Second Mortgages for Debt Consolidation and How to Apply for One

Leveraging a second mortgage is one of the great strategic ways that many Canadian homeowners use to consolidate debt. Though they normally come with higher interest rates when compared to an initial first mortgage, the rates will always be lower compared to car lease payments, high interest credit cards, and even some unsecured lines of credit.

Using second mortgages to consolidate debt as well as help you meet your other pressing financial obligations in time can work well towards improving your credit score and may increase your chances of qualifying for a mortgage with a prime lender sometime in the future.

For you to qualify for a second mortgage, lenders will always consider the following:

Equity – if you have more equity in your home, this will increase your chances of qualifying for a second mortgage. Suppose you were buying a house, having a larger down payment will reduce the risk for the lender and if you can prove timely and regular payments for utilities, insurance, communication etc, your chances of getting a second mortgage will be considerably enhanced.

Your income – before you are allowed a second mortgage, the lender will want to ascertain that you have a reliable and consistent source of income. This is to ensure their conviction that you will indeed meet your repayment obligation towards the mortgage.

Your Credit score – it goes without saying that the higher your credit score, the lower the interest rates, and the easier it will be for you to get qualified for a second mortgage.

The property – since factors such as credit scores are risky, most second mortgage lenders will want to secure their investment so that they don’t lose in the event that you default, and there is no better way to achieve this other than through your property.