a lump sum or as a line of credit. If you choose a line of credit, you will have a pool of money to borrow gradually from. There is no required minimum amount to use at any given time as long as you do not exceed the ceiling amount of your line of credit. If you choose a lump sum, the approved loan’s amount will be available for you to use however you want. You will be charged fixed monthly payments to help you pay your loan gradually over time.

Getting a Second Mortgage

Once you are decided to get a second mortgage, shop around and look up a minimum of three lenders. Get quotes either on your own or with the help of a mortgage professional to better gauge which lender and type of second mortgage is the best fit for your needs. If you need help getting a second mortgage in Canada, contact us at Homebase Mortgages.

 

Second Mortgage Cost, Alternatives, and More

Getting a second mortgage is a popular way to access home equity, but not everyone is well-versed with it. As a homeowner, you may have heard of a second mortgage and perhaps considering applying for one right now. Before you do so, make sure to read up on the things to know when getting a second mortgage. We will talk about alternatives, possible costs to you, and more below.

Why Get a Second Mortgage?

A second mortgage is a loan that allows a homeowner to borrow against the home equity that they have built up in their property. It goes on top of a primary mortgage that was used to purchase the home. Because of this, a second mortgage requires additional payment on top of the first mortgage and failure to do so can result in losing one’s home.

Why do people get a second mortgage then? The answer is because in most cases, getting a second mortgage vastly outweighs the risks of getting one. People use the funds from their second mortgage to pay for debt consolidation, cover a down payment, fund higher education, and pay for home improvement. Although a second mortgage means additional risks and costs, the benefits of using it to achieve financial goals are often worth it.

Types of Second Mortgage

There are several types of second mortgage and they are classed into two forms. You can get one that dispenses cash as a lump sum or one that gives you a line of credit. A home equity loan will let you access funds in one go as a lump sum. This may be a better option for those who want to use the funds for a big expense such as home renovation or debt consolidation. For those who want more freedom to use their funds and the ability to use as little or as much as needed when it is needed, a home equity line of credit could be the better option. The different forms of second mortgage come with their own pros and cons. Your mortgage professional should be able to discuss with you which one will be a better fit for your needs.

Is it Expensive to Get a Second Mortgage?

The costs associated with getting a second mortgage varies based on your lender, how much you are borrowing, and what type of second mortgage you will be getting. You’ll have to be ready to pay for appraisal, recording fees, underwriting or application fee, possible second-lien fee, and more. Paying a closing fee is expected too and that alone could be worth a few thousand dollars.

Is There an Alternative to Getting a Second Mortgage?

Refinancing your mortgage is an option if you cannot qualify for a second mortgage. With a mortgage refinance, there is a possibility that you can get less than what you were aiming for with a second mortgage depending on several factors but there are benefits as well. This option is best discussed with a mortgage professional.

Applying for a second mortgage can be a tricky process that may result in expensive mistakes if not done properly. If you need help getting a second mortgage in Canada, contact us at Homebase Mortgages.

 

Facts About Getting A Second Mortgage in Canada

Some people are worried about getting a second mortgage in Canada because they have a lot of questions and are not sure of the answers. Although getting a second mortgage is now more popular than ever, it is understandable that some people may have misgivings about applying for one because of uncertainty regarding some details. Be sure to familiarize yourself with some important facts below to empower yourself when making a financial decision.

What Is A Second Mortgage?

A second mortgage has many forms. It encompasses home loan products that use the homeowner’s home equity as collateral. Examples include home equity loans and HELOCs. The homeowner can choose a second mortgage that would best fit their needs.

You Use Your Own Money with A Second Mortgage

A second mortgage is a home loan that allows you to tap into your home equity. Since your home equity is the value that you own in your home, it uses your money. Borrowing from your home equity means that your home may be on the line if you have issues with repayment.

Private Lenders Could Be Better Than Banks

It is often very challenging to qualify for a second mortgage from a bank. For those who have been turned down by banks in the past, applying for a second mortgage from a private lender may be easier as they have friendlier requirements and are more apt to review individual cases carefully.

Second Mortgages Are Often Used For Huge Expenses

The most common ways that homeowners use their second mortgage for are home renovation projects and debt consolidation. Compared to other loans, second mortgages have lower interest rates and can help a homeowner save thousands of dollars over time.

Second Mortgages Are Flexible

You can borrow as much or as little as you need with a second mortgage depending on the type of loan product that you apply for. A HELOC is a great choice for small but recurrent expenses and a home equity loan is a good option if you have a one-time big expense.

Interest-Only Payments Are A Thing

If you apply for a HELOC, then it is possible to pay for only the interest until the loan repayment schedule states that the loan should be paid. This is great for people who are currently struggling with cash flow but have incoming money in the future.

There are So Many Uses for A Second Mortgage

A second mortgage can be used for anything once approved. The funds from it can be used to set up a business, fund a home improvement project, pay for higher education, make a dream wedding happen, and so on. The homeowner can use the funds however way they see fit as long as they can pay within the terms of the loan.

There Are Fees and It Is Not Free

The fees for a second mortgage vary from lender to lender and on the type of second mortgage the homeowner is applying for. It is best to discuss these details with a mortgage professional to ensure full understanding of them.

Interest Rate Is Not the Same for Everything

Interest rates and terms vary based on the type of second mortgage and other important factors. Your mortgage professional should be able to discuss these with you as well as compare rates between lenders before you finalize your loan.

You Can Use a Second Mortgage to Repair Your Bad Credit

You can pay off your existing high-interest loan with a second mortgage. By doing so, you can enjoy lower interest as well as improve your credit score.

Thinking of applying for a second mortgage? Contact us at Homebase Mortgages if you have more mortgage and home equity questions. Now might be the right time to apply for a second mortgage!

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7 Things You Need to Know to Get a Second Mortgage in 2020

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

What is a Second Mortgage?

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

How Does It Work?

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

How Does One Qualify for a Second Mortgage?

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

How to Pay for a Second Mortgage?

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

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

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

Why Are Second Mortgage Interest Rates Higher Than Primary Mortgages?

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

Is it Easy to Apply for a Second Mortgage in 2020?

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

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

 

Important Things You Need to Know About HELOCs and Second Mortgages

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

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

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

You Can Lose Your Property if You Miss Payments

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

Second Mortgages and HELOCs Are Not Without Pitfalls

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

Home Renovations Remain a Favorite

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

Second Mortgages and HELOCs Also Require Financial Planning

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

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

 

 

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Third Mortgages Explained

A third mortgage is a type of mortgage that someone who has an existing primary and second mortgage can get on the same home or property.

Most people who take on a third mortgage do so when the penalty for paying off the primary and the second mortgage is not reasonable. When this is the case, it makes more sense to simply obtain another mortgage.

What is a Third Mortgage?

Just like other mortgages, a third mortgage is a loan a homeowner can borrow from a lender based on the value of the homeowner’s property. It is called as such because a homeowner who applies for a third mortgage has an existing second mortgage and a first mortgage on the same property. As the third loan in a series of mortgages, a third mortgage is subordinate to existing ones. This means that in the event of any issue with payment or defaulting on payments, the first mortgage and second mortgage gets first and second priority when it comes to getting paid. A third mortgage will also require monthly payments just like other mortgages.

What Are the Benefits of a Third Mortgage?

Mortgages are applied for by borrowers because of the pros that they offer. Funds from a mortgage can be used to buy a new property or make improvements to an existing one. In this light, a third mortgage is useful because it gives the borrower supplementary funds that can be used however which way the borrower deems fit. This means that the money from a third mortgage can be used for paying for school tuition, funding a home renovation, financing a dream vacation, helping pay for medical expenses, and more. People who have valuable property may be able to secure huge amounts from lenders, at times possibly reaching up to 85% of the home’s value if circumstances permit.

Why Get a Third Mortgage?

If you’re a homeowner who has both primary and second mortgages and need access to your home equity, getting a third mortgage might be a better option for you. Compared to applying for other types of loans that come with high-interest rates, a third mortgage is a smarter financial option for those who can qualify for it.

Applying for a Third Mortgage

Third mortgage application is quick, convenient, and easy at Homebase Mortgages. You simply fill up our online form with your application and our associates will contact you after your application has been received and reviewed. You can expect to be contacted via email or mobile for clarifications on the information you’ve provided as well as other important details needed for your application

Homebase Mortgages is one of the few Canadian firms that can arrange third mortgages for homeowners. The third mortgage can be arranged in such a way that it can mature with one or both existing mortgages to save on penalty fees.

If you’ve been turned down by a bank, faced power of sale, currently self-employed, have low income, or bad credit, contact us at Homebase Mortgages and let us help you pick a financial solution for your needs.