Everything You Need To Know About Second Mortgage in Ontario

Life is unpredictable and sometimesunforeseen and unplanned expenses stand right in our faces. Such situationsleave an individual going for a loan to cover these unexpected costs. MostCanadians often opt for a persona loan or even a spend loan against their credit card, when there is an easy way out to handle such a crisis. And that optionis- a Second Mortgage (2ndMortgage). This article entails detailed information on why you might needa Second Mortgage and how to getone.

What is Second Mortgage?

When you decide to buy a new house and geta loan to purchase it, it’s called a primary mortgage. Simply put, a Second Mortgage is a loan that’sdispersed against the value of your home. It’s a lien taken against a home orproperty that’s already has been loaned for.

The property you purchased is an asset andassets come with certain gain values. A second mortgage is also sometimes known as HomeEquity Loan and can be used to get a loan withouthaving to sell your property or home.

Why Do You Need a Second Mortgage and Do You Qualify forIt?

A second mortgage allows homeowners to use their homes as collateral. Second Mortgages play on the equity ofyour home. The amount of money you’d get on a second mortgage depends on your Home Equity. When you get a loan, the Mortgage Lender becomes the owner of your home till you finishpaying the loan back. The amount of loan that you have paid off is calledequity.

So, if you have an existing mortgage, agood credit score and above 20% equity in their homes, you can easily get an affordable Second Mortgage in the formof Home Equity Line Of Credit (HELOC).But, if your credit score is weak and you hold less than 20% equity, securing aSecond Mortgage with a Private Lender or a reliable Mortgage Agent in Ontario is the wayforward. Most Second Mortgage lenders across Toronto demand the following to approve a 2nd Mortgage request:

1.      Income verification

Needed to ensure that you can affordpayments.

2.      Equity Score

Higher the equity, easier to secure a 2ndloan

3.      Credit Score

Plays a vital role in determining theinterest on 2nd Mortgage

4.      Property Documents

Demanded to corroborate the worth of yourproperty

Why Do You Need a second mortgage?     

There can be umpteen reasons behind one’sdecision to reach out to a mortgage agent in Ontario or a Private Lenderfor a Second Mortgage in Ontario.The most prominent ones are enlisted here:

-         To cover home renovation cost

-         To cover education loan

-         To pay for wedding expenses

-         To be used in an emergencysituation

-         To cover unforeseen medicalexpenses

-         To pay down tax arrears

Why Second Mortgages are Popular in Canada?

Acquiring a Second Mortgage in Ontario or Toronto comes with significantadvantages. Typically used to cover immediate expense, second mortgages arehighly popular for a number of reasons. Some of these benefits are:

-         2nd Mortgage comeswith low interest rate when compared to loans secured against credit cards orlease payments.

-         It has more flexible paymentoptions.

-         It improves your credit scorewhen the amount is used to consolidate debts.

-         Many Mortgage Brokers in Ontario give you the option to only pay theinterest thus, lowering your monthly payments.

-         You can use the 2nd Mortgage money to investin rental properties which eventually can be opted to converting the loaninterest into tax deduction.

Is Second Mortgage Risky?

There are always certain tradeoffs thatcome with benefits in any business. So, if you are applying for a Second Mortgage in Ontario, you need tobe wary of the following:

-         In case of a payment default,you might lose your home, since it’s the collateral against which the loanamount is dispersed.

-         There are additional feeinvolved in some cases. Appraisal costs, origination fees, and credit checkfees are some of the added expenses that you might need to pay for to get asecond mortgage.

-         Interest rates are higher ascompared to primary mortgages

Should You Get a Second Mortgage?

Before you get a Second Mortgage in Ontario, you need to self-assess whether you canafford one. Getting Second Mortgageseems easy money and is highly tempting when you are facing a financial crunch.The ease of getting access to money that otherwise seemed impossible islucrative. However, you need to be wary of making sure that while getting one,you don’t end up in a financial trap.

If you really need money, try to reduceyour existing debt. Adding another loan to your long list of debts will drainyou at all levels- physically, emotionally and financially. Try to budget yourexpenses and spend wisely. A 2ndmortgage is an add-on to the primary mortgage. If you’ve been successfullyrepaying your installments against primary loan without burning a hole in yourpocket, you can definitely go for another loan.

However, if you are unable to make up yourmind or are in a dire need of getting access to funds, you can avail theservices of a reputed Mortgage Agent inToronto, Ontario.  We at EquityMainly Matters, arerecognized and well known within the Mortgage industry for providing ourclients with cost-efficient solutions in the form of First and Second Mortgage, PrivateMortgage, Refinance, Home Equity Loan, Commercial Mortgage, HELOC(Home Equity Line of Credit), and many other Mortgage Solutions. Reach outto us at shawn@equitymainlymatters.ca forinstant quotes.