First & Second Residential Mortgage Solutions

First & Second Residential Mortgage

Owning a home is an ongoing commitment; new responsibilities and issues can arise at any time. A 2nd residential mortgage can help you to fund additional expenses and other financial needs as long as you have equity on your home.

A second mortgage is a secured loan taken against a property that already has a mortgage. A 1st residential mortgage loan is limited to a maximum of about 65-80 percent of the value of your home. If your first mortgage leaves an equity gap, then you may qualify for a 2nd residential mortgage.

There are several reasons why a homeowner may consider getting a 2nd residential mortgage, such as:

  • Difficulty in getting approved for a personal loan (secure or unsecured), perhaps due to self-employment
  • Higher interest on the remaining balance when renewing your mortgage, perhaps due to a lower credit rating compared to when you borrowed your first mortgage, such that the extra cost is comparable to borrowing some more
  • The need for a cheaper option if breaking your mortgage midterm attracts a high penalty

A second mortgage poses a lower risk to the lender because your home acts as the collateral. A second mortgage has a higher interest rate than a first mortgage.

Comprehensive Services to Suit Your Needs

Our Northwood Mortgage brokers can help you navigate the process and settle on the right type of second mortgage for your needs. The common options for second mortgages are:

  • Home equity loan - Comes in the form of a single lump sum that you’re required to repay through fixed monthly payments for a specific period of time. A home equity loan is ideal for homeowners who know the exact amount of money they need and would prefer to receive it at once.
  • Home Equity Line Of Credit (HELOC) - Gives you access to funds in a similar way to credit cards, such that you can borrow any amount you need, provided it’s within the set credit limit.
  • Piggyback loan – Taken out at the same time as the first mortgage, usually with the objective of extending financing in order to reduce the down payment requirement or separate the loan balance into two amounts with a more favorable blended rate.

At Northwood Mortgage, we take the time to listen to your needs and look at the whole picture to approve your first mortgage. This includes situations that fall outside traditional lending categories and include:

  • Self-employed
  • Non-income verifiers
  • Credit issues
  • Financial distress situations
  • New immigrants

First & Second Residential Mortgage-Things to Consider

A second mortgage depends on the value of your home’s equity, determined by subtracting your mortgage balance from the current value of the home. If your home is worth $300,000 but owes $140,000 on your mortgage, you have $160 in home equity.

Depending on the requirements of the lender and your credit score, you may be allowed to borrow up to 85% of your current home equity.

Most lenders have the following requirements when applying for a second residential mortgage:

  • A certain minimum percentage of equity in your home
  • An acceptable credit score
Consult your local home loan expert. After finding an option that might be suitable for your needs, consider visiting Northwood Mortgage for consultation. Our experts will answer any questions you may have and ensure that you’re making the right decision.

Why Choose Northwood Mortgage?

We recognize that each one of our clients has individual needs, and our products and services reflect this. Whether you are taking on your first or second mortgage, Northwood Mortgage offers a number of services to help you:

  • Consolidate your debts to improve cash flow;
  • Turn your home equity into cash when you need it most (home repairs and renovations, education financing, special events like vacations and weddings);
  • Earn a return on your home equity through investments.

We aim to provide you with a high level of tangible savings. We do this by developing well-established relationships with many of Canada's most stable and respected Financial Service companies. This gives you access to an extensive and professional range of products and services that include:

  • Prime mortgages well below posted rates;
  • Construction and bridge financing;
  • Second and third mortgages;
  • Financing, up to 95% on a purchase of under $1,000,000

To learn more about how Northwood Mortgage Ltd. can help you, contact us at info@northwoodmortgage.com, 416-969-8130 or toll free1-888-492-3690.

FAQs

How is a Home Equity Line Of Credit (HELOC) different from a home equity loan when considering a second residential mortgage?

A home equity loan comes in the form of a single lump sum that you’re required to repay through fixed monthly payments for a specific period of time. A home equity loan is ideal for homeowners who know the exact amount of money they need and would prefer to receive it at once. That said, you incur high closing costs at about 2 – 5% of the total loan amount, as well as a title search fee, an appraisal fee, and other fees that the lender may impose. You’re also at risk of the bank foreclosing your home if you default on the loan.

HELOC gives you access to funds in a similar way to credit cards; you can borrow any amount you need provided it’s within the set credit limit. This type of second mortgage has two parts:

  • The draw phase – when you are able to borrow against your line of credit (usually 5-10 years) as an adjustable-rate loan
  • The repayment phase – for repaying the loan principal plus interest (usually 10-20 years) at a fixed-rate

The flexibility offered by HELOC loans is suitable for people with many irregular expenses over time, like starting a business. You have the option to repay during the draw phase to reduce interest charges and free up your credit again.


When should I consider a Piggyback loan for a second mortgage?

This option allows you to split the cost of purchasing your home into two separate loans. A piggyback loan is taken out simultaneously as the first mortgage, usually to extend financing to reduce the down payment requirement or separate the loan balance into two amounts with a more favourable blended rate. For instance, with an 80/10/10 piggyback mortgage formula, you will receive a first mortgage of 80% (loan-to-value) of the cost of purchase, 10% for the second mortgage, and a downpayment of the remaining 10%.


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