A second mortgage is the most common way to access available equity in Canadian homes. Another mortgage can provide you with funds for a variety of reasons from helping you in a financial rut to funding some dreams and goals.
Although a second mortgage offers the advantage of accessing a chunk of home equity it usually carries a higher interest rate compared to a first mortgage, for reference a first mortgage is the one used to purchase a home.
The reason a second mortgage carries a higher interest rate is because the lender's security in the property comes second to the lender of the first mortgage. In the case that a mortgage defaults and a home must be sold to repay the mortgage, the lender of the second mortgage gets paid second to the lender of your original mortgage, therefore the second lender charges a higher rate of interest to offset the risk associated with lending on a second mortgage.
A second mortgage can provide you with enough financing to cover the down payment of an investment property purchase, a second home, a condo for one of your kids or a vacation property. It is highly advised that you have enough available equity to borrow to ensure that it's a financially sound move that will get approved. A lender will likely reject your application if you have too little home equity to borrow a property down payment.
A second mortgage can be used for home renovations.
A lender will be more than willing to fund your ambition to improve your home. A home is security for your loan and given that you plan to add value to that home is an added security for a loan in the case of default.
Though a lender will not likely fund or approve a renovation that involves extreme changes or additions to a home.
A big project like adding another level to your home is a risky move for a lender, as such a project given unfinished or complications could harm the value of the home that a lender is using as security for your debt.
Having multiple debts is a burden and is difficult to payoff, a second mortgage can consolidate that debt and simplify your life. Rolling your debts and loans into your mortgage can be financially strategic and beneficial.
Consolidating your debt is simply repaying debts with mortgage proceeds. Consolidation is when a debt is paid by another debt. The advantage to consolidation is that it brings a gross owed amount under one repayment and a single lower interest rate.
A second mortgage allows you to strategically target high interest debt and amounts with a payment through a replacement mortgage debt that consolidates debts under one repayment and interest rate.
A second mortgage is not the only way to obtain extra funds. Have you considered a Home Equity Line of Credit?
Feel free to send us an email with any questions you may have about the required documents for a second mortgage.
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We have a variety of useful guides that are essential and helpful for all your mortgage needs and questions. We cover everything from basic mortgage concepts to the functions and components of a mortgage to in-depth mortgage guides and strategies.
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We have a few excellent options to determine what you can afford to borrow. We offer an easy to use Mortgage Qualifier Calculator. Simply input the required information and let our calculator give you an idea of how much you can afford to borrow.
If you want to get the most accurate idea of how much you can afford to borrow, contact us or fill out our online mortgage assessment form.
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There are a variety of mortgage types and purposes. Deciding on the best mortgage for you is essential to getting the most logical loan for your financial needs, goals and future.
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What a pleasure it is to do business with Nick. I have used Nick as my mortgage broker several times now and wouldn't think of using anyone else. He is knowledgeable, professional and always timely on any questions or inquires I have. He makes you feel like you are a special customer through the entire process. Nick thanks again for all you expertise and making this a smooth transaction.
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We provide a continued service of advice to strategically save tens of thousands over the life of a mortgage.
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We've been advising on mortgages for 30 years and we've helped thousands of Canadians get approved for their mortgage financing needs. We'd be happy to help you with your second mortgage.
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