When you’re trying to make the most of your money and your equity, you’ll probably start looking at second mortgages – but why are they so expensive?! Here we’re going to talk about how you can work with a Toronto mortgage broker (us!) and know what kind of deal you can really get. If you’re having to take out a second mortgage that runs alongside your first mortgage, it’s easy to understand why a lender might be weary of lending you more money – if you can’t handle your first mortgage how do they know they’re going to get paid again?
What is a Second Mortgage?
If you’ve taken on a first mortgage, you’ve been paying off your mortgage each month. Every payment brings you more and more equity that you can borrow against later, which is what a second mortgage does. It allows you to tap into the piggy bank that is your home and pay off debts, send your kids to school, whatever you want as long as it’s a wise investment. Working with us as your Canada mortgage broker to help you save the most on your second mortgage, so don’t do it on your own!
Why do They Cost More Than a First Mortgage?
They cost more because it’s a gamble for you and a gamble for the lender. It’s a gamble for you because you could lose equity in your home and a gamble for them because you may not be able to repay what you owe. They recoup this loss by charging you a higher interest rate, hoping that one day you’ll be able to pay off the debt in full – but not too quickly of course! This is why they cost more, and why you need to be careful about who you borrow from.
What Can You DO with a Second Mortgage?
You can do just about anything, as long as it’s going to bring you something in return. Investing in a business, your retirement or even education and the value of your home are always great choices. The last thing you want to do is get a second mortgage to go on vacation or to buy a luxury car… don’t gamble with the equity in your home! You only get one shot to make everything go right and if you’re not careful it’s not hard to end upside down on your mortgage, hoping that you can find a way to fix it.
Is it Right for You?
You’re going to want at least 1/3rd of your home paid off before you even think about taking out a second mortgage. If you don’t, there is always the risk you could end upside down on your home drained of equity. Speak with a Canada mortgage broker like us, make sure you’re getting the right financing option and the right lender to service your mortgage. Don’t ever take what’s offered to you, always get the best deal.
To find out how we can help you find a great mortgage, apply online here!