The Secret to Paying Second Mortgages without Penalties

• May 21, 2017

The decision to go for a second mortgage is never an easy one for the majority of Canadians. But when you decide to go for it, you are advised to take your time and weigh all your options to ascertain that indeed, your reason for going for the mortgage is a reasonable one. Of the many things you will have to watch out for when going for the second mortgage, you will need to pay attention to the penalties that come with defaulting or late payments.

You should be advised that most brokers that offer second mortgages will charge an interest penalty equivalent to over 3 months of payments, for late or early mortgage repayments. To avoid such and other accompanying penalties, it is advisable to pay the lender precisely on the actual renewal dates.

It is interesting to note that despite the popularity of second mortgages in Canada, a good number of people decide against going for such loans once they get a full understanding of the associated costs. If the amount you needed was less than $15,000, then you should consider sources of financing other than a second mortgage.

Remember, there are certain fixed costs that come with getting a second mortgage. For instance, you will need an appraisal, a lawyer, a lender and a broker, and the combined cost of these services can amount to up to $4000. This, coupled with other factors, usually makes opting for a second mortgage a less attractive decision for many Canadians.

But if you have no other option and the only route left is to take on a second mortgage, it is imperative that you ask the lender about all the penalties upfront. This is of great importance since this is where most people lose a lot of money with second mortgages, which ultimately drives the cost of the combined mortgages to be quite high.