If you need funds and you don’t qualify to refinance your mortgage,
a 2nd mortgage is a great alternative.
If you have less than 20% equity in your home or if your credit score is not great the mortgage add-on could be for you, it can give you access up to 90% of the equity in your home.
Getting a 2nd Mortgage
You don’t need to break your current mortgage to get the second one
If you have more than 20% equity in your home and good credit score the most affordable option is the Home Equity Line of Credit or HELOC.
The HELOC is a revolving form of credit rather than a lump sum payment.
HELOCs are very popular as they are flexible allowing you to use the credit as required.
They are interest-only loans and you pay interest only on the amount that you have borrowed. With a HELOC you may borrow up to 65% of the equity in your home.
Higher Risk Higher Interest
Second loans do incur various costs and they do attract higher interest rates than first mortgages.
This is to compensate the lender for the higher risk. Second loans are subordinate to the first mortgage.
This means that in the event of foreclosure the second lender will receive payment only after the first mortgage has been settled.
The second lender could, therefore, lose out if insufficient funds remained to cover his mortgage.
Less Expensive Than Unsecured Debt
Despite the additional costs, second loans are secured. They are therefore less expensive than unsecured debts.
They offer a viable option for lenders who want to settle the expensive unsecured debt and save on interest.
A mortgage add-on can also help you to improve your credit score through the payment and consolidation of debt.
If instead, you wish to use this new mortgage for investment purposes you can claim the interest on the loan as a tax-deductible expense.
Get Qualified for a Second Mortgage
Know the risks
Certified Mortgage Brokers Barrie has helped thousands of clients to make the right choices when it comes to making financial decisions.