Second mortgages or “Home Equity Loans” are mortgages that are registered after your primary mortgage. Borrowers would have to make payments for both their mortgages, simultaneously.
Second mortgages are a popular alternative for refinancing to consolidate debts. The borrower can avoid the higher payments by arranging for a second mortgage which would reduce monthly payments and interest rates. Also, when a previous fixed mortgage offers a low rate, borrowers who wish to keep their present rate will prefer to apply for a second mortgage.
Second mortgages are usually at a higher interest rate than bank rates. If the borrower qualifies under CMHC (Canada Mortgages and House Corporation) standards, usually the interest rates will be minimally higher than prime rates. However, if the borrower does not qualify, they will have to resort to private lenders with rates that are higher than bank rates. Fortunately, there are many different and unique lenders that can assist clients.
Second mortgages come with closing costs. In order to get the deal done, closing fees and appraisal costs will be taken into account. If the borrower qualifies under CMHC guidelines, the appraisal can be waived. It is suggested that people looking for a second mortgage pay a down payment of 10-15% based on the value of the property in question.
If you need a second mortgage and would like more information, we can help. Contact one of our experts at Maple Leaf Mortgages for a free consultation on how we can save you money.
Comments on this entry are closed.