Do Not Get A Second Mortgage Without Reading This

Just thinking about getting a second mortgage can be very intimidating. Maybe you’re unsure about whether getting a second mortgage can really help you. Understanding what it is and what it can do for you should allay your worries and make for a smoother application process. That’s why we wrote this article!

Second Mortgage Definition

A second mortgage is defined as a type of loan that is secured against the value of your home, just like your primary mortgage. However, it is called a second mortgage because it only gets second priority with your initial mortgage getting top priority. Homeowners can borrow as much as 90% of their home equity with a second mortgage.

Why Get a Second Mortgage?

If you’re contemplating applying for a second mortgage, the most likely reasons are to finance education or spend for a home renovation. If not these, perhaps you are in the middle of your mortgage term and want to avoid fees related to refinancing or breaking your current mortgage. Or, you’re thinking of using your home equity for debt consolidation.

Given the above common reasons on why people apply for a second mortgage, it is easy to see why getting a second mortgage is gaining popularity.

Risks of a Second Mortgage

Second mortgages carry risks just like any other type of home loan. Lenders also view second mortgages as a riskier type of loan for them because money is lent to a borrower who already has an existing home loan. This is why more and more people are getting their second mortgage from private mortgage lenders because banks tend to be very strict to mitigate possible risks.

Interest rates are higher for second mortgages because lenders need to cover their own risks as well as insurance for lending to borrowers who have a higher risk of defaulting. The same goes for fees and penalties which is why reading the fine print and making sure that you understand all the terms is of utmost importance before signing a second mortgage.

Is It Worth it to Get a Second Mortgage?

Second mortgages spell convenience although some may view them as a bit expensive. Homeowners who have a lot of home equity can usually negotiate for better terms. If the funds are used in a smart way, such as for debt consolidation, you can save a lot of money after all the fees are considered.

The people who benefit the most from getting a second mortgage are those with a plan to pay it off as soon as possible and only using it for temporary financial relief. Note that the benefits you can gain from applying for a second mortgage are dependent on the terms that you can get, especially with the help of mortgage professionals.

Are you looking for insightful information on getting a second mortgage and understanding what it can do for you? Contact us and we’ll be happy to talk! Our team of mortgage professionals will discuss with you what you need to know to ensure that you’re getting the best mortgage help possible.


Got a HELOC? You Might Have Trouble Getting a Second Mortgage

A new rule change may make it a lot tougher for those who have a HELOC in Canada to get a second mortgage. Just recently, Toronto-Dominion Bank, the leading HELOC provider in Canada, just changed their policy and are now requiring those who have applications for other financing methods to prove that they are capable of paying their HELOC based on reaching the theoretical monthly limit and not on how much the actual balance is. This new policy is currently being implemented by some lenders, including the Royal Bank of Canada.

Small Change, Big Changes

As of present time, OSFI, or the Office of the Superintendent of Financial Institutions has not yet directly claimed responsibility for the recent changes although they are Canada’s banking regulator. Industry experts are saying that this change will have a significant impact on the second home and rental markets, not causing a crash of the market but will surely add extra weight on home prices.

What This Means

If you’re thinking of getting a HELOC or new loan in the future, you should be ready for the banks subjecting you on a stress test, testing you on a HELOC credit limit that you can afford. They’ll add an assumed payment to your mortgage application which will be based on the government’s benchmark

If you are getting a new HELOC, all the banks will “stress test” you on the HELOC credit limit. In other words, they’ll add an assumed payment to your mortgage application, based on the greater of the lender’s contract rate or the government’s benchmark posted rate. No impact will be felt if you’re merely renewing mortgage as well. Only those who have an existing HELOC and getting an additional mortgage will feel the hit.

Huge Impact?

With the new policy, a borrower who has a HELOC of $200,000 will have to prove that he or she can pay a monthly HELOC payment of $1,202 based on current rates. This can cause individual debt ratio to skyrocket beyond lenders’ maximum limits.

The good news today is only a few lenders have applied the policy so far although some more major banks will surely implement the change come 2019.

Bank Hypocrisy?

The banking industry makes a lot of money from HELOCs. It is said that borrowers do not apply for a HELOC, they are typically sold a HELOC if they are deemed credit-worthy. HELOCs undoubtedly increase bank profits and banks often build fences around borrowers when it is time for renewal, making borrowers pay more if they want to switch lenders. Banks also try to approve those with a HELOC application for the maximum amount, because the more borrowers use, the more interest they can charge. Some industry insiders now deem the actions quite shady since the usual marketing spiel is that HELOCs don’t have a huge impact on borrowers and now the borrowers are kind of trapped because of new developments.

If you want to retain your HELOC and qualify for a second mortgage to buy another property or to finance a home renovation, know that the recent changes may have an effect on you but some lenders may be easier to talk to than banks. Contact us and we’ll help you get a second mortgage.

Your Must-Know Checklist About Second Mortgages

If you’re undecided yet whether you should get a second mortgage or not, now is one of the best times to get a second mortgage in Canada. You just have to be sure that you fully understand what it means to get a second mortgage and what options will be best for you. More about second mortgages in Canada below!

Getting a Second Mortgage

Unlike your first mortgage, a second mortgage is a loan that is secured by the equity of your home. It is named ‘second mortgage’ because it comes as a second priority to your primary mortgage. People get a second mortgage to access as much as 80-90% of their home equity depending on the type of second mortgage they apply for. People usually opt for a second mortgage when they are still paying their primary mortgage and don’t want to refinance their mortgage due to expensive fees associated with breaking a current mortgage.

Purposes for a Second Mortgage

There are many uses for a second mortgage. The most common reasons are paying for education, consolidating debt, or funding a home renovation project. The main reason for using a second mortgage is to take advantage of the specific benefits that each type of second mortgage has, to help someone better manage his or her financial needs.

Types of Second Mortgages

Far from being a choice for desperate people, applying for a second mortgage is a smart decision if you know how to make a mortgage work for your advantage.

You may choose to get a HELOC or a home equity line of credit if you know that you’ll have several recurrent big expenses coming up because a HELOC will allow you to borrow for as many times as you want or need as long as it doesn’t exceed set limits. It works as a revolving credit so you can pay what you can afford in between each time you borrow, making a HELOC a bit like a credit card but your credit limit is the ceiling assigned to your home equity loan.

You may choose to get a second mortgage or a home equity loan to have access to a lump sum if you need a big amount of cash in one go, such as when you need money for funding a home renovation or when you need funds for a huge investment or debt consolidation.

Risks of Second Mortgages

Lenders typically view that a second mortgage carries more risks for them so it is understandable that lenders impose a higher interest rate for a second mortgage or have strict requirements regarding who to lend money to. This is why big financial institutions prefer other types of loans and why it is easier to get a second mortgage from a small lender. Second mortgages have a higher risk of not getting paid because the primary mortgage is the priority.

Should You Get a Second Mortgage?

The first step that you should take is to fully assess your financial situation to determine if you can qualify for a second mortgage. Note that different lenders may have different requirements so asking for help from mortgage professionals won’t hurt. Understand that a second mortgage goes on top of your first mortgage and failing to pay may have severe consequences. Talk to us at Homebase Mortgages if you have some questions or want to get a second mortgage in Canada.

Get a Second Mortgage When You Have Bad Credit

Do you know that you can significantly improve your credit score by getting a second mortgage when you have bad credit? If used correctly, a second mortgage can be used to repair bad credit although the challenge lies in qualifying for one when your credit score is bad. If your application is strong enough and you’re able to get a good interest rate, then you’ll definitely be able to repair your credit score.

Effects of Bad Credit

Using a second mortgage to fix a bad credit come with a lot of possible pitfalls. You have to note that a second mortgage is still a loan and that it comes with a higher interest rate than your primary mortgage because a second mortgage carries a higher risk for the lender. This means that the lender for the second mortgage will only get paid after the lender of the primary mortgage in case you default on your payments; and hence, second mortgage lenders charge higher interest rates especially for people with bad credit. Bad credit may also mean that stricter terms will be drafted for your second mortgage.

The First Step to Repair Bad Credit

Before you can use a second mortgage to repair your bad credit, you have to qualify for a second mortgage first by improving your credit score even by just a little. You can achieve this by getting a copy of your credit report and looking for mistakes that can be reported to quickly improve your credit score.

Pay Some of Your Debts

Paying off some of your small debts or working to get some of your credit card debts below 30% of your credit card limit can drastically improve your credit score and help you get approval for a second mortgage. Do not be tempted to move your debt to a lower interest card because that is only a band-aid solution that can hinder your possibility to get approval for a second mortgage. Remember that multiple rejected applications can also damage your credit score.

Get a Second Mortgage to Fix Bad Credit

After you’ve done the above, it is still possible to have some trouble getting approved for a second mortgage if you have bad credit. One way to get approval is to have someone as co-signer, perhaps a family member who has a good credit score. It will also help to seek the assistance of professional mortgage brokers who can connect you with lenders who may be more understanding of your situation. A good mortgage professional will not only help you shop for a lender but will also make sure to protect your interests so that you’ll be in a better financial position while paying your second mortgage and even more so after. By paying off a second mortgage, you can fully fix your bad credit. The trick lies in borrowing only what you can afford with the help of trusted mortgage professionals and staying on top of your payments.

Need to assistance connecting to lenders who will lend you a second mortgage despite of your bad credit? Contact us today and we’ll talk about further details with you!

What Canadians Should Know About Second Mortgages

Second mortgages are becoming increasingly popular, but do you know why so? What makes second mortgages attractive for many Canadians and why it is worth a consideration for you? Find out about these and more below!

Second Mortgages are Usually Used for Debt Consolidation and Home Renovation

Most people who get a second mortgage do so because they want to pay off a high-interest debt or because they need funds to finance a home renovation project. Both of these are smart uses for a second mortgage because debt consolidation saves you money on interest and home improvement projects usually increase the value of your home, thereby also increasing your equity.

Your Second Mortgage Can Help With Your Bad Credit

Consolidating your debt with a second mortgage can reverse your bad credit and repair it back to its former spotless glory. It may be a bit challenging to do this by borrowing from a bank so you better try alternative lenders such as private lenders that will have friendlier requirements.

There are Several Types of Second Mortgages

Second mortgages are loan products that come after a primary mortgage. As such, they come in various forms to cater to different people’s needs. For example, HELOCs are typically best for people who need a small amount of cash on a regular basis and happen to have a strong credit profile. Home equity loans, on the other hand, are given as a lump sum.

Second Mortgages are High-Risk Loans for the Unaware

Second mortgages use your home as a collateral so failing to pay based on the terms may result in you losing your home to foreclosure.

You Can Borrow as Little as You Need or as High as Your Equity Will Allow

Because the amount you can borrow on a second mortgage is usually dependent on the home equity you have, the amount you can access can be as much as a few hundreds of thousands of dollars. If you need a small amount fairly often, you can get a HELOC because that type of second mortgage works as a revolving credit with no minimum requirement for the money you borrow each time.

Interest Rates Vary Widely

Because different types of second mortgages have different terms and requirements, their interest rates also vary widely. This means that you have to consider this before getting a second mortgage to ensure that you choose the type that best fits your financial needs and means.

Second Mortgages Have Fees

Just like the interest rates for second mortgages, the fees vary as well depending on the lender, your location, and the specific type of second mortgage you apply for. This is where it gets tricky because you want to make sure that the savings you’ll get will exceed the fees you’ll have to pay. A mortgage professional can help you with this by advising you on what type of second mortgage may be best for you.

Second Mortgages Have Flexible Payment Terms

Some types of second mortgages only require you to pay interest on a set schedule, resulting in lower monthly payments that are easier to manage. This is great for those who want to use a second mortgage for home renovations before selling a home because they can use the second mortgage to increase the home’s selling value and then use the sales profit to repay the second mortgage.

Do you have questions about getting a second mortgage? We’d be glad to talk to you about them! Contact us at Homebase Mortgages so we can discuss with you the different types of second mortgages and help you determine which might be best for you.


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!



Your Guide To Getting A Second Mortgage By Building Home Equity

One of the fastest and most doable ways to build wealth is to build home equity. The value that you build in your home is one of your biggest assets that you can tap in times of need or when you need funding for a large project such as a home renovation.

Building home equity is literally as easy as paying your mortgage. Over time, the money that you pay towards your home grows as part of your home equity, which is defined as the value that you own when you take your home’s market value minus the amount that you still owe. The bigger your home equity, the easier it will be to tap later on when needed. This is one of the biggest tricks in making sure that you get a second mortgage should you need it. You can build your home equity by using the tips below:

Pay A Sizable Downpayment

Paying the largest downpayment that you can afford means starting off your home ownership by owning a large portion of your home from the start. This also means that the sooner you can apply for a second mortgage should the need arise.

Pay As Much As You Can Every Month

Your mortgage is paid monthly with a set amount; however, there is no stipulation against paying more than the minimum required per month so paying a bit extra here and there will not help you fully own your home faster, it can improve your financial profile making other loans possible in the future.

Pick A Shorter Mortgage Term

Not many are aware of this but choosing a 15-year-plan over a 30-year-plan often means paying as little as a few hundred dollars more per month and saving hundreds of thousands of dollars down the road. Always ask to see various term computations so you can determine which one you can afford best.

Be Smart When Choosing Home Improvement Projects

Some home improvement projects boost the equity of your home better, thereby effectively increasing your home equity faster. For example, landscaping your lawn may cost the same as a kitchen floor makeover, but the kitchen floor makeover can bring up the value of your home as well as make it more attractive for buyers. It is all about choosing the wiser investment and going for the one with the bigger returns more so if your funds are limited.

Get a Second Mortgage Fast

Once you’ve been building your home equity for a while, you may choose to tap it by applying for  a second mortgage. A second mortgage can be used to help consolidate your credit card and personal loans so that they can be made easier to pay off and with a lower interest rate. If you’re not after a lump sum loan, you may try for a HELOC to tap your home equity. We’d be happy to explain to you which second mortgage is best for you. Contact us today!


Getting to Know Second Mortgage Loans

Thinking about getting a second mortgage loan can be overwhelming, more so when you don’t know where to start in order to apply for a second mortgage. Perhaps you’re wondering whether you’ll qualify or not, maybe you’re not sure whether applying for a second mortgage would be a smart decision for you, or maybe you want to save up and at the same time, find the best second mortgage provider for you. We aim to help and provide you with this information below!

What is a Second Mortgage?

A second mortgage is a type of loan that is backed by your home equity and that you take on top of your primary mortgage. A second mortgage allows you to tap your home equity via a lump sum without having to sell your home. It is important to note that payments for a primary and second mortgage are separate and both must be paid by the homeowner.

Generally speaking, a second mortgage has a higher interest rate than a first mortgage because lenders face more risks by financing second mortgages. In the event that the homeowner got into financial trouble, the primary mortgage is still likely to get paid and the second mortgage won’t be a priority, hence the interest rates are higher.

Getting a Second Mortgage

Second mortgages are also known as home equity loans. The term can also apply to a HELOC or home equity line of credit which you can better understand by reading our primer on getting a HELOC post. As for getting a second mortgage, it is usually given to homeowners with about 20% home equity and a certain credit score.

Banks and other big financial institutions are the major financiers of second mortgages; however, they have strict rules which make them unattractive for self-employed individuals and those who are trying to repair their credit score. Private lenders also finance second mortgages and they have friendlier terms for those who may not qualify for the terms set by banks. Private mortgage lenders typically work with mortgage brokers.

Uses for a Second Mortgage

A second mortgage can be used for debt consolidation or to pay for a huge expense such as a major home renovation. These are smart ways to use a second mortgage because debt consolidation saves you money on interest and funding a home renovation means increasing your home’s value and therefore increasing your home equity.

Qualifying for a Second Mortgage

In order to qualify for a second mortgage, the lender will look into your equity, your credit score, your ability to pay, and your property. A third party home inspector may be hired as well as a property assessment may have to be done. Your income will be scrutinized to check your ability to pay and your credit score will be perused to see the loans you have. Fees will be a part of this before you qualify and given access to funds via a second mortgage.

Need the help of mortgage brokers to apply for and get approved for a second mortgage? Professional mortgage brokers can do more than that! Talk to us to avoid second mortgage mistakes and get in touch with honest private mortgage lenders. Contact us today!

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!