Canadians are finding more ways to use their home equity in 2021 and applying to get a second mortgage is no longer perceived as just something that people do when they are struggling financially. In fact, the best time to get a home equity loan is when you are financially sound, because that is the time that you can avail of the best deals when it comes to payment terms and interest rates.
With the above said, getting a second mortgage is still a complicated process that shouldn’t be taken lightly. The jargon used can be overwhelming or intimidating and the changing regulations can be confusing. This is why availing of the services of mortgage professionals to help you get a second mortgage is a smart way to get things done fast so that you can focus on things that truly matter.
Uses for Second Mortgage
Second mortgage can be used for any of the following purposes:
- Debt consolidation
- Emergency home repairs
- Emergency car repairs
- Education or tuition fees
- Working capital for a business
- Wedding expenses
- A dream vacation
- Home renovations or upgrades
- Anything that may cost a big amount of money
You do not have to be broke to need a second mortgage. A second mortgage is often taken by people these days to help them get ahead faster in life and/or to invest back in their property.
Types of Second Mortgage
Second mortgages can be grouped into two main forms or categories. You can get a HELOC which is a revolving credit for your second mortgage or opt for a home equity loan which is a lump sum credit. This also goes by the name closed second mortgage. Private lenders, banks, and other financial institutions offer both types of second mortgages but they may differ in their requirements as well as payment terms.
Which type of second mortgage should you apply for? The answer depends on your needs and financial capability to pay back. If you want more flexibility, variable interest rate, and the freedom to reuse your credit, then a HELOC might be a good option for you. If you need a huge sum of cash for something big that you want to spend on and want to have a fixed payment schedule and interest, then a closed second mortgage or a home equity loan could be the right option for you.
Second Mortgage and A Bad Credit
The beauty of applying for a second mortgage is that a lot of lenders will not look for outstanding credit score, high income potential, and other things for you to qualify for it. A lot of lenders only care about the home equity that you’ve built up in your home as a qualifying factor. This is because as a secured loan, lenders know that they have the right to foreclose and sell the property if the borrower fails to pay. Yes, some lenders may look at payment history but one’s credit score is really the least important factor and should not be an issue for you to qualify for a second mortgage more so if applying to private lenders via a mortgage broker.