Posted onJanuary 23/2019
Life can be complex, unpredictable, and exciting. At any point in time you may find yourself in need of a loan to pay for something important, such as an addition to your home, an unexpected repair, medical emergencies, or education tuition.
What is a Second Mortgage?
A second mortgage isn’t complex and, essentially, is what it says: it’s a secondary mortgage on your property. In other words, you are going to take out another loan on your house based on its equity and what you can afford. So with a second mortgage, you’re not refinancing your primary mortgage or borrowing more money on that primary mortgage. Instead, you are taking out a second, smaller loan in the form of a mortgage.
Do I Really Need a Second Mortgage?
Whatever the reason, a second mortgage in Toronto is one of the options that can be explored to fund your financial need. You shouldn’t necessarily jump into this option and decide it’s the right one for you. Work with someone who is strong with numbers and interest rates, such as your accountant or financial adviser. They will look at the costs, and advise what is the best option for you at your age and in your circumstances.
Getting a Second Mortgage in Toronto
Now that you’re ready, let’s look at the different ways to get a second mortgage in Toronto.
Be ready to prove yourself financially. You will need a significant amount of equity in your property, or a way of securing the second mortgage. Equity is the difference between the value of your property and how much you owe. If you owe $40,000 on a $200,000 property, your equity is $160,000. A lender or mortgage broker will use this figure to calculate how much they are willing to lend to you and at what rate.
When you’re at this stage, you will need to get your home appraised. If the value has risen since you bought it, you’re in a good position. But if you are in a market area where prices have fallen or are depressed, you will face some challenges.
Is a Second Mortgage in Toronto Worth It?
At this point, you can determine if a second mortgage makes financial sense. In many instances when borrowers have good equity in their property, a second mortgage is less expensive than borrowing the same amount from a bank. Sometimes, your existing mortgage lender may give you a second mortgage at a slightly lower interest rate, and with no up-front costs.
Who to approach for a Second Mortgage in Toronto?
The obvious first choice is your existing lender. They may give you a good rate, given that you’re already one of their borrowers.
However, a mortgage broker such as Northwood Mortgage can provide a much broader range of options, including interest rates and mortgage types. If your application for a second mortgage in Toronto is approved, we will take you through the pros and cons of this option. This way, we will be able to identify the best second mortgage for your needs.