Second Mortgage Loans in Barrie
Second mortgages are a type of loan that’s taken out on a mortgaged property. It can be a useful resource to access your home’s equity, but it almost always has terms less favourable than the first mortgage.
The lender that facilitates a second mortgage is placed in second position in terms of its priority to receive payment. If the homeowner defaults on his or her payments, the lender in the first position is entitled to payment before the second position. Hence, second mortgages tend to have higher interest rates to account for the increased risk.
Second mortgages can take the form of a home equity line of credit (HELOC) and that may be a good option for individuals who own at least 20% of their home’s equity and have good credit. Homeowners with weak credit and little equity will often need to choose other types of second mortgages, such as through a trust company or a private lender.
Why Do I Need a Second Mortgage?
Often, homeowners can resort to a second mortgage to consolidate several sources of unsecured debt. Even though a second mortgage might have a high interest rate, the interest saved by consolidating several credit card debts, car leases, and other unsecured payments could easily make up for it.
Moreover, using a second mortgage to consolidate debt this way could mean you meet financial commitments more readily. In the long run, this responsible debt management can lead to better credit and allow you to qualify for a better mortgage.
How Do I Qualify for a Second Mortgage?
Lenders will look at four main areas when deciding if you qualify to receive a second mortgage:
- Your income. A reliable source of income will go a long way toward convincing any lender it’s safe to extend credit to you.
- Your equity. The more home equity you already own, the more likely it will be that lenders will see you as a qualified candidate for a second mortgage.
- Your credit score. Like most other loans, better credit will improve your chances and the terms of the loan.
- Your available property. What you have available as collateral will play a large role in the qualification process since it’s a less risky factor than things such as credit score.