Pamela Vasiliu
Sales Representative
pvasiliu@remax.net

RE/MAX Professionals Inc.
Brokerage
Independently owned and operated.

Date: Sunday December the 17th, 2017 
416-236-1241

 

   

Second mortgage loan basics

May 21, 2015 - Updated: May 21, 2015

 

Second mortgage loan basics

A second mortgage is an additional loan taken out on a property that is already mortgaged. For the lender, this is more risky than the first mortgage, because they are in second position on the property’s title. If the homeowner defaulted on their payments and the property was taken into possession, the lender in the first position would always be paid out first, whereas the lender in second position runs a higher risk of not being paid out in full. To compensate for this additional risk, mortgage rates for second mortgages are always higher than for principal mortgages.

For individuals with an existing mortgage, who have good credit and more than 20% equity in their homes, the most affordable second mortgages will be in the form of a home equity line of credit. However, if the homeowner has weaker credit and/or little equity in their property, a second mortgage through a trust company or private lender would be required. 

 

Why would I need a second mortgage and how do I qualify?

A second mortgage can be a great way for homeowners to consolidate debt. Though second mortgages often carry higher interest rates than first mortgages, these rates are still often lower than high interest credit cards, car lease payments or unsecured lines of credit. If you

use a second mortgage to consolidate debt and help you meet other financial commitments on time, this can improve your credit score and allow you to qualify for a mortgage with a prime lender sooner.

In order to qualify for a second mortgage, lenders will look at four areas:
Equity.
The more equity you have available, the higher your chances of qualifying for a second mortgage will be. If you are purchasing a house, a larger down payment also decreases the risk that a lender assumes. Income. Lenders want to verify that you have a dependable source of income, to ensure that you are able to make payments.

Credit score. The higher your credit score, the lower your interest rate will be.
Property. Because other factors are risky (i.e., your credit score), lenders need to secure their investment in case you are unable to keep up with mortgage payments. 

Lender

Example Company

Product

Interest Rate

Credit Score

Minimum Equity

Major Bank

TD Bank

Home Equity Credit Line

2.5%

650-900

25%

Trust Company

Home Trust

Second Mortgage

15.0%

550-700

10-15%

Private Lender

Tridac Mortgage Corporation

Second Mortgage

     

 


Tagged with: mortgages second mortgage junction triangle junction real-estate homes selling buying real-estate roncesvalles high park investing
| | Share

Powered by Lone Wolf Real Estate Technologies (CMS6)