A Second Mortgage is a term used to refer to a mortgage or loan that is given to the same assets without refinancing the first mortgage. Most second mortgages in the market are offered in the form of home equity loans.
A second mortgage can also be referred as the subordinate mortgage because, in the case of any default, the borrower is required to repay the first mortgage first. Therefore, this poses a greater risk to the lenders and that’s why they are offered at higher interest rates than the first mortgage.
Second mortgages can be offered with various repayment periods ranging from one year to thirty years depending on the lender’s loan structure. This type of mortgage has widely been used to facilitate foreclosures in the case homeowners’ defaults to repay their first loan.
Benefits of a second mortgage
- You will have the opportunity to refinance by consolidating debts that have high-interest rates with low-interest rates monthly payment.
- Second mortgage can be used to enhance home improvements
- Offers a cost-effective method that can be used to finance small business and investment opportunities
- The second mortgage does not replace the first mortgage
- It will help you to meet unforeseen expenses
Qualifications for second mortgage
For you to qualify for a second mortgage, the Canadian mortgage market requires that you must have more than 20% of the equity in your home. Besides, you must be in a position to pay the monthly payments on your second mortgage, and you must not go beyond your Total Debt Service Ratio.
Second mortgage can still be accessed by individuals with low credit scores but only at higher interest rates than the usual rate.
Your lender will as well assess the time that you have worked with one employer. The longer the time, the greater the confidence the lender will have in you when giving out the second mortgage.
There are various documents that you will be required to present when applying for the second mortgage. They include the mortgage papers, social insurance number, bank statements and proof of employment.
Are you looking for information on how you can apply for a second mortgage in Canada? Then do not hesitate to contact PrestroMortagages across Ontario Canada for convenient and trusted mortgages.