How to Minimize Risk When Going for a Second Mortgage

Second mortgages have provided millions of Canadians with an avenue to get additional financing based on the equity they have in their homes. In as much as the concept is great when utilized in the right manner, and for the right reasons, a number of people have had nasty experiences with their second mortgages, and wound up regretting them altogether.

To avoid this outcome along with many other bad experiences, here is a brief guide on how you can minimize your risk when considering this type of financing;

Work with a lawyer

Avoid appending your signature without getting a sound legal opinion from a qualified lawyer. Most people get entangled because they agreed to terms they didn’t understand in the mortgage. With the help of a lawyer, you will have a good understanding of all the terminology, and you will know exactly the kind of contract you will be walking into.

Don’t go for short term balloon mortgages

When considering a second mortgage, ensure that the balance will not be due for at least three to five years. This will give you the flexibility you need to get your finances in order, and to avoid lots of pressure that might come with immediate repayment.

Don’t neglect the property

It may be tempting to neglect a property you take a second mortgage on, but you should know that the lenders may secretly pass by to check on the condition of the property. This may lead to unnecessary confrontations, so just ensure that the property is in a good state at all times, throughout the period of the mortgage.

Only go for a second mortgage if it’s necessary

Be advised that by going for a second mortgage, you will be increasing your debt, though it may not sound as such. Only go for the second mortgage if it is absolutely necessary, and you should not do so to finance luxuries in life, such as going for a vacation or getting a brand new Ferrari.