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Second Mortgage Financing for Dummies

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Second Mortgage Financing for Dummies

debt1Home renovations, a child’s education, debt consolidations – these are all common reasons why Canadians are taking advantage of second mortgage financing. If you own your own home, have significant equity and good credit – obtaining that financing is probably far easier than you may think. This week we cover some of the basics to help you.

Second mortgage financing is a great option for people who need to finance larger sums of money. For example, a second mortgage would be great to finally finish your basement, a task which you’ve estimated at $30,000, but not necessarily to finance that family vacation to Disney World which will run you $5,000.

Second mortgage financing is also incredibly attractive right now because of record low interest rates. Other than 1st mortgage financing, it is one of the lowest rate credit products you will find. Just remember, even though those rates are currently at record lows – that isn’t going to last forever.

When looking at second mortgage financing there are a few important points to keep in mind. Firstly, it should be noted that,a few years ago, CMHC mortgage rules changed so the most you will likely be able to borrow against your home is 85% loan to value if you are seeking bank financing.

Secondly, the key to a realistic second mortgage is how you structure it – amortizing a second mortgage is very important because you don’t want to stretch the debt out over 20 or 25 years. For example, you would be wise to amortize a $20,000 second mortgage to consolidate debt over 5 years. At an 8% rate payments would be less than $400 per month.

What if your credit is a little on the shaky side? That’s ok. Even with some credit problems you can still get a second mortgage but more equity will be required and you may pay a higher interest rate.

What to watch out for: loan shark style private lenders. Sky high fees and aggressive default clauses are two red flags that should never be ignored. A good mortgage broker is the way to go because they will deal with all lenders to get you the best deal.

DebtCare has the knowledge and resources to get you the second mortgage financing for those big projects – at a rate that won’t break the bank. Call us today at 1 (888) 890-0888.



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