You never know when the demand for money will strike and leave you in an emergency situation. In such situations, you can rely on financial institutions for a loan. One of the best loans available in the market is the home loan because it usually has lower interest rates, some tax benefit, and a longer repayment term. If you are in dire need of financial assistance or want to have some cash flow for special projects like renovations, you should consider getting a second mortgage.
What is Considered a Second Mortgage?
Your home is a valuable asset and you can borrow money against it if needed. Most people wait until their home has collected some equity before they refinance the mortgage with the same lender. However, you can borrow money against an already mortgaged home, especially if you are consistent with your mortgage repayments and maintain your property well. This loan is considered a second mortgage.
Is it Advisable to Look Into a Second Mortgage?
A second mortgage is a good idea if you are short on cash, want to make home improvements, want to consolidate debt, or need to finance education. If you have a healthy amount of equity and good credit balance, you should consider this option. It is only advisable to look into a second mortgage if you have some financial stability. Be aware that there are consequences with this kind of lending. Any of our seasoned mortgage professionals will gladly walk you through and discuss your unique situation with you.
Pros & Cons of a Second Mortgage
- You can borrow a large loan amount, especially if you have more equity in your home.
- Second mortgage loans might have higher interest rates compared to home loans, but they have lower interest rates compared to other forms of debt.
- As mentioned earlier, you do get some tax benefits. You can discuss your particular case with a mortgage broker in Newmarket to get the best assessment of tax benefits.
- High fees and penalties for non payment
- Second mortgages are more expensive.
How Would You Qualify for a Second Mortgage?
Major banks might provide a second mortgage if you have a good credit score, more than 20% equity, and a good record of paying back the money. However, if you have a poor credit score or low equity, you will have to pay more in interest and will have to get the loan through a private lender or trust company. You should discuss your particular requirements with an experienced mortgage broker to get the best advice.
A mortgage broker is essentially a bridge between the borrower and the lending institution, so if you want assistance with the loan application process and want to find the best deal for your second mortgage, come and talk to our team.
You can talk to a mortgage broker in Aurora for more tips on how to get a second mortgage. Call the experts at Accumetrix Mortgage Alliance today at 905-780-0908.