How do I get a second mortgage on my home?
There are several reasons why an individual might take out a second mortgage on their home, from renovating their house to paying for their children’s post-secondary and much more. With the help of a second mortgage, the borrower can tap into their home’s equity to take care of their expenses. Let us, however, understand what a second mortgage is: A second mortgage is a type of mortgage that the borrower takes out against their house that has an existing loan. In the event the borrower fails to make the regularly scheduled payments, the lender has the right to seize the property.
How does it work?
Your most valuable asset is the equity you have in your property. Like cash, you can utilize them to pay for your expenses. Based on your financial goals and situation, a second mortgage can help with that. The most basic requirement for a second mortgage is the borrower must have sufficient equity built up in their home. It also depends on the value of your property, the mortgage should not be more than 20% of the property’s value, and to be approved, the borrower must have a minimum credit score of 620. You must not forget the Debt-to-Income ratio as well; it must not be lower than 43%.
The interest rates for a second mortgage
The reason being second mortgages are risky for lenders. The interest rate for a second mortgage is usually higher than what a primary mortgage offers. However, if you are riddled with credit card debt or any other kind of debt, then a second mortgage is a financially sound decision.
Why should you get a second mortgage?
Below-mentioned is some of the reasons to get a second mortgage:
- If you need to pay off your high-interest credit card debt
A second mortgage has a much lower rate of interest than a credit card. It can help consolidate all your debt if you have multiple credit card debts.
- If you need to recover your revolving expenses
If you require revolving credit, a second mortgage can give you access to it as long as you ensure to make the scheduled payments.
- If you cannot get a cash-out refinance
Unlike a second mortgage, cash-out refinances have a much lower interest rate. But if the lender denies your refinance request, you can still get a second mortgage. Please do consider all your options before you decide to get a second mortgage.
For more information on second mortgages Toronto, contact One Mortgage Group today to schedule an appointment.