What is a Second Mortgage ?
It is a mortgage loan against a real estate which gets registered behind any first mortgage lien. The lenders are reffered to as lien holders. In other words its an equity loan being provided by an private/alternative lender.
While the real estate market was booming and other financial market returns were down people were lending out their money for better returns.
Second mortgage (2nd mortgages) works for both, lender and borrower well when executed properly with a pre-set exit strategy in place. This work wonders in short term however its an expensive venture to be in as a borrower for long term.
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What are The Benefits of Second Mortgage?
The one biggest reason why a real estate owner will go for a 2nd mortgage is due to the fact that funds are accessible easily and relatively quickly even with bad credit and lower credit scores. If the private lender feels safe about his money they will extend the funds and register a second mortgage lien against the subject property.
Remember these lenders are not financial institutions/ banks with competitive rates. These are private lenders instead.There is great varity of lenders in Toronto, Mississauga GTA area.
Second mortgage Toronto, Mississauga and Brampton are often used by real estate investors to leverage equity for short period of time and have there place in the arena of real estate and mortgages. However prudence is key. Home owners should be very careful when going ahead with second and third mortgages like options for lump sum payments, interest only or make all the payments at the end of the term.
4 Tips for Second Mortgage Borrowers?
- Anyone with sufficient equity in their home or investment real estate may be eligible for a second mortgage or home equity loan.
Below are some points to keep in mind;
- The lower the equity the higher the interest rate for 2nd mortgage
- The higher the loan to value ratio the higher the second mortgage rate of interest will be
- There is no such thing as 1 day closing unless you are willing to pay extremely higher interest rate
- Borrower pays for the appraisal and all other related expenses
- Majority of the lenders won’t lend you money as second mortgage , if your primary mortgage is with a private lender.
How Quickly Can Mississauga's Second Mortgage deal close?
For the purpose of this blog The deal is deemed closed when borrower has received the funds in their hands and all pertinent formalities has been conlcuded.
In general its fair to say that to close a typical second mortgage deal in Brampton, Mississauga GTA area, about 2-4 weeks. There is no such thing as same day closing of second mortgages in Toronto unless you are ready to pay extemly high second mortgage interest rates, which is not a practical approach in our opinion.
However, there is a very specific loan product which is very quick to close but you have to qualify for it. Don’t forget to ask for closing costs and all the other associated costs upfront. Learn more …
Who can benefit from Second Mortgage in Mississauga, Brampton GTA ?
In my 10 years of practice as a full time mortgage agent/broker in Mississauga, Brampton GTA the one most prevelant reason of home owners go for second mortgage is to;
- Pay Off credit cards debt
- Repair & Reestablish their credit
- Debt consolidation
- Pay off CRA quickly
- Access funds to buy new investment real estate
- Establish fair market price to evaluate equity
- Match the best lender with borrowers profile
- Get a laywer to close the deal & hand over the funds to borrower
Qualifying for a second mortgage is not as hard as getting a mortgage with credit unions or banks however affordability is still checked for depending on the type of loan.
How many laywers are needed to complete a second mortgage transection in Toronto GTA ?
- Single realestate Lawyer can close a file if the loan abount is less than or equal to $50,000
- Two Different Lawyers representing borrower and lender are required when the loan amount is more than $50,000.
Read fine print before reading the general terms and conditions.
Not all private lenders are the same. Lenders who lend money on second and third mortgages charge relatively high interest rates and understand the borrower’s desperation.
Some time these lenders are also referred as loan sharks. They sit and wait for the borrower to default. Once defaulted, Game over for a borrower.
Every word in fine print becomes a problem for the borrower and often times borrower ends up losing their family home.
Like everything else second and third mortgages have their pros and cons. Careful evaluation and setting reasonable end results with clear exit strategy should be the primary goal when searching for a private lender.
Is Line of Credit Better Than Second Mortgage?
Yes indeed. Home equity Line of credit HELOC is way better than any 2nd mortgage however its only provided by financial insitutions. Borrowers need to qualify on the basis of their credit, income & mortgage stress test.
f you happen to be looking for a second mortgage with better mortgage rates I personally think, we should meet and discuss your situation so that a viable solution could be designed for your unique situation. You should learn more about our unique approach when matching lenders to borrowers.
Let’s meet for a No Obligation Strategy Session for mortgage and non-mortgage solutions for your real estate. What day works for you better Weekdays or Weekends?
very useful info. Short and too the point.thank you mortgage delivery guy
Thank you Harjit for visiting mortgagedeliveryguy.ca. We try our best to provide the info in a way that a reader can make use of it. Please do not hesitate to connect back if you got any mortgage related questions.
Very useful info.
Glad you found the info useful here. Thank you for your visit for the feedback.
Very useful info.
Thank you Gurnoor.
Eye opening blog.
No one talks about it, the way it’s mentioned here. Eye opening info for sure.
Thanks
Thank you Simran for visting mortgagedeliveryguy.ca & glad to know you liked the content.