Though the concept has been around for a while, some Canadians seem to not understand what a second mortgage is, and how it works. A second mortgage is simply a loan taken against your home when you have some equity on the home. It is subordinate to the first mortgage, and in case of a foreclosure, it will be paid last, after the first one is fully paid.
For those interested in getting one, here are some of the requirements you need for a second mortgage:
The first thing you need for a second mortgage is equity on your home. The amount of funding you will get, will be directly proportional to your home’s equity. You should also understand that a second mortgage will come with higher interest rates because lenders consider it riskier than the first mortgage. But you may have increased chances of getting slightly improved rates if you have a good credit score, and a constant and verifiable income.
Due to the risky nature of second mortgages, banks and mainstream financial institutions shy away from providing them. The majority of lenders in this field are comprised of private lenders or small financial institutions. You should take your time to research the various institutions or lenders, and find one that will not just offer you good rates, but will grant you a good overall experience.
Most second mortgage lenders will require an appraisal, though a good number of them prefer to have a personal inspection of the property. The appraisal is for the sake of the lender, and in case it is not needed, then that will save you some money in the form of fees.
All your mortgage transactions require the services of a lawyer, and so does a second mortgage. You should hire a lawyer who will act in your best interest, to review all the mortgage documents in order to offer you a clear understanding of the mortgage terms.
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