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.
Identification is used to verify your identity. While it’s a measure for preventing fraud, it’s essential for us to properly fill out your mortgage application.
It’s also a requirement so a lender can provide you with funding.
Income verification is required for your application so a lender can verify your ability to manage your mortgage payments.
Also provides essential information for us to assess your situation. Most of all helpful information to determine which mortgage product is appropriate for you.
It’s fraud if you falsify and/or exaggerate your income. Fraud for shelter is the most common form of mortgage fraud in Canada. Therefore we won’t tolerate this irresponsible and harmful behaviour.
It is important to be honest and precise with your income so that you aren’t getting a mortgage you can’t manage to afford.
A mortgage statement is simply a document prepared by your current lender and provided to you upon request. This document will detail your current mortgage.
Your mortgage statement will show:
This document is essential for the lender you apply to. As a document it allows a lender to assess your current mortgage and review your management of that mortgage.
Must show your name, property address, balance or original mortgage amount, and payment
A property appraisal is an estimated value of a home, in this case for one you wish to purchase.
Most noteworthy the appraisal is not a document that you will provide but rather pay for, as a requirement from your lender. Appraisals ordered by a lender are not shared with you as it’s their document.
This document is a cost surrounding your mortgage. While the cost can vary depending upon the location and size of the property.
The cost of an appraisal starts around $350 and can go over $500 (plus tax).
An appraisal is a requirement by a lender so they have a reasonable idea of your home’s current market value.
They use this value to assess the home before they are willing to lend against your home.
A lender will require the most recent property/tax bill statement for the property you are mortgaging.
It’s an essential document that details the property and documented ownership of the property. It also allows a lender to ensure that all taxes are paid up-to-date before financing a mortgage against the property.
A lender will require information on how much you pay for heating a month. Along with this information, if applicable, documentation about any condo fees you pay is also required.
It is required to consider the essential costs surrounding your property, it allows a lender to determine an accurate idea of your finances considering your assets, liabilities, income and property.
A void cheque is simply an unusable cheque that details your transit number and account number. It’s essential for a lender to deposit and withdraw funds from your account.
It’s an essential document that allows a lender to fund your mortgage. Also confirms the funds are in fact deposited to you, the mortgagor.
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.
We'd be happy to help!
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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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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It's always been a pleasure to work with you. Everything was made very easy for us even though you are in a different province. I believe I always got a great rate without me having to negotiate with several different banks. All the work was done for me. Thank you.
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