What Do You Need To Learn About Second Mortgages?

The second mortgage loan has become a very popular product offered by mortgage brokers in Toronto. And because people find new ways to borrow money, a second mortgage could be a perfect way to finance a larger expenditure. But before getting a second mortgage in Toronto there are some things that you have to be informed about so you can make a good choice where your finances are concerned.

First of all, before taking out a new loan, you should know what does it represent in the greater picture of your over all finances. The second mortgage in Toronto can be considered a home equity loan – or a heloc for that matter. What you should know is that the second mortgage doesn’t require the refinancing of the loan you already have, but it gives you the possibility of considering your home as collateral for a second charge mortgage.

A second mortgage is actually giving you the possibility of borrowing more money due to the fact that you have a home, even though it isn’t fully paid off. You will continue to pay for the mortgage you already have, along with a new 2nd mortgage in the event you accept the terms offered and sign the necessary papers with the lender and lawyer. So it is a possible to acquire higher financing and amounts to pay for large item tickets with a second collateral charge mortgage on your current property.

Another thing that has to be clear to you is that the mortgage you already have won’t be affected by this second place mortgage – you still need to make your payments as agreed to. So don’t worry about the payment conditions changing on the first, because they will not – however, in some cases lenders do not allow for a second behind their first and will actually recall their first mortgage. The 2nd mortgage is indeed helpful for paying off high interest debt by leveraging a lower interest rate then what unsecured credit products provide. So be certain you are ready to take on a second obligation, because after you sign on the dotted line with your john hancock, you will have two bills to pay, and don’t even think of missing payments on either, without there being penalties.

Thus, its important to be aware of the terms and conditions of the second mortgage, before signing for it. And a very important thing that has to be taken into consideration no matter the loan you are taking out is the one referring to the interest rate. This has to be as low as possible and also if possible, a fixed one. But usually, for a second mortgage the interest rates are a bit higher than those for the first mortgage, so think well if you can afford to pay it. The reasoning behind why seconds are more expensive is related to the risk factor which is higher for these second mortgages.

Given all these considerations, a second mortgage continues to be a more affordable way of borrowing money if you compare all the interest rates in relation to unsecured credit products. Also, second mortgages can be a wonderful finance bridge in times of financial hardship, when one needs to leverage their property for cash.

Most people can be approved for a second mortgage in Toronto because it is a good way of borrowing money as long as the house is approved as collateral. After taking the money, you can generally use it to fund whatever project you have at hand with little say from the lender, unless conditions were stipulated on funding in the contract. As spoken of previously, 2nd mortgage can be used for funding different expenses, like the education for your children, going back to school yourself, completing major renovations on your home in a cost effective manner or even for taking a trip overseas if your heart so desires.

Toronto Private Mortgage Lenders – Expert Mortgage
85 E Liberty St, Toronto, ON M6K 3R4
(289) 203-7282

Why Get a Second Mortgage in Toronto?

A second mortgage in Toronto is a handy option that can be taken on your home on which you have an existing first mortgage. A second mortgage amount will be based upon the equity that in available in the property, after an appraisal has been completed. Typically this mortgage will be of a lower priority compared to the primary mortgage and the first mortgage loan will be paid off first in the event of insolvency. In case you have opted for refinancing of the first loan after availing of the second mortgage, you have to request for the subordination of your second loan from the lender.

Second mortgages can be availed in a variety of circumstances. These mortgage loans can be taken to invest in lucrative investment schemes that would ensure higher returns than the interest rates of the second mortgage. People take out a second mortgage Toronto, ON loan for a variety of reasons including debt repayment, medical bills payment, financing the education costs, home renovation, buying another home, creating a home equity line of credit, and even for a auto loan to buy a new car. The second mortgage is also referred to as Home Equity Loan in many instances. If you are eligible for a loan that is about one-fifth of your original home purchase amount, the private mortgage insurance may be waived off – do speak to a licensed insurance rep to confirm the same.

The interest rate on a second mortgage loan in Toronto will be more than those of the first mortgage and it will have a shorter duration than the first mortgage – usually one year in term. Thus a second mortgage will mean that you are responsible for the timely repayment of both the first and the second home mortgage. A healthy track record that shows timely repayment of the first loan will greatly increase your chances to qualify for the second mortgage loan.

Before choosing the right second mortgage loan, you need to compare the various quotes provided and never fall for the first offer that you might come across – ask questions. Online research is the quickest and the easiest way to find out about the various mortgage loans offered and a well-informed decision is what pays off in the end. So, do consider all factors and re-payment terms, as your second mortgage decision will cost you dearly, if you are not prudent with your finances.

Make sure that you are well aware of all the terms and conditions of the loan from your mortgage broker in Toronto. Do not choose any loan that requires a costly prepayment penalty in the event you pre-pay the mortgage early or miss a payment inadvertently. Read the documents clearly and in case you are in doubt, do not hesitate to avail the services of a mortgage specialist who will suggest the best possible option for you and ensure you are connected with a lawyer to protect your interests.

Second mortgage loans come as handy sources of funds to meet your well-cherished holiday plans or to meet the education expenses of your children. Mortgage markets are flooded with many a type of home loan and a qualified mortgage broker lender in Toronto will help you choose the best option.

Refinancing Your Home in Toronto

Refinancing, when it refers to your second home mortgage in Toronto, basically means re-obtaining the financing to pay off the original debt and start paying the new loan with even better terms. The new loan is generally the same size as the old one and uses the same property, your house as security or collateral.

There are several reasons to go for refinancing:

· To switch over to a fixed mortgage from an adjustable one. This will ensure your monthly payments stay exactly the same for the duration of the loan. It is useful if you expect the interest rates to rise in near future.
· To lower the interest rate.
· To reduce the term of longer mortgages.
· To obtain money using the equity of the property.
· To use the cash out to consolidate debt.

Lots of property owners pay interest rates that are too high and are locked into loans that do not fit their financial goals and income levels. Your mortgage payments should not account for more than one-third of your monthly income. How can you judge whether refinance is a sensible thing to do? Weigh the interest savings you will get against all the charges and fees you will pay to refinance. If the cumulative savings are more than the refinance costs, you can go ahead with the option.

The refinance option becomes less attractive if there are huge prepayment fees on the old mortgage. This increases the cost to refinance.

Should you refinance your home in Toronto?

This question can be answered by asking yourself two other questions:

· Do you plan on staying in this home for the complete duration of the term of the loan, which is generally between 15 and 30 years?
· Do you have equity in the property? Equity is the difference between the value of your home and the outstanding loan amount or mortgage pending on it.
· Are you getting financial benefit out of the switch or some other benefit like a longer term of repayment?

If the answer to the first question is a ‘No’ and to the second and third a ‘Yes’, you can benefit from the home loan refinance. Equity is the crucial element in your decision to refinance. It would be advisable to wait for up to five years before thinking over the refinance option unless, of course, your property came with equity.

People tend to resort to refinancing for either cash outs or to decrease their monthly repayments. Often people want both, but that is just not possible. Whatever your motivation, you should have a minimum of 25 percent equity in your home before you proceed. This equity will be your comfort cushion and will also give more confidence to the lender in your repaying ability, which may mean better interest rates.

Refinancing your home can reduce your monthly payments, making it much easier for you to meet your expenses. You can also potentially save interest payments amounting to thousands of dollars by the end of your mortgage.